Microfinance and social exclusion

“The term social exclusion is used to emphasise the processes which push people to the edge of society, which limit their access to resources and opportunities” (European Anti-Poverty Network - EAPN).

Poverty is a direct consequence of social exclusion representing a main issue in Europe.

For Eurostat, “Social exclusion relates to being unable to enjoy levels of participation that most of society takes for granted. Social exclusion is multi-dimensional in that it encompasses income poverty, unemployment, access to education, information, childcare and health facilities, living conditions, as well as social participation. It is multi-layered insofar as the causes of exclusion can be at the national, community, household or individual level".

The main source for comparable annual data on the level and composition of poverty and inequality in the EU is the Community Statistics on Income and Living Conditions (EU-SILC). The EU applies a relative poverty standard: people falling below 60% of median income are considered to be at-risk-of poverty.

According to Eurostat, In 2008, in the EU 27, the unemployment rate was 7% and the long-term unemployment rate was 2,6%, both having declined between 2004 and 2008. However, because of the economic crisis, the unemployment rate has reached 9.6% in 2010 and long-term unemployment has reached 3.8%.

In 2013 in the EU 28  the unemployment rate is 12,2% and the long-term unemployment rate was 4,7 % in 2012, both having risen  between 2008 and 2012 (persons are considered to be long-term unemployed after 12 months of unemployment).

European policies covering  the issue of social exclusion

In 2010, the European Commission also launched the “Europe 2020 strategy for smart, sustainable and inclusive growth”. Fighting against poverty and social exclusion is one of the five principal objectives of this strategy and the European Commission intends to reduce by 20 million the number of persons living in or at risk of poverty and social exclusion. 

In the framework of the European 2020 Strategy, the European Social Fund, a key element in the fight against poverty in the European Union, will be readjusted. Its aim is to help Member States to address social problems.

Another important element for the Europe 2020 Strategy is the creation of the European Platform against poverty and social exclusion. According to the Communication from the Commission on the European Platform against Poverty and Social Exclusion, “the key actions of the Platform rely on a mix of policy coordination, dialogue with institutional and non-institutional actors, funding and strategic partnerships

Microfinance plays an important role in this context: it is a development tool allowing the poor to improve their living conditions by facilitating access to basic financial services such as loans, savings, money transfer services or micro insurance.

Microfinance is widely seen as improving livelihoods, reducing vulnerability and fostering social as well as economic empowerment.

Progress Microfinance

The European Progress Microfinance Facility (Progress Microfinance), established in 2010, with the Decision No 283/2010/EU increases the availability of microcredit –loans below  25.000 Euro– for setting up or developing a small business.

Progress Microfinance does not directly finance entrepreneurs, but Public and private entities, both banks and non-banks, can apply for support from Progress Microfinance in the form of a guarantee or a funded instrument (debt, risk-sharing instruments and equity) thereby sharing the providers' potential risk of loss providing funding to increase microcredit lending.

Thereby the provider decides the conditions for microloans to entrepreneurs in terms of amount, duration, interest rates and fees and the timeframe to get a loan .

Progress financing cannot be used to cover credit lines such as overdrafts or short-term revolving facilities.

Social and employment impact is one of the key policy considerations for Progress Microfinance. According to the report “Implementation of the European Progress Microfinance Facility — 2012”.


To see some EMN Good Practices from members related to social inclusion, consult the documents provided on the Publications menu relative to Good Practices. 


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