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This newsletter is supported by the European Community Programme for Employment and Social Solidarity (2007-2013). The information contained in this publication does not necessarily reflect the position or opinion of the European Commission.
The EMN Newsletter
Foreword
EMN Working Groups
Five new members joined EMN in September and November
Adie's 20th Anniversary!
EIF and Fonds de Participation sign guarantee agreement under the EU CIP programme
nef publishes two new reports on British community development finance
EMN 5th Annual Conference held in Nice (France)
EMN has a new Board of Directors
European Microcredit Research Award 2008 - Winners announced
Giordano Dell'Amore “Italy Award”
Overview of the Microcredit Sector in the European Union 2006-2007
2010: the European Year for combating poverty and social exclusion
The new NAPs 2008-2010
The 7th European Roundtable on Poverty
EU to improve access to finance for micro and SMEs and to reinforce development of microcredit in Europe
JEREMIE: Improved access to finance for micro business and SMEs in the regions of the EU
Latest publications available on-line 		Sept-Nov 2008

English version
Version française
Versión española


Foreword

These are very challenging times for the microfinance sector, and not only in Europe. We are passing through a very turbulent period with optimism mixed with serious concerns.

After many years of intensive debate, microfinance has been acknowledged by policy makers in Brussels as a valuable instrument for promoting entrepreneurship for the (too) many socially and economically excluded citizens in Europe. The EU Initiative on microcredit and the communication on Active Social Inclusion from the DG EMPL clearly spell out the importance of our sector in contributing to both the promotion of entrepreneurship and social inclusion. The new facilities, JASMINE and JEREMIE, offer microfinance organizations the resources to expand their operations. And such growth is indeed very much needed: in Europe the number of microborrowers, the size of the portfolios of the MFIs and the number of MFIs are still low. If we want to make a difference, we need to focus more on growth and expansion of our organizations and of our capacity to deliver microfinance services on a larger scale. It is a basic condition for our own continuity; if we remain small we will lose support. But we have always to keep in mind that the bottom line must be the actual sustainability of our clients, microentrepreneurs and the many self-employed. If we do not offer them a level playing field and services at fair prices there is no need for growth of the sector itself.
 
This brings me to the concerns we have: the sustainability of many microborrowers is at stake with the economic crisis having a direct effect on them and thus on many MFIs worldwide. Many microentrepreneurs, often at the end of a production chain, see sales going down and are not in position to repay, a normal economic phenomenon one may say. But the drop in repayments is a very dramatic one and makes flaws in the system visible. Microentrepreneurs are faced with very short repayment periods (for loans that would normally be renewed almost automatically) and with very high interest charges, often higher than the businesses they run can actually generate, default comes rather quickly when economic conditions worsen. On top of that, we now also see that clients cannot repay their microloans anymore because the secondary sources dry up: (i) other member in the household have difficulty in holding onto their jobs and do not bring in income and (ii) worse, in many countries, households no longer receive remittances from abroad. 

 

A growing number of MFIs in developing countries, but also in nearby Serbia and the Ukraine for instance, are now starting to face liquidity problems, and as a consequence they cannot renew existing loans for their clients, many of whom need that new loan as working capital.... so their reaction is “ better not to repay”...... To keep their clients in the system, MFIs need to seek other ways of raising liquidity, for example from parties abroad. Many investment funds have been set up in recent years seeking to invest in high-yielding MFIs; MFIs that were allowed to attract deposits did so offering high rates. But private depositors are looking for secure ways to invest their savings and the private investors who recently discovered the sector and sought high returns are running away. And worse, the development-oriented funding agencies are less willing to extend new credit lines...... There are many lessons for all of us to learn so as to look more critically into our strategies asking ourselves whether we are still on the right track. Maybe we need to redesign our products and redefine our lending conditions and reassess the funding relations we “enjoy” presently.

