European Microfinance Network Daniel Sorrosal - European Microfinance Network Microfinance in Europe Microfinance in Europe Colloque: La Microfinance comme

European Microfinance NetworkEuropean Microfinance Network

Daniel Sorrosal - European Microfinance Network Daniel Sorrosal - European Microfinance Network

Microfinance Microfinance in Europein Europe

Colloque: La Colloque: La Microfinance comme Microfinance comme outitl d’integration outitl d’integration economiqueeconomique

April 26th 2011, April 26th 2011, BrusselsBrussels


The The European Microfinance NetworkEuropean Microfinance Network (EMN) (EMN) was launched by its founding members (was launched by its founding members (AdieAdie - - France, France, nefnef - UK and - UK and EVERS&JUNGEVERS&JUNG - Germany) - Germany) in April 2003, with the support of the in April 2003, with the support of the European European CommissionCommission and the and the French Caisse des French Caisse des Dépôts et ConsignationsDépôts et Consignations (CDC). (CDC).

The The EMNEMN is a Non Governmental Organisation is a Non Governmental Organisation ("Association loi 1901, under the French ("Association loi 1901, under the French legislation) and was officially registered in Paris legislation) and was officially registered in Paris on May 23rd 2003.on May 23rd 2003.

HistoryHistory


✓ TheThe mission of EMN mission of EMN is to promote is to promote microfinance as a tool to fight social and microfinance as a tool to fight social and economic exclusion and to promote economic exclusion and to promote microentrepreneurship and self-employment. microentrepreneurship and self-employment.

✓ This is achieved by supporting the This is achieved by supporting the development of microfinance organisations development of microfinance organisations through the through the dissemination of good dissemination of good practices practices and by and by improving the regulatory improving the regulatory frameworks frameworks for microfinance, self-for microfinance, self-employment and microentreprises at the employment and microentreprises at the European Union and Member State levels. European Union and Member State levels.

MissionMission


EMN is a network organisations created, EMN is a network organisations created, run and supported by its members.run and supported by its members.

EMN supports its members:EMN supports its members:- by making their working environment more by making their working environment more

favourable, both at European and national levels.favourable, both at European and national levels.- by helping them grow and develop so that they by helping them grow and develop so that they

become sustainable organisations that respond become sustainable organisations that respond to specific market needs. to specific market needs.

✓ 6 Working Groups6 Working Groups: Research, IT, Social : Research, IT, Social Performance, Asset Building, Legal Environment Performance, Asset Building, Legal Environment and Regulation and Growthand Regulation and Growth

StrategyStrategy


Klaas MolenaarKlaas Molenaar - President (Triodos Facet – The - President (Triodos Facet – The Netherlands)Netherlands)

Maria Doiciu Maria Doiciu - Vice-president- Vice-president (Eurom - Romania)(Eurom - Romania) Giampietro PizzoGiampietro Pizzo – Vice-president (Microfinanza - Italy) – Vice-president (Microfinanza - Italy) Jean-Pierre Watthy Jean-Pierre Watthy – Treasurer (Fonds de Participation - – Treasurer (Fonds de Participation -

Belgium)Belgium) Joyce Kimwaga Joyce Kimwaga – Secretary (NEEM - Sweden)– Secretary (NEEM - Sweden) Faisel RahmanFaisel Rahman (Fair Finance – UK) (Fair Finance – UK) Silvia RicoSilvia Rico (Foro Nantik Lum de Microfinanzas - Spain) (Foro Nantik Lum de Microfinanzas - Spain) Helena MenaHelena Mena (Millennium bcp – Portugal) (Millennium bcp – Portugal)

GovernanceGovernance


EMN has EMN has 88 88 members in 21 members in 21 European European countries. countries.

Members are Members are microfinance microfinance providers, research providers, research institutions, banks, institutions, banks, etc.etc.

75% practitioners75% practitioners

25% Eastern 25% Eastern EuropeEurope

22% consulting, 22% consulting, research organismsresearch organisms

10% banks10% banks

MembersMembers


EMN strengthens its members EMN strengthens its members and develops exchange…and develops exchange…In 6 years:In 6 years:• 10 different training 10 different training courses courses • more than 1.500 persons more than 1.500 persons trainedtrained• 12 consultancy missions12 consultancy missions

• Organisation of 15 Organisation of 15 exchange visits with over exchange visits with over 250 participants250 participants• Publication and Publication and dissemination of good dissemination of good practice guidespractice guides


EMN develops research, increases EMN develops research, increases visibility and creates links between visibility and creates links between stakeholdersstakeholders

EMN participated with its EMN participated with its members in members in 42 research 42 research projects projects about the sector, and about the sector, and set up a Research Working Group. set up a Research Working Group.

