Barriers to Climate Finance in Developing Countries: A Theory of Constraints Analysis from Pakistan

Abstract

Climate finance is a fundamental mechanism for enabling emerging economies to mitigate and adapt to minimize the impact of climate change. Despite Pakistan’s negligible contribution to global greenhouse gas emissions, it is still on the top list of highly climate-vulnerable nations, facing escalating environmental, social, and economic risks. This study investigates the specific barriers hindering the resource allocation and efficient utilization of climate finance in Pakistan. Guided by the Theory of Constraints and adopting a qualitative case study design, the research incorporates semi-structured interviews, participant observation, and document review with key stakeholders, including policymakers, financial institutions, NGOs, and community representatives. Data were thematically analyzed using MAXQDA software. Eight key barriers emerged: (1) lack of awareness on climate change, (2) lack of technical expertise and institutional capacity, (3) institutional inefficiencies and procedural delays, (4) lack of resources and inadequate stakeholder collaboration, (5) lack of national monitoring and evaluation framework, (6) lack of financial incentives for green practices, (7) government disincentives, and (8) bureaucratic barriers. These constraints are interlinked, reinforcing inefficiencies in accessing and deploying domestic and international climate finance. The study contributes to the knowledge resources by offering context-specific insights into climate finance barriers in Pakistan and proposes targeted policy reforms to enhance institutional capacity, foster multi-level coordination, incentivize green practices, and streamline procedures for timely fund mobilization. Findings have broader implications for other developing countries facing similar socio-political and institutional constraints in climate finance governance.