It is not necessary to be a fortune-teller to see that microfinance’s future is at stake. This brings me to propose the setting up of an Emergency Fund for MFIs..... Why should we only have such funds for the banking system in developing countries and not for the MFIs that serve so many poor? The lessons to be learnt for Europe are many, but maybe one very important one is  to retain direct contact with your clients and design services that ensure the continuity of their businesses – the sustainability of the client is more important than that of the instrument.....
Klaas Molenaar
President of the Board

 

 

EMN Working Groups

The EMN working groups were designed as a way to reach the objectives proposed in the EMN Strategic Plan for 2009-2011. They are part of the EMN strategy to decentralise as much of the organisation and execution of its activities as possible through the membership, encouraging and facilitating local and regional collaboration and forming working groups in which members actively participate to encourage input into its activities. The EMN has identified four key working groups: Social Performance and Impact, Financial Sustainability/Funding, Regulation and Research (already active). EMN members are encouraged to join these working groups, each of which will have a coordinator and selected core members and, within the EMN Board of Directors, one director has been assigned as the contact for each working group.

The idea of developing working groups grew from the successful experience of the Research Working Group (RWG). Founded by several EMN members in January 2007 to foster synergy in the research field of microfinance in Europe, the group is comprised of individuals, academics and representatives from throughout the continent. The RWG enhances the investigation and understanding of the European microfinance sector by facilitating joint research projects as well as information exchanges at regularly scheduled meetings. Among its activities are pan-European microcredit sector surveys, joint publications, research workshops and the presentation of the European Microcredit Research Award. The Fundación Nantik Lum (Spain) currently serves as the group’s head coordinator.

More information on the Research Working Group available here. 

Five new members joined EMN in September and November

The EMN Board welcomed three new members at its September meeting and two more at its November meeting, bringing the number of members to 69 from 22 European countries.

Fondazione Operti (Italy) grants credit to people disadvantaged due to age, sex, race, religion or political belief, to individual entrepreneurs and to small cooperatives. It provides instruments that give people the possibility of starting up in an honest way, establishing an increasingly consolidated economic independence through an activity that is in its early stages and needs some capital to start.
 
Cajasol (Spain) was founded in May 2007 as a result of the merging of two Andalusian savings banks (El Monte de Piedad and Caja San Fernando), both with a well-established tradition of commitment to socio-economic development. Fundación Cajasol targets persons over 45, single-parent households, young people with difficulties in entering the job market, immigrants, women and long-term unemployed persons in Western Andalusia and Madrid. It provides loans up to €15,000 for a maximum of five years.
 
Marcelo Abbad Consultoria (Spain) was created in June 2008 with the purpose of contributing to the creation, development and refinement of microfinance activities aimed at improving the living conditions of the poorest, within the framework of International Cooperation, the Solidarity Economy and Corporate Social Responsibility. Its founder, Marcelo Abbad Sort, has a long professional background in banking and microfinance in Spain.
 
BNP Paribas (France) is a European leader in banking and financial services, with a significant and growing presence in the United States and leading positions in Asia. The Group has one of the largest international banking networks, a presence in over 85 countries and 171,200 employees worldwide. Through its Microfinance Group, BNP Paribas finances MFIs, mainly in emerging countries, and provides them with technical assistance through its skilled retired staff.
 
BESA Foundation (Albania) finances micro and small entrepreneurs on sustainable bases. Clients of the BESA Foundation will include people from all socio-economic brackets including the unemployed and start-up businesses. BESA Foundation also provides technical assistance for entrepreneurs, including training and study.
 
For more information on EMN members, please click here. 

Microfinance in Hungary : Opportunities for expansion

The Hungarian microfinance sector is characterised by strong public sector involvement. The State supports microfinance within the framework of its SME policy as a tool to reduce poverty and unemployment through job creation and enterprise development. The Hungarian economy underwent a deep recession after transition to the market economy – caused, amongst other things, by a heavy decline in the industrial sector, only partly compensated by the emerging and mostly urban services and real estate sectors. Rising unemployment and inflation widened the poverty gap. The long-term unemployed, low-salary workers, retired persons, the young generation, the Roma population and large families are the most vulnerable social groups. Furthermore, important regional differences exist - between the urban, rural and small rural communities and between the Western and (North-) Eastern parts of Hungary.
 
Microbusinesses have become an essential part of the Hungarian economy; they are the only sector with net job creation since 1990. However, the fact that the population does not have a notable entrepreneurial tradition, experience or knowledge hindered the development of the sector. Moreover, about 90% of the sector is financially underserved (Kallay, Microfinance in Hungary, 2003).
 
The 35 commercial banks only reach microenterprises at the top of the turnover band, despite downscaling. This is due to high transaction costs caused by strict regulation, and the lack of interest of banks in IT development that could lower costs and speed up processing. In contrast, the 170 savings cooperatives offer smaller-sized loans and are present in rural areas where many banks lack access (MFC, Microfinance Market Study for Hungary, 2008).
 
