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Microfinance in Europe
Social Performance Management
Data from 25 finanical institutionMicrofinance Centre members in Europe
The report was developed with the support of the Social Performance Fund, financed by the Ford Foundation
Main achievements
• Support to excluded segments of population.
• Positive contribution to sustainability of microbusinesses
• Follow minimum practices of client protection
• Active engagement in supporting local communities
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Main challenges
• MFIs demonstrate strong social commitment, however, few have been able to translate mission into S.M.A.R.T. objectives
• Non-financial products and services are underdeveloped in microfinance
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MFIs social goals
0
0
0
0
0
1
0
4
0
0
1
19
1
3
5
5
6
7
10
11
17
19
19
5
0 5 10 15 20 25
Health improvement
Access to water and sanitation
Children's schooling
Adult education improvement
Youth opportunities
Gender equality, women's empowerment
Housing
Poverty reduction
Development of start-up enterprises
Employment generation
Growth of existing businesses
Increased access to financial services
MFIs’ main social goals
Primary goal
Secondary goal
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MFIs fulfill their primary goal well through helping excluded population to growbusiness
4
Strategic documents’ definition
Lack of S.M.A.R.T. social targetscreates a difficultyto effectivelymonitor MFIs socialaspirations.
96%
84%
60%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
Mission Social goals Social targets
Strategic document define
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Client outcomes monitoring
MFIs continue to playpositive role in microbusiness sectordevelopment
19 MFIs report at least one indicator related to supporting business. 9128
70421
321292
0 50000 100000 150000 200000 250000 300000 350000
number of clients withincreased income (business
income)
number of jobs created
number of jobs sustained
Outcome
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Target markets
Most MFIs target groups which areexcluded from traditional financialservices
16%
8%
8%
12%
32%
48%
64%
76%
96%
0% 20% 40% 60% 80% 100% 120%
Other
EU Internal Migrants…
Other migrants
Refugees
Ethnic minorities…
Youth (up to 29…
Women
Urban clients
Rural clients
MFI target markets
Percentage ofinstitutionstargetinggroup
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Product and service offering
Building partnershipswith non-financialproviders may be anopportunity for MFI to respond to diverseclient needs.
Non-financial services could play a positiverole in further sectordevelopment. 8%
12%
20%
40%
100%
0% 20% 40% 60% 80% 100%
Insurance
Deposits
Other financial services
Non-financial services
Loans
Product and service offering
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Financial products
61%
39%
Number of borrowers(as of 31 Dec 2017)
Business Loans Non Business Loans
66%
34%
Portfolio in EUR (as of 31 Dec 2017)
Business Loans Non Business Loans
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Agriculture loans dominate which confirms primary interest to support clients in rural areas
*Based on information from 23 MFIs
321
327
3772
6190
13378
38146
42290
83278
88921
0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000
Microleasing
Education
Other
Production
Trade
Housing loans
Service
Consumption
Agriculture
Loan uptake (number of borrowers as of 31 Dec 2017)*
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Loan purposes
10
Development of non-financial services
4402
277
47 566
0 10000 20000 30000 40000 50000
Other
FinancialEducation
Businessdevelopment
Non-financial services (clients outreach)
8 MFIs reported providing business development services, 1 MFI provides financial education and 5 MFIs other non-financial services.
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Gender distribution
Gender distribution is successfully addressed among staff.
Efforts to increase number of women in governance need to be undertaken.
52%
48%
Field and front office
Women Men
47%
53%
Management
Women Men
38%
62%
Board
Women Men
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Over-indebtedness prevention
MFIs need to expend moreeffort in regularmonitoring of indebtednesslevels
75%
80%
85%
90%
95%
100%
Internal auditverification
maximumpercentage of a
borrower'sdisposable income
defined
Repayment capacityanalysis conducted
Indebtednessmonitored by
board/management
Over-indebtedness prevention
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Costs transparency
96%
80%
60%
0%
20%
40%
60%
80%
100%
The contract provides total cost ofproduct, interest rate, APR(or EIR),
fees (including penalties fees),Repayment schedule
Product pricing displayed in branches Product pricing is displayed on website
Transparency
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Disclosing contract terms and conditions are a norm. Further disclosure is driven by national legislation.
