June 2015 - Microfinance Institutions and Banks in Europe: The story to date

Banks represent a dense network in Europe. According to the European Central Bank, as of March 2015, the European Union (EU) counted 7,233 credit institutions. They play a crucial role in business financing (80% of European business activities are funded by banks; European Banking Federation, 2014), especially for Small and Medium Enterprises (SMEs). However, access to finance is not easy for the SMEs, particularly when they lack formal collateral or credit history.

In comparison, Microfinance Institutions (MFIs) mainly focus on the financing of very small and small businesses (business microcredit) and low income or poor individuals (personal microcredit). The driving force of the microcredit market is financial and social inclusion. Targeted microborrowers belong to segments of the population such as (long-term) unemployed, women, migrants, young, rural and/or disabled people. Business loans generally target very small (new) businesses that lack any form of collateral or credit history. However, no single definition of microfinance exists in Europe (European Banking Federation, 2010). The relative number of European MFIs is relatively low, estimated to range between 500 and 700 institutions.

The aim of this study is to draw a relevant picture of MFI-bank partnerships in Europe. We analyse why MFIs and banks mutually collaborate, the challenges they encounter and discuss possible paths for improvement of their cooperation.

 


  June 2015 - Microfinance Institutions and Banks in Europe: The story to date