european microfinance network an introduction to microfinance, and european policies and instruments...

European Microfinance NetworkEuropean Microfinance Network

An introduction to Microfinance, An introduction to Microfinance, and European policies and and European policies and

instrumentsinstruments

Daniel Sorrosal – European Microfinance Network Daniel Sorrosal – European Microfinance Network

Weed Project Online Class , September, 14Weed Project Online Class , September, 14thth 2010 2010



✓ Created in 2003 by Adie (France), EVERS & JUNG Created in 2003 by Adie (France), EVERS & JUNG (Germany) and new economics foundation – (Germany) and new economics foundation – nefnef (UK). (UK).

✓ EMN has today 88 members from 23 European EMN has today 88 members from 23 European countriescountries

✓ EMN is based in Paris and a new office in Brussels has EMN is based in Paris and a new office in Brussels has been opened in 2010been opened in 2010

✓ The EMN secretariat is composed of 4 staffThe EMN secretariat is composed of 4 staff


The mission of EMN is to promote microfinance as a tool to fight social and economic exclusion and to promote micro-entrepreneurship and self employment.

• 87 Members in 21 countries

• NGOs, Banks, think tanks, Research institutes, consultant

•77% practitioners, 10% Corporate members, 25% from new EU members States

•Information, Lobbying, Good practices, Capacity building, Research

European Microfinance European Microfinance NetworkNetwork


The Social Context for MFThe Social Context for MF Population at risk of poverty : 80 millionPopulation at risk of poverty : 80 million

Active population below the poverty line : 28 millionActive population below the poverty line : 28 million

In 2004, the average In 2004, the average at-risk-of-poverty rate at-risk-of-poverty rate in the EU was 16%, in the EU was 16%, while national figures ranged from 9% to 21%. In most countries, while national figures ranged from 9% to 21%. In most countries, the at-risk-of-poverty rate (for the population aged 16 or more) was the at-risk-of-poverty rate (for the population aged 16 or more) was higher for higher for women.women.

The The youngyoung have the highest at-risk-of-poverty rate, at 19% for have the highest at-risk-of-poverty rate, at 19% for children aged 0-17, and 18% for the 18-24 age groups. children aged 0-17, and 18% for the 18-24 age groups.

One person households and those with dependent childrenOne person households and those with dependent children tend to tend to have the highest poverty risk, with the highest poverty rate have the highest poverty risk, with the highest poverty rate affecting single parents with one dependent child (33% in the EU affecting single parents with one dependent child (33% in the EU as a whole).as a whole).

Long-term unemploymentLong-term unemployment is one of the major indicators for is one of the major indicators for exclusion. exclusion.

Due to the crisis around 9 Mn people are expected to become Due to the crisis around 9 Mn people are expected to become unemployedunemployed


Financial Exclusion ContextFinancial Exclusion Context

Financial exclusion is defined as the share of people Financial exclusion is defined as the share of people without a bank account, with no savings and without without a bank account, with no savings and without revolving credit.revolving credit.

7 % in Europe 157 % in Europe 15

10 EU newcomers 47% of all inhabitants have no 10 EU newcomers 47% of all inhabitants have no banking account, as compared to 10 percent in the banking account, as compared to 10 percent in the EU-15.EU-15.

In the EU-15, 20% of adults lack access to transaction In the EU-15, 20% of adults lack access to transaction banking facilities, some 30 percent have no savings banking facilities, some 30 percent have no savings and 40 percent have no credit facilities. and 40 percent have no credit facilities.


Number of enterprises in Europe (in thousands)

9

255

1 693

21 228

Informal sector(Income-generating activities)

> 250 employees

50 à 250 employees

10 - 49 employees

0 - 9 employees

23,2 million enterprises in EU 25

91,5% of enterprises in Europe are micro-enterprises (0 - 9)

Informal sector represents 10 to 15% of GDP

Source : Communication of the Commission dated 10/11/2006 on SME policy as regards the total number of enterprises. Breakdown according to Eurostat 2006 (2003 data)

The Economic ContextThe Economic Context


HistoryHistory 14th century, first pawnshops in Italy

19th century, M. Raiffeisen, Germany first cooperative savings credit unions

After 1989 development in Eastern Europe

Main development in Western Europe after 2000 (60%)


Microfinance in Europe is considered as a tool for both social inclusion and Microfinance in Europe is considered as a tool for both social inclusion and employment creation definedemployment creation defined

Microcredit is defined as loans < 25K€ to individuals excluded, unemployed or Microcredit is defined as loans < 25K€ to individuals excluded, unemployed or inactive or to Micro enterprises < 10 employeesinactive or to Micro enterprises < 10 employees

84523 microcredits were granted in Europe in 2009, amounting to €828 million 84523 microcredits were granted in Europe in 2009, amounting to €828 million

170,000 active microfinance clients in 2009 170,000 active microfinance clients in 2009

9,600€ Average loan size with 3 year term9,600€ Average loan size with 3 year term

47% of clients are people excluded from the financial system, 47% of clients are people excluded from the financial system,

27% are women, 38% were unemployed and 13% are members of an ethnic minority.27% are women, 38% were unemployed and 13% are members of an ethnic minority.

