A Landscape Study into the Climate Vulnerability of MSME Markets in V20 Nations

Micro, small and medium enterprises (MSMEs) are the economic backbone of the more than 70 countries in the Global South that make up the Vulnerable Twenty Group of Ministers of Finance (V20)—supporting livelihoods, employment and local economic stability—yet remain disproportionately exposed to climate shocks and underserved by financial systems.

In 2026, the V20-SIF completed a pioneering landscape study “Resilient MSMEs, Resilient Economies: Climate-smart financial services for micro, small and medium enterprises in V20 economies”, examining the state of climate risk insurance and financing solutions for micro, small, and medium-sized enterprises (MSMEs) across the world’s most climate-vulnerable economies. The study, based on three years of in-country engagement provides the first comprehensive assessment of both the scale of climate risk faced by MSMEs in V20 nations and the structural barriers preventing financial protection from reaching them.

Scope and objectives

The analysis conducted for this report examined financial sectors in 14 representative V20 countries
across three regions:
◾ Africa & the Middle East: Ghana, Kenya, Morocco, Rwanda, Senegal
◾ Asia-Pacific: Fiji, Nepal, Philippines, Vietnam
◾ Latin America & the Caribbean: Barbados, Colombia, Costa Rica, Dominican Republic, Honduras

Drawing on survey responses and interviews with financial institutions, the V20-SIF sought to develop a pragmatic and replicable approach to strengthening MSME resilience.  This approach centred around addressing four core questions:

  1. How are climate-related risks affecting MSMEs across V20 markets?
  2. How are financial institutions currently responding to these risks?
  3. What systemic barriers limit the scaling of financial solutions?
  4. Where can coordinated public–private action help address these constraints?
Next steps

The Landscape Study marks a pivotal step in the V20-SIF’s mission to drive innovation in climate and disaster risk financing for MSMEs.

Moving from assessment to implementation, the report outlines the V20-SIF’s approach to managing the structural constraints limiting the ability of financial systems to support MSME climate resilience. These structural constraints include gaps in forward-looking risk data, limited technical capacity within financial institutions, and challenges in developing and scaling climate-responsive financial products. Taken together, these constraints point to a central challenge: while the need for MSME resilience finance is clear, practical mechanisms to implement solutions at scale remain limited.

Addressing this gap requires approaches that go beyond isolated pilots, focusing instead on working within existing financial systems to build scalable capabilities. The V20-SIF was established to support this transition from diagnosis to implementation. Rather than creating parallel delivery structures, V20-SIF works within existing MSME–credit ecosystems—particularly banks and microfinance institutions—to strengthen their ability to assess and manage climate risk. By embedding new capabilities within institutions that already serve MSMEs, the facility aims to support approaches and solutions that can be replicated across markets over time

Encouragingly, the report finds that many of the necessary building blocks are already in place. Financial products exist. Delivery channels exist. Relationships between financial institutions and MSMEs are well established. Credit is already the primary financial tool used by MSMEs, while banks and microfinance institutions have emerged as the most important distribution channels for broader resilience solutions, including insurance. The challenge is not whether solutions exist, but how to adapt, integrate, and scale them for millions of businesses operating under increasingly volatile climate conditions.

The MSME-credit ecosystem approach outlined in the report offers a practical pathway forward. By building on existing financial relationships, strengthening climate-risk capabilities, integrating credit, insurance and risk
advisory services, and mobilising climate-tolerant capital, it provides a framework for translating climate risk into actionable and scalable financial solutions. The experience of the V20 Sustainable Insurance Facility demonstrates that this transition can begin today through portfolio-level risk analysis, adaptation-linked lending, bundled credit-insurance solutions and other commercially viable approaches that can be replicated across markets.

Ultimately, the constraint is not a lack of evidence, ideas, or institutions. It is the speed and scale of implementation. Tens of thousands of financial institutions must adapt to serve tens of millions of MSMEs whose resilience will increasingly determine the resilience of V20 economies themselves.