EMN has a specialEMN has a specialinterest on interest on gendergender as well as well as as migrationmigration, , through the through the coordination of coordination of projects projects co-financed by theco-financed by the European Union. European Union.

A website, a quarterly newsletter, the A website, a quarterly newsletter, the "Microfinance Europe“ magazine …"Microfinance Europe“ magazine …

Organisation of 7 Annual Conferences Organisation of 7 Annual Conferences and 2 International Conferences with and 2 International Conferences with more than 2500 participantsmore than 2500 participants


EMN participates in improving EMN participates in improving the regulatory environmentthe regulatory environment Lobbying at EU and national levelsLobbying at EU and national levels Development of specific tools (eScorecard – Development of specific tools (eScorecard –

NAPs tool kit…)NAPs tool kit…) "The European Initiative for the development "The European Initiative for the development

of microcredit in support of growth and of microcredit in support of growth and employment" – JASMINEemployment" – JASMINE Improve the legal and institutional environment in the Member Improve the legal and institutional environment in the Member

StatesStates Further change the climate in favour of entrepreneurshipFurther change the climate in favour of entrepreneurship Promote the spread of best practicesPromote the spread of best practices Provide additional financial capital for new and non-bank MFIsProvide additional financial capital for new and non-bank MFIs

European Progress Microfinance Facility - June European Progress Microfinance Facility - June 20092009


Microfinance – emergence Microfinance – emergence and evolutionsand evolutions


Offer adapted financial services to a Offer adapted financial services to a significant number of people on low income significant number of people on low income

who are economically active in order to who are economically active in order to improve their living conditions and their improve their living conditions and their

participation in the local economyparticipation in the local economy..

Build up in the long term sustainable Build up in the long term sustainable financial institutions at the service of financial institutions at the service of

underpriviledged populations .underpriviledged populations .

Source : CGAP (Consultative Group to assist the Poor – Source : CGAP (Consultative Group to assist the Poor – International investor)International investor)


Microfinance activitiesIncome-generating

activities SMEs

Education Housing

Health

But also access to….

Microentreprises

Social


Microfinance in Europe


What is What is microfinance in microfinance in Europe?Europe?


Entrepreneurial spirit less developed and Entrepreneurial spirit less developed and encouraged encouraged

A welfare state with strong social protection A welfare state with strong social protection Strict regulation for microenterprisesStrict regulation for microenterprises High cost of social benefitsHigh cost of social benefits In certain countries easy access to consumer loans In certain countries easy access to consumer loans

(very high interest rates) (very high interest rates) Highly developed bank system, strict bank Highly developed bank system, strict bank

regulation regulation Difficulties for organisms of reaching sustainabilityDifficulties for organisms of reaching sustainability

Characteristics of microfinance in Characteristics of microfinance in EuropeEurope


Number of enterprises in (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 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 contextThe economic context


The social contextThe social context

✓ Population at risk of poverty: 78 millionPopulation at risk of poverty: 78 million✓ Working population under the poverty line: 28 Working population under the poverty line: 28

millionmillion✓ Rate of people at risk of poverty in the EU: 17% Rate of people at risk of poverty in the EU: 17%

(2007)(2007)✓ National figures vary from 10% to 25%.National figures vary from 10% to 25%.✓ Especially at risk: women, young people (20% for Especially at risk: women, young people (20% for

children between 0-17; 19% for those between 18-children between 0-17; 19% for those between 18-24 years), single parent households with children 24 years), single parent households with children (34%).(34%).

✓ Long-term unemployment is one of the main Long-term unemployment is one of the main factors of exclusion.factors of exclusion.


The financial contextThe financial context Financial exclusion defined as the part of the population without a Financial exclusion defined as the part of the population without a

bank account, neither savings nor credit (nor insurance).bank account, neither savings nor credit (nor insurance).

7 % in Europe 15, 34% in Europe 107 % in Europe 15, 34% in Europe 10

In the 10 new EU countries 47 % don’t have a bank account, In the 10 new EU countries 47 % don’t have a bank account, compared to 10 % in the EU15.compared to 10 % in the EU15.

