Nearly three out of four micro, small and medium enterprises in India are not aware of available Green Financing options, according to the fifth edition of MSME Insights from Kinara Capital.
The study surveyed 3,649 MSMEs across 100 cities in Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Telangana and Puducherry. It found that 73.2 percent of businesses lacked awareness about Green Financing, while another 11.2 percent said they avoided it because the process was unclear.
Despite these gaps, more than half of the MSMEs that applied for green business loans secured funding. The report said this shows the sector is ready to adopt sustainable practices once barriers are removed.
Commenting on the report, Hardika Shah, Founder and CEO of Kinara Capital said, India’s ambitious Net Zero target by 2070 cannot be achieved without placing the country’s dynamic MSME sector at the heart of its climate strategy. While many MSMEs are eager to adopt sustainable practices, a significant number lack the guidance and resources to take the first step.”
“To unlock this potential, focused awareness campaigns and technology-led solutions are essential. These efforts can bridge the Green Financing gap and catalyze large-scale, sustainable transformation across India’s MSME landscape,” Shah further added.
The findings show that 74.2 percent of MSMEs planning to raise financing in the next year want to invest in sustainability measures. About 14 percent said they plan to manufacture eco-friendly products, and 11.8 percent intend to wholesale or sell them directly to consumers.
Trading MSMEs showed the strongest intent to adopt green financing, with 55.2 percent expressing interest compared with 41 percent of manufacturers. Tamil Nadu and Puducherry led in regional responses with 37.5 percent of MSMEs planning green investments. Andhra Pradesh and Telangana followed at 31.6 percent, and Karnataka at 22.1 percent.
Solar energy solutions topped the list of preferred options, with 32.4 percent of respondents interested in rooftop solar or solar-powered products. Electric vehicles attracted 27.7 percent, while 19.3 percent wanted to invest in energy-efficient machinery. Another 11.2 percent prioritized water, sanitation and waste management.
MSMEs also preferred agile lenders for Green Financing. Of those that secured funding, 46.7 percent chose NBFCs or fintech firms, compared with 24.1 percent who borrowed from private banks and 17.5 percent who went to national banks.
Kinara Capital said the findings highlight the need to raise awareness and simplify access to green credit so that MSMEs can play a larger role in India’s transition to a sustainable economy.