The Last-Mile Problem in Green Finance: Why Small Businesses Struggle to Access Sustainable Finance, and a Readiness Index to Measure It

Abstract Green finance has expanded quickly over the last decade, but most of that growth has reached borrowers that already have the reporting systems and collateral that lenders expect. Small businesses, which make up the bulk of enterprises and jobs in emerging economies, sit at the far end of the chain. This is the last mile of green finance. The paper approaches the problem from the borrower's side rather than the investor's and asks why small firms struggle to reach sustainable finance even where suitable credit lines exist. Building on work about information asymmetry, financial literacy and the diffusion of innovations, it identifies seven barriers: ESG data, documentation, awareness, collateral, financial literacy, perceived complexity and green investment knowledge. These are turned into a composite instrument, the Small Business Green Finance Readiness Index (SB-GFRI), scored from 0 to 100. Because primary survey data are still to be collected, the empirical section applies the index to a sample of 320 firm profiles built only to demonstrate and stress-test the analytical workflow; the results show how the method behaves and are not evidence about real firms. Six hypotheses are tested with logistic regression, one-way ANOVA, Welch's t-test, Spearman correlation and Friedman's test. The index proved internally consistent (Cronbach's alpha = 0.85) and insensitive to the weighting scheme, and the workflow returned interpretable readiness tiers linked to practical support measures. The paper closes with implications for lenders, regulators and business-support intermediaries.