In the EU15,18 % of adults don’t have access to bank transactions, 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. 30% don’t have savings and 40% don’t have any credit facilities.


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 segmentationMarket segmentation


In the EU15: microcredit rather than microfinance In the EU15: microcredit rather than microfinance

Definition UE: loan below 25 000 EURDefinition UE: loan below 25 000 EUR

Focus on unemployed persons setting up a Focus on unemployed persons setting up a business (inclusion)business (inclusion)

Microfinance comprises financing and non-Microfinance comprises financing and non-financial services financial services

Microfinance is hardly profitable, but makes Microfinance is hardly profitable, but makes sense economically sense economically

Focus on social inclusion and job creation rather than Focus on social inclusion and job creation rather than profitability. profitability.

Main featuresMain features


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 banks

ONG, focus on specific groups

ONG, 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 developmentStrong growth

Synergy effects on costs due to existing infrastructure.

European Microfinance Institutional European Microfinance Institutional models models

NBFI, Foundation microfinance approachCredal 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 Lenders Micro Lenders

Objective More enterprises More entrepreneursMore access to

credit

Focus Enterprise Entrepreneur Credit access

Risk Management

Selection of viable

businesses only

Repayment follow up

Leverage, economies of

scale & Innovation

Loan size € 10 - 25 K € 5 -10 K € 2 -10 K

ServicesBusiness Plan &

FinanceCoaching & Finance Finance only

MethodologyBusiness Plan

LendingBusiness Plan

LendingStep lending

Type of service

One-shotOne shot & Some recurrent clients

Recurrent clients

Best adapted to

Start-ups New EntrepreneursSmall, 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 activityMicrofinance 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.*The data didn’t include one major actor in Poland and the network of Procredit banks in Eastern Europe.

European Microfinance in figuresEuropean Microfinance in figures

European Microfinance NetworkEuropean Microfinance Network28

EMN Survey of the Microcredit Sector in the EMN Survey of the Microcredit Sector in the European Union 2008-2009European Union 2008-2009

Survey participants: 170 organisations in 21 countries

Total 84,523 microloans for €828 million


Number of active clientsNumber of active clientsEnd of 2009: 135,815 active clients (72% response rate)

European Microfinance NetworkEuropean Microfinance Network30

Target clients:Target clients:•People excluded from traditional financial services: 47% People excluded from traditional financial services: 47% of organisationsof 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:Type of businesses:•Start-ups rather than existing enterprisesStart-ups rather than existing enterprises•Registered business with less than 5 employees are the Registered business with less than 5 employees are the main target (55%)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« persons65.5% of clients are « unbankable« persons

Excluded people and new businesses are the main Excluded people and new businesses are the main targetstargets


Mission: jobs, inclusion and growthMission: jobs, inclusion and growth


Loan Products and Pricing: Diversity in Loan Loan Products and Pricing: Diversity in Loan Sizes and Interest ratesSizes 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 The maximum loan size offered to clients ranges from €37,000 to €220 (even if the EU defined a microcredit €37,000 to €220 (even if the EU defined a microcredit as being below €25,000).as being below €25,000).

• (Non-weighted) Interest rates charged range from 2% (Non-weighted) Interest rates charged range from 2% at the lowest to 22% at the highest. The average is at the lowest to 22% at the highest. The average is 9%.9%.

• Average (non-weighted) interest rates vary by country Average (non-weighted) interest rates vary by country - the highest rates are charged in the United Kingdom - the highest rates are charged in the United Kingdom (22% average) and Poland (17% average) and the (22% average) and Poland (17% average) and the lowest in Portugal and Finland (3% and 2% lowest in Portugal and Finland (3% and 2% respectively).respectively).


Not only just microcredit for enterprise Not only just microcredit for enterprise developmentdevelopmentOnly 19% of respondents do not provide any kind of support. Only 19% of respondents do not provide any kind of support.

