1. The European Progress Microfinance Facility

2. Why the Facility? Rising unemployment Credit crunch
Funding needs of non banking providers of microcredit (regulatory environment and inter-banking market)
Need for quick and direct action

3. Objective of the Facility
Increase access to, and availability of, microfinance for:
vulnerable groups (unemployed, disadvantaged people, young people, etc.) wanting to set up or further develop a micro enterprise (including self-employment).
Micro-enterprises, especially those in the social economy

4. Budget
Union contribution: € 100 M ( from Progress programme and margins)
+ EIB contribution (€ up to 100 M)
Expected leverage 5 times
1% maximum for support measures
Re-investment within 6 years
After end of Facility: surpluses back to Community budget

5. Products Under discussion with EIF/EIB: Guarantees (June)
SICAV / Specialised investment fund (September) for:
debt instruments;
equity

6. GUARANTEES AND RISK SHARING INSTRUMENTSEC
EIF
Guarantee
MFI
Loan portfolio
of target
beneficiaries
Micro-
loans
FIs
(banks)
for MFIs /
NGOs
for target
Debt
Instrument
Micro loans
- Counter Guarantees
- Guarantees
to cover losses of Banks/MFIs which provide
micro-loans to final beneficiaries

7. special vehicle and MFI
Shareholding
in special vehicle
Agreement between
special vehicle and MFI
Micro-credit
to final beneficiaries
FB=Final Beneficiaries

8. How can the individual benefit from the Facility?
Public employment service or NGO
Microfinance provider
(bank or NGO)
4. Training, coaching (ESF)
Interest rebate (ESF)
Micro-
enterprise 1 2 3
1 The unemployed or disadvantaged person is informed about the possibilities offered by the Facility through the public employment service or by NGOs. He/she is directed towards a micro-finance provider.
2 The application is made to the microfinance provider (bank or NGO)
3 A contract is signed between the beneficiary and the provider. The individual can benefit from the interest rebate offered by the ESF
4 From the information phase until the actual running of the business the beneficiary is supported by the European Social Fund through training and coaching, guidance and mentoring.
How can the individual benefit from the Facility?
Individual
Micro entrepreneur
loan
Information
Support

9. Loan interest rate rebates
Art. 11 of ESF Regulation
The rebate covers the fee charged by a lender to a borrower for the use of the borrowed money
The principal of the loan is not concerned
Forms of rebate :
a return of part of a payment
a deduction from a sum before payment

10. Loan interest rate rebates
Two operational options
Specific rebate support : in combination with Progress
General rebate support : irrespective of Progress
Common requirement : alignement with the ESF scope and specific objectives of the operational programme
The eligibility test for the micro-borrowers (Progress decision) is a duty of the financial intermediaries

11. Loan interest rate rebates
Specific rebate support granted to borrowers:
- Granted for loans not exceeding €25000 obtained from intermediaries backed by Progress
- Partial or full coverage of interest due on the basis of real costs approach
- Simplified costs option : a package with weighting of components

12. Loan interest rate support
General rebate support granted to borrowers / intermediaries (limitation of art. 54(5) of 1083/2006) :
- Granted for loans that may exceed €25000 irrespective of the Progress facility
- Partial or full coverage of interest due on the basis of real costs approach
Simplified costs option : a package with weighting of components
- Possibility of a ‘deduction of a sum before payment’ via the intermediaries

13. Next steps start up Facility by mid 2010
Accompanying and promotional measures through ESF technical assistance : preparatory study
Launching event: October 2010
Annual reporting to Council/EP starting in 2011