To facilitate access to small loans for microenterprises with up to nine employees, the government, in 2001, set up a national microcredit programme and established a National Microcredit Fund, with the help of EU PHARE funds. It is coordinated by the Hungarian Foundation for Enterprise Promotion MVA, a non-profit Plc founded by the government in 1990 to support the development of small and medium-sized enterprises, that changed its name to the Hungarian Enterprise Promotion Network Consortium in 2007. The programme is backed by the partially state-owned Guarantee Agency Hitalgarancia and the Hungarian Development Bank. It is locally implemented through the Local Enterprise Agencies (LEAs), a nationwide network of foundations with over 140 offices in 19 counties and Budapest, with more than 15 years of practical experience. The national microcredit programme underwent some major difficulties, caused by reliance on official funds, centralized operations and frequent changes of loan terms, but the LEA network remained operational. Since 2005, LEAs are involved in a new public programme called “Microcredit Plus” and they are also eligible for EU JEREMIE funds. LEAs provide approximately 1,000 loans per year.
 
A new, subsidized loan product based on a Canadian model, Széchenyi Card, was introduced in 2002 through a partnership between the National Association of Entrepreneurs and Employers and the Hungarian Chambers of Commerce. It gives enterprises that have existed for at least one year, the possibility of drawing down a short-term loan for working capital over one year. Since its introduction, the product has achieved scale by leveraging technology and regional distribution channels, introducing entrepreneurs to commercial banks. However, Széchenyi Card does not target unbankable microenterprises. In 2007, the average loan size was above €25,000, although three-quarters of the loans disbursed were below €25,000. About 20,800 cards were issued in 2006 (MFC, 2008).
 
The only non-bank microfinance institution in Hungary is Mikrohitel, founded in 2005. It lends from its own capital, providing microcredit to entrepreneurs and NGOs as well as to the Roma population in partnership with Autonómia, an NGO funded by Soros and UNDP on a pilot basis through a group lending scheme. It also provides business counselling, training and technical assistance and has initiated a microfinance housing loan programme. Mikrohitel disburses around 150 to 200 loans a year to entrepreneurs (ibid.).
 
The overregulation of the Hungarian financial sector and inconsistencies in the national microcredit programme have left a large share of the potential microcredit market unserved - the unbankable though creditworthy population. Introduction of appropriate regulation and re-establishment of fair competition are necessary steps to fill this huge market gap.

 

Adie's 20th Anniversary!

On this occasion, the association has assessed its action, 20 years after the emergence of microcredit in France, and provides prospects for the future

With more than 51,000 businesses and 62,000 jobs created, Adie is the main microcredit operator in France. Since its creation, Adie has remained faithful to the purpose of microcredit which is to aid excluded people who do not have direct access to bank credit. It offers small loans or microcredits from €500 up to €5,500 which will allow them to start a business, and it ensures the follow up before, during and after the business creation to ensure sustainability. In 20 years, Adie has helped to improve the institutional environment of microcredit and microenterprises using its field experience to propose measures to simplify and streamline payroll taxes. It is now represented nationwide. This presence also enables Adie to offer its services in remote areas and in the French overseas departments and territories.
 
In 2007, the association had a growth rate of 30% with nearly 10,000 microcredits granted. In the coming years, Adie has the ambitious goal of doubling its business by 2010 in a market where the microcredit demand will continue growing along with self-employment and where the current offer remains limited. Adie will remain faithful to its target population which has no access to the traditional banking system. Due to the growing financial precariousness and interest of banks, some of which are already working with the top segment of customers, Adie will extend its target to small income-generating activities in the informal sector, that it will try to formalize, as well as to poor employees.

 

To better meet the needs of its customers, Adie has diversified its products (additional funding, microinsurance, social microcredit for individuals, microsavings in cooperation with the banks, etc.), and its methods, fully exploiting the possibilities offered by new technologies. Thus, in early 2009, the association will officially launch the first French microcredit online website.

Alongside credit, training and advice services to customers will continue to develop and become more professional. They will continue to enjoy the support of a large number of volunteers and benefit from funding, mainly public, even if arrangements are made to mobilize more private funds.

