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Is finance a barrier in green renewable energy?

One of the major single barriers is a financial barrier in the expansion of green renewable energy. The barrier depends on the country to country which originated from the Asian bank-dominated financial system.

As the Asian countries are in a developing market scenario, venture capital is still in a very limited stage. The situation of an Asian financial market has been discussed by Yoshino and Taghizadeh-Hesary.

But even then, Japan and the Republic of Korea, the more economically advanced Asian countries have developed more supportive community funds for renewable energy projects which became a backbone to establish banks and independence.

As per Yoshino and Taghizadeh-Hesary (2017), “these economies’ banks dominate the financial system, pension funds and insurance companies provide a second level, and the share of the capital market is small.” Thereby the “banks, insurance companies, and pension funds will be the main source of finance for projects and businesses in the overwhelming majority of the Asian countries including green renewable energy projects.”

As per Yoshino and Taghizadeh-Hesary (2014)

“Within this restricted financial market, the availability of funds for green renewable projects is further limited, given the risk-aversion characteristic of the main potential funders: Asian banks. Restricting the availability of venture capital, this characteristic is a consequence of much larger problems affecting all the small and medium-sized enterprises (SMEs) in which the majority of these projects fall.”

Source:- Handbook of Green Finance

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