European Microfinance Network Daniel Sorrosal - European Microfinance Network Microfinance in Europe Microfinance in Europe Colloque: La Microfinance comme outitl d’integration economique Colloque: La Microfinance comme outitl d’integration economique April 26th 2011, Brussels April 26th 2011, Brussels

European Microfinance Network The European Microfinance Network (EMN) was launched by its founding members (Adie - France, nef - UK and EVERS&JUNG - Germany) in April 2003, with the support of the European Commission and the French Caisse des Dépôts et Consignations (CDC). The European Microfinance Network (EMN) was launched by its founding members (Adie - France, nef - UK and EVERS&JUNG - Germany) in April 2003, with the support of the European Commission and the French Caisse des Dépôts et Consignations (CDC). The EMN is a Non Governmental Organisation ("Association loi 1901, under the French legislation) and was officially registered in Paris on May 23rd The EMN is a Non Governmental Organisation ("Association loi 1901, under the French legislation) and was officially registered in Paris on May 23rd History

European Microfinance Network ✓ The mission of EMN is to promote microfinance as a tool to fight social and economic exclusion and to promote microentrepreneurship and self-employment. ✓ This is achieved by supporting the development of microfinance organisations through the dissemination of good practices and by improving the regulatory frameworks for microfinance, self- employment and microentreprises at the European Union and Member State levels. Mission

European Microfinance Network EMN is a network organisations created, run and supported by its members. EMN is a network organisations created, run and supported by its members. EMN supports its members: EMN supports its members:  by making their working environment more favourable, both at European and national levels.  by helping them grow and develop so that they become sustainable organisations that respond to specific market needs. ✓ 6 Working Groups: Research, IT, Social Performance, Asset Building, Legal Environment and Regulation and Growth Strategy

European Microfinance Network Klaas Molenaar - President (Triodos Facet – The Netherlands) Klaas Molenaar - President (Triodos Facet – The Netherlands) Maria Doiciu - Vice-president (Eurom - Romania) Maria Doiciu - Vice-president (Eurom - Romania) Giampietro Pizzo – Vice-president (Microfinanza - Italy) Giampietro Pizzo – Vice-president (Microfinanza - Italy) Jean-Pierre Watthy – Treasurer (Fonds de Participation - Belgium) Jean-Pierre Watthy – Treasurer (Fonds de Participation - Belgium) Joyce Kimwaga – Secretary (NEEM - Sweden) Joyce Kimwaga – Secretary (NEEM - Sweden) Faisel Rahman (Fair Finance – UK) Faisel Rahman (Fair Finance – UK) Silvia Rico (Foro Nantik Lum de Microfinanzas - Spain) Silvia Rico (Foro Nantik Lum de Microfinanzas - Spain) Helena Mena (Millennium bcp – Portugal) Helena Mena (Millennium bcp – Portugal) Governance

European Microfinance Network EMN has 88 members in 21 European countries. Members are microfinance providers, research institutions, banks, etc. 75% practitioners 25% Eastern Europe 22% consulting, research organisms 10% banks Members

European Microfinance Network EMN strengthens its members and develops exchange… In 6 years: 10 different training courses 10 different training courses more than persons trained more than persons trained 12 consultancy missions 12 consultancy missions Organisation of 15 exchange visits with over 250 participants Organisation of 15 exchange visits with over 250 participants Publication and dissemination of good practice guides Publication and dissemination of good practice guides

European Microfinance Network EMN develops research, increases visibility and creates links between stakeholders EMN participated with its members in 42 research projects about the sector, and set up a Research Working Group. EMN has a special interest on gender as well gender as well as migration, through the coordination of projects co-financed by the European Union. European Union. A website, a quarterly newsletter, the "Microfinance Europe“ magazine … Organisation of 7 Annual Conferences and 2 International Conferences with more than 2500 participants