Thanks to the changes in the legal framework, the association plans to cover its credit-related costs within three years. The follow-up services that correspond to a "public service" will continue to be subsidized.

Download here the Adie's press release (only in French).

EIF and Fonds de Participation sign guarantee agreement under the EU CIP programme

In September 2008, the European Investment Fund (EIF) signed its first guarantee agreement - under the EU CIP SME Guarantee Facility - with the Brussels-based EMN member Fonds de Participation (Belgium). Fonds de Participation is a public federal financial institution whose mission is to provide subordinated loans to SMEs and loans to microenterprises that cannot obtain commercial loans from the traditional banking system. The agreement offers the possibility of allocating additional financing volumes for those very SMEs that would not otherwise have access to resources.
 
The CIP (Competitiveness and Innovation Framework Programme), which spans the period from 2007 to 2013, has been put in place to boost European productivity, innovation capacity and sustainable growth, whilst simultaneously addressing complementary environmental concerns. Within the framework of the CIP, the EIF has been allocated €1.1bn to be split between venture capital – with the High Growth and Innovative SME Facility (GIF) - and guarantees – with the SME Guarantee Facility (SMEG). Under the SMEG, financial institutions are encouraged to improve access to finance for SMEs.

View the EIF press release here.

nef publishes two new reports on British community development finance

 

The report “Social investment for community development: Completing the half-built house” considers the prospects for community finance and social investment and puts forward a number of key recommendations such as: a simple and well-designed tax mechanism that goes beyond the Community Investment Tax Relief; compulsory disclosure by banks of their lending and investment in disadvantaged areas; a grant fund to enable CDFIs to leverage private finance and improve lending practices; a matched funding scheme to motivate charitable foundations to invest in social enterprises and support for the development of a new social finance institution to act as a coordinator.

 

 

The second report, “UK CDFIs – from surviving to thriving”, starts with the fact that public support for the CDFI sector is disappearing, pushing CDFIs to increase efficiency while continuing to fulfill their original purpose - to provide affordable finance to disadvantaged communities. Drawing on four case studies, the report outlines strategies used to balance the pressures CDFIs are under, both to identify lessons that they can draw upon, and to recommend how other stakeholders can better support community finance to achieve its goals.

 

To download the reports, please click here. 

Fair Finance puts accountability back into lending with online disclosure

Celebrates £1m of sustainable lending to the poor

Socially responsible lender Fair Finance today put accountability back into the heart of lending by voluntarily disclosing details of its loans since 2005.
 
“We have nothing to hide about our lending activities”, said Faisel Rahman, founder and managing director of Fair Finance. “Instead we want to celebrate them, and now people can see that we lend to each and every community in which we operate.”
 
Disadvantaged communities and areas will stay poor if they don’t receive investment. Banks are the main source of private investment in these communities, but because of the current lack of information and transparency there is currently no way of comparing provider lending behaviour and encouraging better targeting of resources.
 
Rahman continued: “In the US banks are required to prove that they are not excluding any community by publically disclosing their lending under the Community Reinvestment Act of 1977. By using this data, and working with governments and communities, an estimated additional $4.5 trillion of loans and investments have been brought to poor and excluded communities. Fair Finance hopes that UK banks, lenders, credit unions and community finance agencies join them in a campaign to make our financial services more transparent.”
 
Established by Gordon Brown, and chaired by Sir Ronald Cohen, the UK’s Social Investment Taskforce published an initial report in 2000 calling for voluntary disclosure by banks of lending in underinvested communities. Follow up reports in 2003 and 2005 demonstrated the lack of progress on this issue and there have been increased calls for mandatory disclosure.
 
Fair Finance believes that disclosure makes business sense, and helps to demonstrate where it is lending and where it needs to target. It also gives clients trust in its openness and helps build relationships.
 
Mark Hannam, chair, Fair Finance added: “We have now lent over £1m in East London to provide credit to the financially excluded and to help create new small-businesses. Our defaults are running at only 6%, demonstrating the quality of our business model. Our responsible lending approach has seen us grow at between 50-80% a year over the last 3.5 years.   The next stage is to raise more capital so that we can cover the whole of London!”
 
Fair Finance calculates that it has put over £½m back into the hands of the poor who have used its services rather than the doorstep lenders and pay day lenders they used previously - where APR’s in excess of 1000% are not uncommon.
 