9% Average interest rate (range from 2% to 36%)9% Average interest rate (range from 2% to 36%)

50% of organizations have repayment rate above 80% ( average 63%)50% of organizations have repayment rate above 80% ( average 63%)

59 % of organisations do not ask for a guarantee59 % of organisations do not ask for a guarantee

❖ Data based on 2007 EMN Survey. 2009 EMN Survey is underway, number of Data based on 2007 EMN Survey. 2009 EMN Survey is underway, number of respondents has increased from 111 to 180 in 2010, growth of figures expected. respondents has increased from 111 to 180 in 2010, growth of figures expected. Survey will be available in May 2010 Survey will be available in May 2010

What is MF in EuropeWhat is MF in Europe


Not included ProCredit Banks, Commercial Banks(Source : overview of the microcredit sector in the EU 2008 - 2009)

2007 2008 2009

Number of loans 42 750 90 605 84 523

In million of euros 394 802 828

Estimated supplyEstimated supply

End of 2009 …More than 170.000 active clients


What is the potential demand?What is the potential demand?

Total stock

Annual flow

Source : Adie

16M

497M

10M

38M

63M

Total population


Supply of MF in the EUSupply of MF in the EU


Microfinance providers in Europe are still young (especially in Western Europe)Microfinance providers in Europe are still young (especially in Western Europe)

62% of organisations participated in the EMN survey began their activity in 2000 or 62% of organisations participated in the EMN survey began their activity in 2000 or later (26% after 2005) later (26% after 2005)

67% of organisations don't grant more than 100 microcredits per year. 67% of organisations don't grant more than 100 microcredits per year.

85% less than 20 staff (but 17 000 volunteers). 85% less than 20 staff (but 17 000 volunteers).

Biggest organisation is ADIE in France with 26.000 clients, more than 500 staff Biggest organisation is ADIE in France with 26.000 clients, more than 500 staff

60% are non-profit organisations60% are non-profit organisations

11% are Banks, Savings Banks and other credit institutions (focus on bankable 11% are Banks, Savings Banks and other credit institutions (focus on bankable clients)clients)

Only for 24% of institutions have microcredit as their primary activityOnly for 24% of institutions have microcredit as their primary activity

47% target socially excluded populations 47% target socially excluded populations

Fighting poverty and social exclusion is more widespread in Western EuropeFighting poverty and social exclusion is more widespread in Western Europe

SME creation and support and is predominant in Eastern EuropeSME creation and support and is predominant in Eastern Europe

Who does MF in EuropeWho does MF in Europe


Existing Micro and small enterprises

Classical start-ups

Finance gap to be filled by banks

Income-generating activities

Microenterprises created by deprived groups

Market failure to becorrected by nonbankinstitutions

Types of Microfinance Types of Microfinance clientsclients


Microfinance Microfinance providersproviders

installed in existing institutions or installed in existing institutions or development banksdevelopment banks

political pressure motivationpolitical pressure motivation

sometimes image problem to reach micro sometimes image problem to reach micro clients and motivate to repay due to bank clients and motivate to repay due to bank and public ownershipand public ownership

Institutional Support programs

Specialized units of banksNGOs, target group driven approach

NGOs, microfinance driven approach

• small scale• finance seen as added value to the business

support

• inspired by microfinance success in developing countries

• business support seen as added value to finance

Adie in France, ANDC in Portugal, PSYBT in UK, Micro Bo, Per Micro in Italy ...

Finnvera in Finland, KfW in Germany, Fonds de Participation in Belgium, ICO in Spain, ...

WEETU in UK, Hordaland Credit Circle in Norway, Enterprise in Germany, Integra Slovakia

Cajas with microfinance programs in Spain (e.g. Foundacio Caixa Catalunya), Millenium bcp in Portugal, MicroBank in Spain

• young development• strong growth rates• synergy effects on costs through existing bank

infrastructure (i.e. back office, branches)NBFI, microfinance driven approachROMCOM, FAER– Romania;– MFIs in Eartern European countries• Mature MFI• Sustainable• Rather SMEs oriented than social• 2 transforming into a bank Funduz Mikro (Poland)

Patria Credit (Romania)

Cooperatives Uncar in Romania; Crédal in Belgium, Slok in Poland

• Big number of clients• Mainly personal loans


Microfinance in EuropeMicrofinance in Europe

• In EU rather microlending than microfinance In EU rather microlending than microfinance

•EU definition: loan amounts up to 25K EUR to EU definition: loan amounts up to 25K EUR to support the development of micro enterprises, self-support the development of micro enterprises, self-employmentemployment

