1. European Microfinance Network An introduction to Microfinance, and European policies and instruments Daniel Sorrosal – European Microfinance Network Weed Project Online Class, September, 14 th 2010

2. European Microfinance Network Created in 2003 by Adie (France), EVERS & JUNG (Germany) and new economics foundation – nef (UK). Created in 2003 by Adie (France), EVERS & JUNG (Germany) and new economics foundation – nef (UK). EMN has today 88 members from 23 European countries EMN has today 88 members from 23 European countries EMN is based in Paris and a new office in Brussels has been opened in 2010 EMN is based in Paris and a new office in Brussels has been opened in 2010 The EMN secretariat is composed of 4 staff The EMN secretariat is composed of 4 staff

3. European Microfinance Network The mission of EMN is to promote microfinance as a tool to fight social and economic exclusion and to promote micro-entrepreneurship and self employment. 87 Members in 21 countries NGOs, Banks, think tanks, Research institutes, consultant 77% practitioners, 10% Corporate members, 25% from new EU members States Information, Lobbying, Good practices, Capacity building, Research European Microfinance Network

4. The Social Context for MF Population at risk of poverty : 80 million Population at risk of poverty : 80 million Active population below the poverty line : 28 million Active population below the poverty line : 28 million In 2004, the average at-risk-of-poverty rate in the EU was 16%, while national figures ranged from 9% to 21%. In most countries, the at-risk-of- poverty rate (for the population aged 16 or more) was higher for women. In 2004, the average at-risk-of-poverty rate in the EU was 16%, while national figures ranged from 9% to 21%. In most countries, the at-risk-of- poverty rate (for the population aged 16 or more) was higher for women. The young have the highest at-risk-of-poverty rate, at 19% for children aged 0-17, and 18% for the 18-24 age groups. The young have the highest at-risk-of-poverty rate, at 19% for children aged 0-17, and 18% for the 18-24 age groups. One person households and those with dependent children tend to have the highest poverty risk, with the highest poverty rate affecting single parents with one dependent child (33% in the EU as a whole). One person households and those with dependent children tend to have the highest poverty risk, with the highest poverty rate affecting single parents with one dependent child (33% in the EU as a whole). Long-term unemployment is one of the major indicators for exclusion. Long-term unemployment is one of the major indicators for exclusion. Due to the crisis around 9 Mn people are expected to become unemployed Due to the crisis around 9 Mn people are expected to become unemployed

5. European Microfinance Network Financial Exclusion Context Financial exclusion is defined as the share of people without a bank account, with no savings and without revolving credit. Financial exclusion is defined as the share of people without a bank account, with no savings and without revolving credit. 7 % in Europe 15 7 % in Europe 15 10 EU newcomers 47% of all inhabitants have no banking account, as compared to 10 percent in the EU- 15. 10 EU newcomers 47% of all inhabitants have no banking account, as compared to 10 percent in the EU- 15. In the EU-15, 20% of adults lack access to transaction banking facilities, some 30 percent have no savings and 40 percent have no credit facilities. In the EU-15, 20% of adults lack access to transaction banking facilities, some 30 percent have no savings and 40 percent have no credit facilities.

6. European Microfinance Network Number of enterprises in Europe (in thousands) 9 255 1 693 21 228 Informal sector (Income-generating activities) > 250 employees 50 à 250 employees 10 - 49 employees 0 - 9 employees 23,2 million enterprises in EU 25 91,5% of enterprises in Europe are micro-enterprises (0 - 9) 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

7. European Microfinance Network History 14th century, first pawnshops in Italy 19 th century, M. Raiffeisen, Germany first cooperative savings credit unions After 1989 development in Eastern Europe Main development in Western Europe after 2000 (60%)

8. European Microfinance Network Microfinance in Europe is considered as a tool for both social inclusion and employment creation defined Microfinance in Europe is considered as a tool for both social inclusion and employment creation defined Microcredit is defined as loans < 25K to individuals excluded, unemployed or inactive or to Micro enterprises < 10 employees Microcredit is defined as loans < 25K to individuals excluded, unemployed or inactive or to Micro enterprises < 10 employees 84523 microcredits were granted in Europe in 2009, amounting to 828 million 84523 microcredits were granted in Europe in 2009, amounting to 828 million 170,000 active microfinance clients in 2009 170,000 active microfinance clients in 2009 9,600 Average loan size with 3 year term 9,600 Average loan size with 3 year term 47% of clients are people excluded from the financial system, 47% of clients are people excluded from the financial system, 27% are women, 38% were unemployed and 13% are members of an ethnic minority. 27% are women, 38% were unemployed and 13% are members of an ethnic minority. 9% Average interest rate (range from 2% to 36%) 9% Average interest rate (range from 2% to 36%) 50% of organizations have repayment rate above 80% ( average 63%) 50% of organizations have repayment rate above 80% ( average 63%) 59 % of organisations do not ask for a guarantee 59 % of organisations do not ask for a guarantee Data based on 2007 EMN Survey. 2009 EMN Survey is underway, number of respondents has increased from 111 to 180 in 2010, growth of figures expected. Survey will be available in May 2010 Data based on 2007 EMN Survey. 2009 EMN Survey is underway, number of respondents has increased from 111 to 180 in 2010, growth of figures expected. Survey will be available in May 2010 What is MF in Europe