Fair Finance is a for-profit non-distributing social enterprise that invests 100% of its surplus back into the communities it serves. It has grown from one council estate in Stepney to now cover eight London boroughs with two offices. It plans to open more branches and bring its model of simple, accessible and fair financial services to all across London in the coming years.

 

EMN 5th Annual Conference held in Nice (France)

During its 5th Annual Conference held in Nice (France), from 8 to 10 September 2008, and organised in partnership with EUROFI and with the support of Adie, the European Microfinance Network brought together around 300 participants, practitioners, bankers, researchers, investors, local government representatives, the European Commission representatives, policy makers, central bankers and the private sector.

With the backing of the French Presidency, the Conference was co-organised by Adie and financially supported by the European Commission, the Caisse des Dépôts et Consignations, the Lévi-Strauss Foundation , the Paca region, the City of Nice, Crédit Coopératif, BNP Paribas and Microbank.
 
This 5th Annual Conference was also the 5th anniversary of EMN. It was also particularly important because it was organised under the auspices of the EU French Presidency, which thereby recognised the importance of this tool not only at the European level but also at the French level. It was also a unique opportunity to analyse and to emphasise the recent "European Initiative for the Development of Microcredit in Support of Growth and Employment" of the European Union which should help support the development of the sector in Europe in the coming years. At the conference, Danuta Hübner, European Commissioner for DG Regio, announced the launch of the JASMINE initiative to develop microfinance institutions in Europe.
 
This Conference showed, one more time, the potential of the sector and the increasing interest of institutions and the political arena in the use of relevant tools to help socially and financially excluded people get hold of their lives and contribute to the economic growth of their countries, whatever their geographical region.
 
With an average satisfaction rate of 94%, this Conference was a very successful meeting point for those interested in the microfinance field in Western Europe.
 
The next EMN Annual Conference will be organised in June 2009, in Milan (Italy). This will be, once more, a Conference where we will offer you brand new ideas and topics for discussion as well as a suitable space for networking and exchange opportunities.
 

See you in June 2009 in Milan!!

For more information on our next events, visit our website.

EMN has a new Board of Directors

Within the framework of EMN’s 5th Annual Conference, Klaas Molenaar, former vice-president, was elected as EMN’s new president. He replaces Maria Nowak (Adie, France) who resigned from her position after two terms as EMN President. Klaas Molenaar has more than 30 years field experience in SME programmes and organisations worldwide, linking experiences abroad with that in the Netherlands. He is the founder of FACET BV (1990) an SME consultancy, training and implementation agency with special expertise in SME financing and BDS, as well as that of SEON Foundation, an organisation specialised in Business Creation and entrepreneurship for starting SMEs in the Netherlands. Klaas has also conceptualised, founded and managed IntEnt Foundation, an organisation facilitating the creation of business by migrant entrepreneurs residing in the Netherlands in the country of origin to link Development, Migration and Entrepreneurship.

At the General Assembly held on 9th of September 2008 in Nice, EMN also elected four new Board members. These are:

  • Jean-Pierre Watthy in the function of Treasurer; Jean-Pierre is Manager of Studies at Fonds de Participation (Belgium), a Federal Public financial institution supporting entrepreneurship that fulfils its missions under the auspices of the Minister for the Middle Class, the Minister of Finances and the Minister for Employment.
  • Angel Font Vidal as one of the two Vice-presidents; He is Director of Inclusió Social de Fundació Caixa Catalunya (Spain), the first Spanish savings bank that created a microcredit programme.
  • Silvia Rico, Co-Director of Foro Nantik Lum de Microfinanzas (Spain), a permanent research centre on microfinance that disseminates best practices and knowledge on microfinance programmes. Foro Nantik Lum is also coordinator of the EMN research group.
  • Joyce Kimwaga, Director of NEEM (Sweden), a non-governmental and non-profit making organisation with the ambition to promote entrepreneurship among women from ethnic minorities and trim down the unemployment rate.
The new EMN Board now consists of seven people, including the two Board members Maria Doicu – Vice-President (Director of EUROM consultancy – Romania) and Faisel Rahman - Secretary (Director of Fair Finance – UK).

For more information, please visit the website section "About us/The Board".