•Microfinance combines Financing with Business Microfinance combines Financing with Business Support ServicesSupport Services

Focus on social inclusion and employment creation


EU support to microfinanceEU support to microfinance

Microfinance fits the Europe 2020 Strategy (Smart Microfinance fits the Europe 2020 Strategy (Smart Growth, Social inclusion, Focus on youth, etc)Growth, Social inclusion, Focus on youth, etc)

Various EU initiatives since 2007 by different DG Various EU initiatives since 2007 by different DG (Regio, Enterprise, Employment)(Regio, Enterprise, Employment)

Latest initiative from EU Parliament with €100M Latest initiative from EU Parliament with €100M and support from European Investment Bank: and support from European Investment Bank: "The European microfinance facility for "The European microfinance facility for employment and social inclusion (Progress)"employment and social inclusion (Progress)"


Enterprise development PolicyEnterprise development Policy

• Managed by: DG Enterprise within the European CommissionManaged by: DG Enterprise within the European Commission

• Competitiveness and Innovation Framework ProgrammeCompetitiveness and Innovation Framework Programme

• Objective: fostering entrepreneurship and improving access to Objective: fostering entrepreneurship and improving access to finance for SMEs.finance for SMEs.

• Financial Instrument: Microcredit Guarantee Window Financial Instrument: Microcredit Guarantee Window

• Implementing Body: European Investment FundImplementing Body: European Investment Fund

• To know more see : To know more see :

• http://ec.europa.eu/cip/index_en.htm

• http://www.eif.org/what_we_do/microfinance/microcredit_guarantees/index.htm

European Policies dealing with European Policies dealing with MF MF

http://ec.europa.eu/cip/index_en.htm

http://www.eif.org/what_we_do/microfinance/microcredit_guarantees/index.htm

http://www.eif.org/what_we_do/microfinance/microcredit_guarantees/index.htm


Regional PolicyRegional Policy

• Managed by: DG REGIO within the European CommissionManaged by: DG REGIO within the European Commission

• Program: JASMINE (Joint Action to support microfinance Program: JASMINE (Joint Action to support microfinance institutions in Europe)institutions in Europe)

• Objective: improve access to finance for small businesses, and Objective: improve access to finance for small businesses, and for socially excluded people who want to become self-for socially excluded people who want to become self-employed.employed.

• Financial Instrument: Technical Assistance Funds (€6M) + Loan Financial Instrument: Technical Assistance Funds (€6M) + Loan Funds (€14M)Funds (€14M)


• To know more see: To know more see:

• http://ec.europa.eu/regional_policy/funds/2007/jjj/micro_en.htm

• http://www.eif.org/what_we_do/microfinance/JASMINE/index.htm


http://ec.europa.eu/regional_policy/funds/2007/jjj/micro_en.htm

http://ec.europa.eu/regional_policy/funds/2007/jjj/micro_en.htm

http://www.eif.org/what_we_do/microfinance/JASMINE/index.htm

http://www.eif.org/what_we_do/microfinance/JASMINE/index.htm


Employment and Social PolicyEmployment and Social Policy

• Managed by: DG EMPLOYMENT within the European Managed by: DG EMPLOYMENT within the European CommissionCommission

• Program: EPMF (European Progress Microfinance Facility)Program: EPMF (European Progress Microfinance Facility)

• Objective: providing microcredit to small businesses and to Objective: providing microcredit to small businesses and to people who have lost their jobs as a consequence of the crisis people who have lost their jobs as a consequence of the crisis and want to start their own small businesses.and want to start their own small businesses.

• Financial Instrument: Guarantee Funds and Loan Funds Financial Instrument: Guarantee Funds and Loan Funds (€100M)(€100M)


• To know more see: To know more see:

• http://ec.europa.eu/social/main.jsp?langId=en&catId=836http://ec.europa.eu/social/main.jsp?langId=en&catId=836

• http://www.eif.org/what_we_do/microfinance/progress/http://www.eif.org/what_we_do/microfinance/progress/index.htmindex.htm



Thank you for your attention !Thank you for your attention !

Awaiting your questions...Awaiting your questions...



103 rue de Vaugirard 75 006 Paris, France 103 rue de Vaugirard 75 006 Paris, France 1 rue de Ligne 1000 Brussels, Belgium1 rue de Ligne 1000 Brussels, Belgium

Tel: +33 1 42 22 01 19 Tel: +33 1 42 22 01 19 Fax: +33 1 42 22 06 44Fax: +33 1 42 22 06 44www.european-microfinance.orgwww.european-microfinance.org

Daniel Sorrosal - Senior Programme Officer Daniel Sorrosal - Senior Programme Officer [email protected]@european-microfinance.org

european microfinance network an introduction to microfinance, and european policies and instruments...

Documents

risk of poverty

highest poverty risk

highest poverty rate

european countries emn

poverty line

eu newcomers

european policies

active microfinance