9. European Microfinance Network Not included ProCredit Banks, Commercial Banks (Source : overview of the microcredit sector in the EU 2008 - 2009) 200720082009 Number of loans 42 75090 60584 523 In million of euros 394802828 Estimated supply End of 2009 …More than 170.000 active clients

10. European Microfinance Network What is the potential demand? Total stock Annual flow Source : Adie 16M 497M 10M 38M 63M Total population

11. European Microfinance Network Supply of MF in the EU

12. European Microfinance Network Microfinance providers in Europe are still young (especially in Western Europe) Microfinance providers in Europe are still young (especially in Western Europe) 62% of organisations participated in the EMN survey began their activity in 2000 or later (26% after 2005) 62% of organisations participated in the EMN survey began their activity in 2000 or later (26% after 2005) 67% of organisations don't grant more than 100 microcredits per year. 67% of organisations don't grant more than 100 microcredits per year. 85% less than 20 staff (but 17 000 volunteers). 85% less than 20 staff (but 17 000 volunteers). Biggest organisation is ADIE in France with 26.000 clients, more than 500 staff Biggest organisation is ADIE in France with 26.000 clients, more than 500 staff 60% are non-profit organisations 60% are non-profit organisations 11% are Banks, Savings Banks and other credit institutions (focus on bankable clients) 11% are Banks, Savings Banks and other credit institutions (focus on bankable clients) Only for 24% of institutions have microcredit as their primary activity Only for 24% of institutions have microcredit as their primary activity 47% target socially excluded populations 47% target socially excluded populations Fighting poverty and social exclusion is more widespread in Western Europe Fighting poverty and social exclusion is more widespread in Western Europe SME creation and support and is predominant in Eastern Europe SME creation and support and is predominant in Eastern Europe Who does MF in Europe

13. European Microfinance Network Existing Micro and small enterprises Classical start-ups Finance gap to be filled by banks Income-generating activities Microenterprises created by deprived groups Market failure to be corrected by nonbank institutions Types of Microfinance clients

14. European Microfinance Network Microfinance providers installed in existing institutions or development banks political pressure motivation sometimes image problem to reach micro clients and motivate to repay due to bank and public ownership Institutional Support programs Specialized units of banksNGOs, target group driven approachNGOs, microfinance driven approach small scale finance seen as added value to the business support inspired by microfinance success in developing countries business support seen as added value to finance Adie in France, ANDC in Portugal, PSYBT in UK, Micro Bo, Per Micro in Italy... Finnvera in Finland, KfW in Germany, Fonds de Participation in Belgium, ICO in Spain,... WEETU in UK, Hordaland Credit Circle in Norway, Enterprise in Germany, Integra Slovakia Cajas with microfinance programs in Spain (e.g. Foundacio Caixa Catalunya), Millenium bcp in Portugal, MicroBank in Spain young development strong growth rates synergy effects on costs through existing bank infrastructure (i.e. back office, branches) NBFI, microfinance driven approach ROMCOM, FAER– Romania;– MFIs in Eartern European countries Mature MFI Sustainable Rather SMEs oriented than social 2 transforming into a bank Funduz Mikro (Poland) Patria Credit (Romania) Cooperatives Uncar in Romania; Crédal in Belgium, Slok in Poland Big number of clients Mainly personal loans

15. European Microfinance Network Microfinance in Europe In EU rather microlending than microfinance In EU rather microlending than microfinance EU definition: loan amounts up to 25K EUR to support the development of micro enterprises, self-employment EU definition: loan amounts up to 25K EUR to support the development of micro enterprises, self-employment Microfinance combines Financing with Business Support Services Microfinance combines Financing with Business Support Services Focus on social inclusion and employment creation

16. European Microfinance Network EU support to microfinance Microfinance fits the Europe 2020 Strategy (Smart Growth, Social inclusion, Focus on youth, etc) Microfinance fits the Europe 2020 Strategy (Smart Growth, Social inclusion, Focus on youth, etc) Various EU initiatives since 2007 by different DG (Regio, Enterprise, Employment) Various EU initiatives since 2007 by different DG (Regio, Enterprise, Employment) Latest initiative from EU Parliament with 100M and support from European Investment Bank: "The European microfinance facility for employment and social inclusion (Progress)" Latest initiative from EU Parliament with 100M and support from European Investment Bank: "The European microfinance facility for employment and social inclusion (Progress)"

17. European Microfinance Network Enterprise development Policy Enterprise development Policy Managed by: DG Enterprise within the European CommissionManaged by: DG Enterprise within the European Commission Competitiveness and Innovation Framework ProgrammeCompetitiveness and Innovation Framework Programme Objective: fostering entrepreneurship and improving access to finance for SMEs.Objective: fostering entrepreneurship and improving access to finance for SMEs. Financial Instrument: Microcredit Guarantee WindowFinancial Instrument: Microcredit Guarantee Window Implementing Body: European Investment FundImplementing Body: European Investment Fund To know more see :To know more see : http://ec.europa.eu/cip/index_en.htmhttp://ec.europa.eu/cip/index_en.htmhttp://ec.europa.eu/cip/index_en.htm http://www.eif.org/what_we_do/microfinance/microcredit_guarantees/in dex.htmhttp://www.eif.org/what_we_do/microfinance/microcredit_guarantees/in dex.htmhttp://www.eif.org/what_we_do/microfinance/microcredit_guarantees/in dex.htmhttp://www.eif.org/what_we_do/microfinance/microcredit_guarantees/in dex.htm European Policies dealing with MF

18. European Microfinance Network Regional Policy Regional Policy Managed by: DG REGIO within the European CommissionManaged by: DG REGIO within the European Commission Program: JASMINE (Joint Action to support microfinance institutions in Europe)Program: JASMINE (Joint Action to support microfinance institutions in Europe) Objective: improve access to finance for small businesses, and for socially excluded people who want to become self-employed.Objective: improve access to finance for small businesses, and for socially excluded people who want to become self-employed. Financial Instrument: Technical Assistance Funds (6M) + Loan Funds (14M)Financial Instrument: Technical Assistance Funds (6M) + Loan Funds (14M) Implementing Body: European Investment FundImplementing Body: European Investment Fund To know more see:To know more see: http://ec.europa.eu/regional_policy/funds/2007/jjj/micro_en.htmhttp://ec.europa.eu/regional_policy/funds/2007/jjj/micro_en.htmhttp://ec.europa.eu/regional_policy/funds/2007/jjj/micro_en.htm http://www.eif.org/what_we_do/microfinance/JASMINE/index.htmhttp://www.eif.org/what_we_do/microfinance/JASMINE/index.htmhttp://www.eif.org/what_we_do/microfinance/JASMINE/index.htm European Policies dealing with MF

19. European Microfinance Network Employment and Social Policy Employment and Social Policy Managed by: DG EMPLOYMENT within the European CommissionManaged by: DG EMPLOYMENT within the European Commission Program: EPMF (European Progress Microfinance Facility)Program: EPMF (European Progress Microfinance Facility) Objective: providing microcredit to small businesses and to people who have lost their jobs as a consequence of the crisis and want to start their own small businesses.Objective: providing microcredit to small businesses and to people who have lost their jobs as a consequence of the crisis and want to start their own small businesses. Financial Instrument: Guarantee Funds and Loan Funds (100M)Financial Instrument: Guarantee Funds and Loan Funds (100M) Implementing Body: European Investment FundImplementing Body: European Investment Fund To know more see:To know more see: http://ec.europa.eu/social/main.jsp?langId=en&catId=836http://ec.europa.eu/social/main.jsp?langId=en&catId=836 http://www.eif.org/what_we_do/microfinance/progress/index.htmhttp://www.eif.org/what_we_do/microfinance/progress/index.htm European Policies dealing with MF

20. European Microfinance Network Thank you for your attention ! Awaiting your questions...

21. European Microfinance Network European Microfinance Network European Microfinance Network 103 rue de Vaugirard 75 006 Paris, France 1 rue de Ligne 1000 Brussels, Belgium Tel: +33 1 42 22 01 19 Fax: +33 1 42 22 06 44 www.european-microfinance.org Daniel Sorrosal - Senior Programme Officer d.sorrosal@european-microfinance.org