European Microfinance Network EMN participates in improving the regulatory environment Lobbying at EU and national levels Lobbying at EU and national levels Development of specific tools (eScorecard – NAPs tool kit…) Development of specific tools (eScorecard – NAPs tool kit…) "The European Initiative for the development of microcredit in support of growth and employment" – JASMINE "The European Initiative for the development of microcredit in support of growth and employment" – JASMINE Improve the legal and institutional environment in the Member States Improve the legal and institutional environment in the Member States Further change the climate in favour of entrepreneurship Further change the climate in favour of entrepreneurship Promote the spread of best practices Promote the spread of best practices Provide additional financial capital for new and non-bank MFIs Provide additional financial capital for new and non-bank MFIs European Progress Microfinance Facility - June 2009 European Progress Microfinance Facility - June 2009

European Microfinance Network Microfinance – emergence and evolutions

European Microfinance Network Offer adapted financial services to a significant number of people on low income who are economically active in order to improve their living conditions and their participation in the local economy. Build up in the long term sustainable financial institutions at the service of underpriviledged populations. Source : CGAP (Consultative Group to assist the Poor – International investor)

European Microfinance Network Microfinance activities Income-generating activities SMEs EducationHousing Health But also access to…. Microentreprises Social

European Microfinance Network Microfinance in Europe

European Microfinance Network What is microfinance in Europe?

European Microfinance Network Entrepreneurial spirit less developed and encouraged Entrepreneurial spirit less developed and encouraged A welfare state with strong social protection A welfare state with strong social protection Strict regulation for microenterprises Strict regulation for microenterprises High cost of social benefits High cost of social benefits In certain countries easy access to consumer loans (very high interest rates) In certain countries easy access to consumer loans (very high interest rates) Highly developed bank system, strict bank regulation Highly developed bank system, strict bank regulation Difficulties for organisms of reaching sustainability Difficulties for organisms of reaching sustainability Characteristics of microfinance in Europe

European Microfinance Network Number of enterprises in (in thousands) Informal sector (Income-generating activities) > 250 employees 50 à 250 employees employees employees  23,2 million enterprises in the EU 27  91,5% of entreprises in Europe are micro-enterprises (0 - 9)  The 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 context

European Microfinance Network The social context ✓ Population at risk of poverty: 78 million ✓ Working population under the poverty line: 28 million ✓ Rate of people at risk of poverty in the EU: 17% (2007) ✓ National figures vary from 10% to 25%. ✓ Especially at risk: women, young people (20% for children between 0-17; 19% for those between years), single parent households with children (34%). ✓ Long-term unemployment is one of the main factors of exclusion.

European Microfinance Network The financial context Financial exclusion defined as the part of the population without a bank account, neither savings nor credit (nor insurance). Financial exclusion defined as the part of the population without a bank account, neither savings nor credit (nor insurance). 7 % in Europe 15, 34% in Europe 10 7 % in Europe 15, 34% in Europe 10 In the 10 new EU countries 47 % don’t have a bank account, compared to 10 % in the EU15. In the 10 new EU countries 47 % don’t have a bank account, compared to 10 % in the EU15. In the EU15,18 % of adults don’t have access to bank transactions, 30% don’t have savings and 40% don’t have any credit facilities. In the EU15,18 % of adults don’t have access to bank transactions, 30% don’t have savings and 40% don’t have any credit facilities.

European Microfinance Network Existing SMEs New traditional enterprises Market gap to be filled by banks Income-generating activities Microentreprises set up by excluded persons Market gap to be filled by specialised insitutions Market segmentation Market segmentation

European Microfinance Network In the EU15: microcredit rather than microfinance Definition UE: loan below EUR Focus on unemployed persons setting up a business (inclusion) Microfinance comprises financing and non-financial services Microfinance is hardly profitable, but makes sense economically Focus on social inclusion and job creation rather than profitability. Main features