14
Client complaint channels
Significant majority have at least 2 channels to submit complaints.
Majority of MFIs prefer complaints to be submitted in writing via email/web/FB/letter.
100%
96%
88%
82%
84%
86%
88%
90%
92%
94%
96%
98%
100%
System to submitcomplaint
Dedicated personresponsible for recordingand cataloging complaints
Complaints are reccorded
Customer complaints mechanism
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Client research
For the innovationsector, additionalefforts need to be made to learnabout clients’ needs and preferences.
80%
40% 40% 40%
0%
20%
40%
60%
80%
100%
Target clientcharacteristics
ClientsNeed/preferences
for products
Clientsneed/preferences
for deliverychannels
Potential barriersto access products
Market research
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Green agenda implementation
20 MFIsreported atleast 1 initiativerelated to greenmicrofinance.
2
3
8
9
10
11
11
14
14
0 5 10 15
Has an environmental manager
Tracks achievement of quantitative objectives toreduce internal ecological footprint
Offers loans to improve clients' environmentalresilience
Offers loans for environmentally-friendlytechnologies/activities
Has a formal environmental policy
Has processes/mechanisms to reduce internalecological footprint
Evaluates environmental risks of clients' activities
Offers loans for renewable energy and energyefficiency
Raises staff awareness on internal ecologicalfootprint
Green microfinance policies and processes
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Supporting local communities
MFIs could more strategically link their community engagement with social goals as the supported group isoften not related to MFI social goals
17 MFIs reported financial and/or non-financial support to local communities.
3
3
3
4
4
5
10
0 2 4 6 8 10 12
Other
Elderly
Migrants, internally displaced people,refugees
Unemployed
Indigenous people or ethnic minority
Disabled people
Youth
Support for excluded population
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Looking to the future
• With increased market saturation, competition and legal limitations, diversification of non-financial services may be the most effective way for future development of microfinance.
• Digitalization brings new opportunities to the sector but MFIs planning any new solutions should not forget about one of their key market advantages – relationship with client and putting the client in the centre.
• Social aspiration is what makes microfinance sector different from other types of financial players. Therefore MFIs need to expend more efforts to monitor and report social outcomes to their stakeholders.
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Respondents of the research
25 financial institutions reported social performance data for 2017:
Albania: Noa Sh.a., AgroSocial Fund; BiH: EKI, Lider, Mi-Bospo, Partner, Sunrise;Bulgaria: Maritza Invest, Ustoi;France: Adie;Greece: KEPA;Hungary: Local Enterprise Agency Heves County;Kosovo: Agency for Finance in Kosovo, KEP Trust, KosInvest;Macedonia: Moznosti;Montenegro: Alter Modus, Monte Credit;Romania: good.bee Credit, Patria Credit, Vitas;Serbia: Agroinvest, Opportunity Bank;Spain: ACAF;UK: BCRS Business Loans
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About microfinance sector in Europe
Majority of the sector isregistered as non banking financial institutions (40%)
There is also a certainnumber of MFIs operatingas NGOs (24%).
4%8%
24%
40%
24%
Legal form
CommercialBank
Cooperative/Credit Union
NGO
NBFI
Other
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About microfinance sector in Europe
European microfinance sector is relatively mature.
76% of MFIs were established between 1995 – 2004
0%
8%
44%32%
12%
4%
Year microfinance operations began
Before 1989
1990-1994
1995-1999
2000-2004
2005-2009
2010-2015
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About Microfinance Centre (MFC)
MFC is an international
financial inclusion resource centre
and network
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About Microfinance Centre (MFC)
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Our vision is for financethat is centered around creating benefits for clients and excels at delivering responsible financial services.
Our mission is to empower people and communities through social finance.
Microfinance Centre services
2 31 4 5 6 7
Research Capacitybuilding
SPM & Customer Protection
Financial Education
Support for Networks
Policy Work
Regional Networking & Information
Exchange