 

European Microcredit Research Award 2008 - Winners announced

In June 2008, EMN and its Spanish member Nantik Lum had launched the European Microcredit Research Award intended to promote research about microfinance in Europe and endowed with €1,000. The call for proposals encountered excellent feedback; out of 13 propositions received, the Selection Committee chose the three best ones to be presented at EMN’s 5th Annual Conference research strand on September 10. The three chosen papers covered different areas: microfinance as a European policy issue by Michael Unterberg (EVERS&JUNG), Gender and microcredit in France by Sophie Brana (University Montesquieu-Bordeaux IV) and sustainability and microfinance in Britain by Karl Dayson and Pål Vik (University of Salford).
 
The final 2008 Award winners were announced during the Conference session “Celebrating 5 years of EMN” : Karl Dayson, executive director, and Pål Vik, research assistant, at Community Finance Solutions, University of Salford (United Kingdom) for their paper: “Making European microfinance more sustainable – lessons from Britain”. The paper identifies and analyses best practice in promoting sustainable microfinance institutions (MFIs) based on an in-depth analysis of five UK MFIs. The authors state that the MFIs are still some way away from covering all their costs with income generated from their core activity of lending. The results of the loan portfolio analysis suggest that they can increase their sustainability considerably through charging interest rates which more closely reflect the costs of delivery and by organising staff to maximise loan officer exposure to potential customers. The degree to which the MFIs can boost the sustainability of their operations depend on their starting point (i.e. interest rates charged, initial loan officer productivity), product mix and cost structure. The study argues that funders and policy-makers can support the sector in moving towards greater sustainability through ensuring that loan capital is available to underpin portfolio growth and through providing development grants to stage-manage productivity increases.
 
The selected papers can be downloaded on the EMN Research Award page here.

 

Giordano Dell'Amore “Italy Award”

The Giordano Dell'Amore Award “Microfinance, Innovation and Sustainability” aims to become a crucial event connecting two important initiatives: an international conference and a global contest on microfinance best practices.

The strategic purpose of this initiative is to start a common reflection on the methodologies, tools and social impact of microfinance and consequently on the role this instrument is playing in the development process. The initiative is designed to involve the operators of the microfinance sector in Italy. The Giordano Dell'Amore Award is open to all institutions and organisations active in the field. The prize consists of a fund of 50.000 euros awarded to the most innovative and sustainable microfinance project, to be reinvested in new microfinance activities. The top microfinance experiences will be collected in a publication that will be distributed at the conference.
 
The International Conference and the award ceremony will take place for the first time during the 6th Edition of the European Microfinance Network Conference scheduled from 4 to 5 June, 2009 in Milan.
 
A huge number of operators active in the field will be invited at the conference that will see the presence as guest speaker of a leading expert in the microfinance field. The expert will participate in the selection of the best microfinance experiences as juror and will deliver a speech (core lecture) on a relevant and current theme of microfinance.
 
For any additional information, please write to: award@fgda.org. For application forms please download the Competition Announcement by clicking here.  

 

 

Overview of the Microcredit Sector in the European Union 2006-2007

 

The third survey on the Microcredit Sector in the European Union covers the years 2006 and 2007 with data from 94 microfinance actors operating in 21 countries from the EU 27, including the non-member states Norway and Switzerland. It was carried out by EMN member Fundación Nantik Lum (Foro Nantik Lum de MicroFinanzas) on behalf of EMN. Fundación Nantik Lum is the coordinator of the EMN Research Working Group for the period 2007-2009.
 
According to the survey, some of the most important sector trends are the following: Amongst EU lenders, the number of microloans disbursed between 2007 and 2006 grew by 14%. As a whole, the number of active clients in the EU was 121,677 as of the end of 2007. The vast majority of the EU lenders are not for profit organisations in the form of non-governmental organisations (NGOs), foundations or government bodies. Twenty-eight percent of respondents focus solely on microlending, compared to 16% in 2005. Microlenders focus on start-up businesses and on the consolidation of existing small microenterprises, i.e. those with five or fewer employees. Clients targeted, in order of importance, are financially excluded individuals followed by women, unemployed persons, ethnic minorities and immigrants. Youth (18-25 years) and disabled people remain as lower priority groups. Average microloan size is increasing ; lenders focusing on SME support and job creation tend to lend larger sums whilst those focusing on social and financial inclusion tend to make smaller microloans.
 