European Microfinance Network Part of existing programmes of development banks Political pressure at the basis Sometimes image problem for reaching out to clients and make them pay Institutional support programmes Special entities of banksONG, focus on specific groupsONG, focus microfinance Small scale (exemption: Prince Trust) Finance seen as added value for enterprise support Inspired by international practice Integrated non financial services ADIE in France, Per Micro in Italy, ANDC in Portugal DMI in Germany, Finnvera in Finland, Fonds de Participation in Belgium, ICO in Spain,... PSYBT in UK, Banco Mundial de la Mujer in Spain, Autonomia Foundation in Hungary, etc Microbank and Savings Banks Foundations in Spain, Millennium Microcredito in Portugal, Microstart (ADIE & BNP) in Belgium Recent development Strong growth Synergy effects on costs due to existing infrastructure. European Microfinance Institutional models NBFI, Foundation microfinance approach Credal in Belgium, Fair Finance in UK, Patria Credit in Romania, Mikrofond in Bulgaria, etc – MFIs in Eastern Europe and Credit Cooperatives in Western Europe

Micro Enterprise Lenders Inclusion LendersMicro Lenders ObjectiveMore enterprisesMore entrepreneursMore access to credit FocusEnterpriseEntrepreneurCredit access Risk Management Selection of viable businesses only Repayment follow up Leverage, economies of scale & Innovation Loan size€ K€ K€ K Services Business Plan & Finance Coaching & FinanceFinance only Methodology Business Plan Lending Step lending Type of serviceOne-shot One shot & Some recurrent clients Recurrent clients Best adapted toStart-upsNew Entrepreneurs Small, recurrent finance needs Less adapted to Plain credit, atypical ideas, concepts not well developed Existing entrepreneurs, not needing coaching Higher loan needs, higher risk profiles Microfinance models by activity

In 2009, a total of 84,523 microcredits for 828 million euros were granted*. In Western European countries, 51,027 loans were made for 477 million euros, while in Eastern Europe 18,293 loans were made for 307 million euros. End of 2009: 135,815 active clients. (based on 72% of survey respondents) €49.9 billion for 237,495 loans since their creation. (based on 74% of survey respondents) *The data didn’t include one major actor in Poland and the network of Procredit banks in Eastern Europe. European Microfinance in figures

European Microfinance Network 28 EMN Survey of the Microcredit Sector in the European Union Survey participants: 170 organisations in 21 countries Total 84,523 microloans for €828 million

European Microfinance Network Number of active clients End of 2009: 135,815 active clients (72% response rate)

European Microfinance Network 30 Target clients: People excluded from traditional financial services: 47% of organisations People excluded from traditional financial services: 47% of organisations Women: 44% Women: 44% Ethnic minorities and/or immigrants: 41% Ethnic minorities and/or immigrants: 41% Unemployed people: 32% Unemployed people: 32% No specific target: 30% No specific target: 30% Type of businesses: Start-ups rather than existing enterprises Start-ups rather than existing enterprises Registered business with less than 5 employees are the main target (55%) Registered business with less than 5 employees are the main target (55%) 24% provide loans to informal or non registered business 24% provide loans to informal or non registered business 65.5% of clients are « unbankable« persons 65.5% of clients are « unbankable« persons Excluded people and new businesses are the main targets

European Microfinance Network Mission: jobs, inclusion and growth

European Microfinance Network Loan Products and Pricing: Diversity in Loan Sizes and Interest rates A variety of loan sizes offered to clients. A variety of loan sizes offered to clients. The maximum loan size offered to clients ranges from €37,000 to €220 (even if the EU defined a microcredit as being below €25,000). The maximum loan size offered to clients ranges from €37,000 to €220 (even if the EU defined a microcredit as being below €25,000). (Non-weighted) Interest rates charged range from 2% at the lowest to 22% at the highest. The average is 9%. (Non-weighted) Interest rates charged range from 2% at the lowest to 22% at the highest. The average is 9%. Average (non-weighted) interest rates vary by country - the highest rates are charged in the United Kingdom (22% average) and Poland (17% average) and the lowest in Portugal and Finland (3% and 2% respectively). Average (non-weighted) interest rates vary by country - the highest rates are charged in the United Kingdom (22% average) and Poland (17% average) and the lowest in Portugal and Finland (3% and 2% respectively).

