Dutch banks call for stronger support to fund circular economy entrepreneurs

Dutch banks are ready to finance circular economy entrepreneurs, but more support from the government is needed to make the business case for such ventures financially viable, according to Medy van der Laan, chair of the Dutch Banking Association. Van der Laan made her comments during a roundtable discussion on "circular financing and tax shift" in the Dutch Infrastructure and Water Management Committee on December 12, 2024.

"While banks are eager to finance circular entrepreneurs, the business cases for circular models are rarely profitable enough to attract funding," van der Laan explained. To address this, she presented concrete proposals to the government aimed at making these business models more viable and, therefore, more likely to receive financial backing.

One of the key suggestions was to create a level playing field through pricing incentives and regulation. According to van der Laan, such measures would significantly increase demand for circular products, fostering greater confidence among financiers and encouraging investment in innovation and new players in the supply chain.

Van der Laan also called for a tax shift at both European and national levels, advocating for a reduction in labor taxes and an increase in taxes on materials. "Heavier taxation on natural resources would stimulate labor-intensive circular business models, such as repair services," she said. This shift would lower fixed costs, making circular business models less risky and more attractive to banks.

Another proposal was for the government to increase its demand for circular products, leveraging its purchasing power of approximately 80 billion euros per year. "As the largest purchaser, the government can integrate circularity as a requirement in public procurement, greatly stimulating the market and improving financing opportunities," van der Laan stated.

The banking sector also called for temporary financial bridging solutions through public-private partnerships. Van der Laan emphasized the need for risk-bearing capital to support circular entrepreneurs, noting that expanding the investment mandates of existing government-backed funds would help reduce the need for loans, making repayment easier and lowering the risk for banks.

Currently, financing for circular entrepreneurs remains more of an exception than the rule. However, van der Laan stressed the importance of the circular economy, not just as an idealistic goal but as a practical necessity. "Circularity is essential for achieving climate targets, restoring biodiversity, and reducing geopolitical risks associated with resource dependency," she said.