Financial performance reporting is still weak across the sector. However, amongst organisations providing this data, loan portfolio performance ratios have improved since the last survey. Amongst the 20% of lenders that provided information on their operational self-sufficiency rates, the average rate in 2007 was 80% and half of the respondents were operationally self-sustaining. The best financially performing organisations are located in Eastern EU countries, namely in Bulgaria and Romania, characterised by their for profit legal status.
 
The most important challenges for the sector are related to reaching sustainability and maintaining good social performance. Some of the lenders’ propositions for achieving sustainability include better access to private and public funds, more support from public social services, better assistance to microentrepreneurs on their business development as well as on their financial education, and de-regulation on interest caps.
 
Download the survey on the EMN Publications page here. 

 

 

2010: the European Year for combating poverty and social exclusion

The EPSSCO Council of the EU (Ministers for Employment, Social Policy, Health and Consumer Affairs) formally adopted the decision to make 2010 the European Year for Combating Poverty and Social Exclusion. The fight against poverty and social exclusion is a central objective of the EU and its Member States, as part of the Lisbon strategy. A European Year can be an essential additional tool to ensure a stronger EU value added to these efforts and it’s part of the EU strategy to support Member States in their drive for greater social cohesion in Europe. 

 

The Year is generally seen as an opportunity for improving understanding among the general public of the complex structural realities that cause poverty in the EU, and the tools available to combat poverty and social exclusion. EMN, with its members, will take such an opportunity to demonstrate during that year how microfinance in the European context can be a powerful tool for employment and growth, for a better inclusive labor market. The Campaign from the Commission will have a budget of 17 Million € of which 9 Million will be distributed through Member States and 8 Million are dedicated to transnational activities. 

For more information, please visit EMN’s page by clicking here.

The new NAPs 2008-2010

All Member States have now submitted their National Action Plans for Social Inclusion for the period 2008 – 2010. The reports are important documents explaining how Member States plan to meet the common European objectives, especially as regard social protection and their fight against poverty and social Exclusion. EMN conducted several actions to analyse how microfinance has been included in the previous NAPs 2006-2008 and how to influence the new ones. EMN is currently in the process to start analysis the new NAPs 2008-2010 to have a better idea of the evolution of the role of microfinance in those NAPs.

For more information on the National Strategic Reports on Social Protection and Social Inclusion, please click here.

 

The 7th European Roundtable on Poverty

EMN and some of its members (Adie, Réseau Financement Alternatif and Crédal) actively participated in the 7th European Roundtable on Poverty and Exclusion, organized under the EU French Presidency and with the European Commission DG EMPL in Marseille (France) on October 15-16. For the first time a workshop on Financial exclusion was organized and a field visit was organized to visit some Adie’s clients. The main topic of the roundtable was based on the Commission Recommendation on “Active Inclusion of people excluded from the labour market”.

 

This recommendation is an important step in EU social policy as it marks the first legislative Act of the European Union in the field of social inclusion. The approach sits on three pillars: adequate income support, inclusive labour markets and access to quality services. It proposes common principles for each of the pillars, encouraging national governments to define their policies on this basis. For the first time the roundtable was followed by an informal meeting of social affairs ministers. The ministers expressed their interest in the strategic approach of active inclusion and welcomed the Commission Recommendation.

For more information on The European Social Protection and Social Inclusion process, please click here.

 

EU to improve access to finance for micro and SMEs and to reinforce development of microcredit in Europe

The JASMINE Initiative

Danuta Hübner announced the launch of the JASMINE Initiative during the EMN 5th Annual Conference held in Nice in September.

Regional Policy Commissioner Danuta Hübner presented on November 2007 an Initiative which seeks to improve access to finance for small businesses and for socially excluded people who want to become self-employed. This initiative, in line with the Lisbon Strategy aims to make small loans, or microcredit, more widely available in Europe to satisfy unmet demand.
 
The main aspects of the initiative are: 
  • First, it invites Member States to adapt their national institutional, legal and commercial frameworks needed to promote a more favourable environment for the development of microcredit.
  • Secondly, it recommends setting up a new European-level facility with staff to provide expertise and support for the development of non-bank microfinance institutions in Member States.
  • To find more capital for microcredit providers, this initiative proposes setting up a microfund in the new facility.
To meet these objectives, the EC and the EIB Group launched the JASMINE initiative to develop microfinance institutions in Europe which was announced by Danuta Hübner during the 5th EMN Annual Conference last September.
  • This initiative provides technical assistance to microfinance institutions (MFIs) to help them to become credible financial intermediaries and obtain capital more easily.
  • Another aspect is to finance operations by the most promising non-bank institutions so that they can grant more loans to project promoters.
The original feature of JASMINE is that it brings together several EU Institutions (the Commission, the EIB, the Parliament), public and private banks, the EUROFI network (think tank on European financial and banking services) and donors. The project is due to start in early 2009 with a pilot phase that should last for three years. The project's start-up capital will be some 50 million euros.
 