European Microfinance Network Not only just microcredit for enterprise development Only 19% of respondents do not provide any kind of support. 42% provide other financial services

European Microfinance Network In Western Europe the need to provide microentrepreneurs with access to microloans is now recognised. However, in order to develop and better respond to the needs of potential clients, the microfinance sector faces a number of challenges: An environment characterised by a highly developed, competitive financial service industry, with a growing number of operators offering high-interest consumer loans leading to over-indebtedness by families; An environment characterised by a highly developed, competitive financial service industry, with a growing number of operators offering high-interest consumer loans leading to over-indebtedness by families; An entrenched welfare system that fails to encourage people to seek self-employment; An entrenched welfare system that fails to encourage people to seek self-employment; The lack of an entrepreneurial culture, and moreover the lack of incentives to develop one at various levels of society; The lack of an entrepreneurial culture, and moreover the lack of incentives to develop one at various levels of society;

European Microfinance Network Lack of sufficient funding to cover operational costs of microlenders, and the short-term basis on which funding is offered; Lack of sufficient funding to cover operational costs of microlenders, and the short-term basis on which funding is offered; High dependency on the public sector for operational and capital funding, with little independent revenue due to low interest rates; High dependency on the public sector for operational and capital funding, with little independent revenue due to low interest rates; An unfavourable legal framework resulting from the implementation of usury laws that prohibit development of the sector; An unfavourable legal framework resulting from the implementation of usury laws that prohibit development of the sector; The development of best practices among microlenders in order to strengthen their operational and performance capacities. The development of best practices among microlenders in order to strengthen their operational and performance capacities.

European Microfinance Network An enabling European policy MF is situated between two major areas: economic policy and social inclusion policy. MF is situated between two major areas: economic policy and social inclusion policy. This two-fold approach is completed by regional cohesion policy This two-fold approach is completed by regional cohesion policy Initiatives: JEREMIE, JASMINE and EPMF Initiatives: JEREMIE, JASMINE and EPMF The PROGRESS Microfinance Facility for Employment and Social Inclusion (EPMF) The PROGRESS Microfinance Facility for Employment and Social Inclusion (EPMF) The creation of a dedicated EU Entrepreneurship and Microfinance Taskforce now converted into a permanent unit within the organigram of DG Employment as focal point for Microfinance at European level. The creation of a dedicated EU Entrepreneurship and Microfinance Taskforce now converted into a permanent unit within the organigram of DG Employment as focal point for Microfinance at European level.

European Microfinance Network European Progress Microfinance Facility €200 million Microfinance facility for investment, guarantee and lending to EU MFIs. The main funders are the EU with €100 million reallocated from the PROGRESS program over 4 years ( ), plus €100 million matching funds from European Investment Bank €200 million Microfinance facility for investment, guarantee and lending to EU MFIs. The main funders are the EU with €100 million reallocated from the PROGRESS program over 4 years ( ), plus €100 million matching funds from European Investment Bank Expected to leverage: more than €500 million, in a joint initiative with international financial institutions particularly the European Ivestment Bank (EIB) Group Expected to leverage: more than €500 million, in a joint initiative with international financial institutions particularly the European Ivestment Bank (EIB) Group The new facility is aimed at supporting unemployed people with a business project find the necessary financial means to set up their own business through access to microcredit as well as financially supporting existing microenterprises in the context of the crisis. The new facility is aimed at supporting unemployed people with a business project find the necessary financial means to set up their own business through access to microcredit as well as financially supporting existing microenterprises in the context of the crisis.

European Microfinance Network Merci, thank you ! Daniel Sorrosal EMN Executive Secretary European Microfinance Network - Brussels 37 Rue du Prince Royal 1050 Brussels – Belgium Tel: European Microfinance Network - Paris 103 Rue de Vaugirard Paris - France Tel: Fax: