Microfinance in Europe : A solution for the crisis ?

Microfinance Club of Paris organized a conference on March 27th to answer that question. Back on the main points of the stakeholders present at the conference.

In a debate organized by the Microfinance Club of Paris, supported by the Convergence Group, several speakers from microfinance sector tried to make an assessment of the current state of microfinance in Europe and to know if microfinance can provide a solution to the current economic crisis.

Among the stakeholders :

  • Cyril Gouffièes - European Investment Fund (EIF)
  • Francesco Grieco - European Microfinance Network
  • Sébastien Poidatz - Expert in personal microcredit at The Caisse des Dépôts group

  • How is Microfinance in Europe ?

    The European Microfinance Network (EMN) has currently 94 members from 17 European countries. The purpose of REM is to promote microfinance as a tool to fight against social exclusion.

    The latest survey of REM reveals that in Europe between 500 and 700 microfinance institutions (MFIs) offer microcredit in Europe. The study was focused on 32 countries and 376 MFIs were interviewed.
    Note that more than 54% of MFI respondents reported having made ​​more than 100 loans to their customers.

    In Europe, microcredit is defined as a credit lower than 25,000 euros for the development of self-entrepreneurship. This definition does not therefore take into account the personal microcredit.

    In 2011, 204,000 microloans were disbursed by the survey participants (IMF), the average loan size is about € 5,100 taking into account the countries of Eastern Europe, and € 7,100 if you count only the EU member countries.

    On products and services, 50% of MFIs offer only generic microcredit (professional) which is the standard offer. However in 2011, 34% of microfinance institutions also offered personal microloans.

    In general, the average interest rate is 11% and the average maturity is 35 months. The interest rate varies depending on the country, 4% in France for example instead of 30% in Romania.

    European MFIs typically target income generating activities and business promotion. 33% of loans are intended to finance start-ups, 38% of clients are women and 12% of loans are given to ethnic minorities or immigrants.

    Francesco Grieco also noted that the model used by most European MFIs is the social inclusion for the most vulnerable groups.

    What are the solutions against the financial crisis ?

    Financial support for microfinance in Europe is centered around the European Investment Bank(EIB composed of the European Investment Bank and European Investment Fund).
    The nature of the financial support to the microfinance sector in Europe is part of the implementation of the budget of the European Union in 2014-2020.

    The period 2014-2020 is characterized by two major axes:

  • Technical assistance and institutional strengthening
  • The liquidity of MFIs

  • Concerning these two major axes, several changes are possible:

  • 1. Strengthening the protection of the underlying borrowers (MFI clients) through financial education, assistance in developing business plans and free customer care.
  • 2. Increased support in equity of MFIs to be protected from shocks.
  • 3. Downscaling, like MicroBank in Spain, it is for a conventional bank to create a specialized microfinance branch within its group.

  • We are witnessing a widespread development of microfinance as a "cure of the crisis" from an entrepreneurial approach to the logic of the fight against poverty and exclusion.

    Source : CGAP, Report by Convergences

    Tags : crisis, economy, Europe, MFI, microcredit, microfinance, microworld