JASMINE is one of the actions announced in the Communication on the development of microfinance in Europe. It complements the JEREMIE initiative launched jointly by the EC and the EIB in 2006, which allows the Member States and regions of the EU to transform part of their Structural Fund allocations into financial products designed specifically for small and medium-sized enterprises.

JEREMIE: Improved access to finance for micro business and SMEs in the regions of the EU

JEREMIE: Improved access to finance for micro business and SMEs in the regions of the EU

JEREMIE, Joint European Resources for Micro to medium Enterprises, is an initiative of the Commission together with the European Investment Bank (EIB) and the European Investment Fund (EIF) in order to promote increased access to finance for the development of micro, small and medium-sized enterprises in the regions of the EU.
 
JEREMIE reflects the European Commission’s new approach to regional policy, characterised by the wish to go away from simple grants and rely more on revolving funds (loans). An estimated €2.5 billion is expected to be managed under JEREMIE with a potential leverage x5.
 
The EIF and the Commission have now finished the ‘preparatory phase’ covering the years 2006 and 2007. During this phase some 50 market failure studies (evaluations of the gaps between supply and demand for financial engineering products) in support of SMEs and microcredit operations were carried out (out of which 4 specifically on microfinance: two by EMN with its members for France and the Netherlands and two by MFC for Hungary and Poland). JEREMIE has now entered into its operational phase. About 15-20 Member States are expected to implement or to be inspired by JEREMIE.
 

How does it work?

Members States and regions (managing authorities) have the possibility to place part of their EU-allocated structural funds (ERDF/ESF) in a dedicated Holding Fund (HF) which acts as “fund of funds” or “umbrella fund”. The HF is governed by an Investment Board and may be managed directly by EIF and/or by national institutions selected upon public procurement. This is formalised through a “Funding Agreement” between the managing authority and the selected HF.
 
Once formalised, the HF launches an open call for expression of interest addressed to financial intermediaries (FIs) (including venture capital, loan or guarantee funds and microcredit providers). The HF provides equity, guarantees or loans, to selected and accredited FIs in accordance with operational details to be agreed between the managing authority and the HF. A considerably leverage effect is expected, bringing in additional loan capital from banks, the EIB and other IFs. Managing authorities can also decide to make available in parallel technical assistance credits to accredited FIs.
 

Programming period

JEREMIE covers the period 2006-2015. This means that by the end of 2015 at the latest, the totality of contributions from the operational programme to fund or holding fund needs to have given rise to an equivalent level of payments by the financial intermediaries for investments in MSMEs.
 
Agreements signed so far:
So far, funding agreements have been signed with the following countries:
  • EIF as HF manager: Greece (100m€; June 2007), Romania (100m€; Feb. 2008), Latvia (203 m€; July 2008), Lithuania (80m€; Oct. 2008), Languedoc-Roussillon region in France (€30m; Oct. 2008),
  • EIF & National Institution as HF manager: Slovakia (Oct.2008), Bulgaria (end 2008)
  • National Institution as HF manager: Hungary (2007), Wales, Finland
 
Further negotiations are underway:
Further JEREMIE contracts between the EIF and national or regional governments are currenty under negotiation with the governments of Cyprus, Finland, Malta, Slovenia, Spanish regions (Galicia, Andalusia, Canary Islands), Italian regions (Marche, Lombardy) and Polish regions (Wielkopolska).
 

Contract Notice

In the framework of the JEREMIE Initiative, the DG REGIO of the EC and the EIF are leading microfinance market surveys in order to enhance their knowledge on the European microfinance market. In this prospect, the EIF call for a market study assessing the nature of the financial intermediaries specialised in providing microcredit throughout the European Union. Besides, information shall be provided on the needs of the intermediaries of a pilot action such as JASMINE in terms of: Capital, Technical Assistance, Regulation improvements, Promotion of microcredit.
 
Source: EU website

 

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