42% provide other financial services42% provide other financial services


In In Western EuropeWestern Europe the need to provide microentrepreneurs with the need to provide microentrepreneurs with access to microloans is now recognised. However, in order to access to microloans is now recognised. However, in order to develop and better respond to the needs of potential clients, develop and better respond to the needs of potential clients, the the microfinance sector faces a number of challengesmicrofinance sector faces a number of challenges::

• An environment characterised by a highly developed, An environment characterised by a highly developed, competitive financial service industrycompetitive financial service industry, with a growing , with a growing number of operators offering high-interest consumer loans number of operators offering high-interest consumer loans leading to over-indebtedness by families;leading to over-indebtedness by families;

• An entrenched welfare systemAn entrenched welfare system that fails to encourage people that fails to encourage people to seek self-employment;to seek self-employment;

• The lack of an entrepreneurial cultureThe lack of an entrepreneurial culture, and moreover the , and moreover the lack of incentives to develop one at various levels of society;lack of incentives to develop one at various levels of society;


• Lack of sufficient fundingLack of sufficient funding to cover operational costs of to cover operational costs of microlenders, and the short-term basis on which funding is offered;microlenders, and the short-term basis on which funding is offered;

• High dependency on the public sectorHigh dependency on the public sector for operational and capital for operational and capital funding, with little independent revenue due to low interest rates;funding, with little independent revenue due to low interest rates;

• An unfavourable legal frameworkAn unfavourable legal framework resulting from the resulting from the implementation of usury laws that prohibit development of the sector;implementation of usury laws that prohibit development of the sector;

• The development of best practicesThe development of best practices among microlenders in order to among microlenders in order to strengthen their operational and performance capacities.strengthen their operational and performance capacities.


An enabling European policyAn enabling European policy

MF is situated between two major areas: economic MF is situated between two major areas: economic policy and social inclusion policy.policy and social inclusion policy.

This two-fold approach is completed by regional This two-fold approach is completed by regional cohesion policycohesion policy

Initiatives: JEREMIE, JASMINE and EPMFInitiatives: JEREMIE, JASMINE and EPMF The PROGRESS Microfinance Facility for The PROGRESS Microfinance Facility for

Employment and Social Inclusion (EPMF) Employment and Social Inclusion (EPMF) The creation of a dedicated EU Entrepreneurship The creation of a dedicated EU Entrepreneurship

and Microfinance Taskforce now converted into a and Microfinance Taskforce now converted into a permanent unit within the organigram of DG permanent unit within the organigram of DG Employment as focal point for Microfinance at Employment as focal point for Microfinance at European level.European level.


European Progress Microfinance FacilityEuropean Progress Microfinance Facility

€€200 million Microfinance facility for investment, 200 million Microfinance facility for investment, guarantee and lending to EU MFIs. guarantee and lending to EU MFIs. The main funders The main funders are the EU with €100 million reallocated from the are the EU with €100 million reallocated from the PROGRESS program over 4 years (2010-2013), plus €100 PROGRESS program over 4 years (2010-2013), plus €100 million matching funds from European Investment Bank million matching funds from European Investment Bank

Expected to leverage: more than €500 million, in a joint Expected to leverage: more than €500 million, in a joint initiative with international financial institutions initiative with international financial institutions particularly the European Ivestment Bank (EIB) Groupparticularly the European Ivestment Bank (EIB) Group

The new facility is aimed at supporting unemployed The new facility is aimed at supporting unemployed people with a business project find the necessary people with a business project find the necessary financial means to set up their own business through financial means to set up their own business through access to microcredit as well as financially supporting access to microcredit as well as financially supporting existing microenterprises in the context of the crisis.existing microenterprises in the context of the crisis.


Merci, thank you !Merci, thank you !

Daniel Sorrosal Daniel Sorrosal EMN Executive SecretaryEMN Executive [email protected]

European Microfinance Network - BrusselsEuropean Microfinance Network - Brussels37 Rue du Prince Royal 37 Rue du Prince Royal 1050 Brussels – Belgium1050 Brussels – BelgiumTel: +32 494 468 010 Tel: +32 494 468 010

European Microfinance Network - ParisEuropean Microfinance Network - Paris103 Rue de Vaugirard103 Rue de Vaugirard75 006 Paris - France75 006 Paris - FranceTel: +33 1 42 22 01 19 Tel: +33 1 42 22 01 19 Fax: + 33 1 42 22 06 44Fax: + 33 1 42 22 06 44

www.european-microfinance.org

mailto:[email protected]

http://www.european-microfinance.org/

Documents

European Microfinance Network Daniel Sorrosal - European Microfinance Network Microfinance in Europe Microfinance in Europe Colloque: La Microfinance comme