1 micro-credit as a tool for entrepreneurship in europe philippe delvaux european commission...
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Micro-Credit as a tool for Micro-Credit as a tool for Entrepreneurship in EuropeEntrepreneurship in Europe
Micro-Credit as a tool for Micro-Credit as a tool for Entrepreneurship in EuropeEntrepreneurship in Europe
Philippe Delvaux
European Commission Directorate General for Regional Policy
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Technology & innovation
Eco friendly SMEs
ICT in SMEs
Start-ups
12% / €3.2bn
65% / €17.7bn
9% / €2.5bn
14% / €3.7bn
ERDF supportERDF support t to Small Businesseso Small Businesses
€ € 27 billion27 billion
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9
255
1 693
21 228
Informal sector(Income-generating
activities)
> 250 employees
50 - 250 employees
10 - 49 employees
0 - 9 employees
23,2 million enterprises in EU
92% of enterprises inEurope are micro-enterprises
(up to 9 employees)
Informal sector represents10 to 15% of GDP
Active population below the poverty line : 28 million
Micro-credit :
Max. Amount: €25,0000 - 9 employees
Turnover: max 2 Mio Euros
µC
Number of enterprises in the EU (x 1000)
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Particularity of micro-creditParticularity of micro-credit
• Many issues at the same timeMany issues at the same time• Many parties involvedMany parties involved• Several approaches over the worldSeveral approaches over the world• A mix of funding and technical assistanceA mix of funding and technical assistance• Matches real needsMatches real needs• Existing instrumentsExisting instruments
However, an important gap in the market.However, an important gap in the market.
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A few reasonsA few reasons
• Different types and understanding of what is Different types and understanding of what is micro-credit, what it should be.micro-credit, what it should be.
• Various approaches. No one-size-fits-all model.Various approaches. No one-size-fits-all model.
• Lack of standards.Lack of standards.
• Absence of collateral from part of the borrower.Absence of collateral from part of the borrower.
• Administrative cost of small loan not Administrative cost of small loan not proportionate to its amount.proportionate to its amount.
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Challenging Micro-creditChallenging Micro-credit
µ-credit
Social Inclusion
Banks
µ-enterprise
µ-finance
EIBBasel II
Legislation
Charities
CreditUnions
Employment
LisbonStrategy
Self-employment
EuropeanCommission
2020Strategy Trust
EuropeanSocial Fund
EuropeanCouncil
European Parliament
FinancialEngineering
Seed capital
Growth and jobs
JEREMIE
RevolvingFunds
Grants
ESBG
PROGRESS
Capacitybuilding
Mentoring
Sustainability
Member States Regions Guarantees
LoansQuality label
Trainingµ-Financenetworks
Ratingagencies
Coaching
Codesof
ConductSocial
Responsibility
Funds
RegionalPolicy
Equity
Interestrate
subsidy
EIF
µ-creditproviders
MFI €SavingsBanks
Bankability
StructuralFunds
Consumerprotection
StatisticsInterest
rates
Character based
lending
Mezzaninefinance Non-bank
Win-win
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Challenging Micro-creditChallenging Micro-credit
Poverty
Social benefits
LuxFlag
Public Banks
Services
EESCEQUAL
MFC
Change
CIPEU Budget
Additionality
Unemployment
ProceduresDefinitions
RiskManagement
IFRS
Public Banks
Governance
Communicationon µC
Collateral
SubsidiarityOver
indebtedness
CGAP
Basel III
Yunus
EAFRD
Women
µ-financefunds
Communication
FinancialInclusion
Financial Regulation PHARE
LeverageDevelopment
countriesDeprivedpopulations
EPMF
MixMarket
EGAF
UniversityAwarenessraising
WorldBank
Supervision
StrategicPlanning
Information systems
Mindsets
Overindebtedness
MFI $GrameenBankFinancial
Crisis
Lobbies
CooperativeBanks
YunusUsurary
rates
EntrepreneurshipGlobalization Client
Relations
Challenge
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To take what exists into account and look at ways To take what exists into account and look at ways to increase the provision of micro-credit in the EUto increase the provision of micro-credit in the EU
• Build confidence in micro-creditBuild confidence in micro-credit• Contribute to develop the microfinance sectorContribute to develop the microfinance sector• Promote entrepreneurship through micro-creditPromote entrepreneurship through micro-credit• Encourage networking of stakeholdersEncourage networking of stakeholders
ChallengeChallenge
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• A gap in the policyA gap in the policy• Timely proposalsTimely proposals• High EU acceptance High EU acceptance • Motivation of stakeholdersMotivation of stakeholders• Lessons learnt from the financial crisisLessons learnt from the financial crisis• Big Brother ‘JEREMIE’ in the backgroundBig Brother ‘JEREMIE’ in the background• ‘‘JASMINE’ designed as a quality systemJASMINE’ designed as a quality system• Provision of large funding thanks to EPMFProvision of large funding thanks to EPMF
Success factorsSuccess factors
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• Existing policy tailored initiativesExisting policy tailored initiatives• No usable sector specific statisticsNo usable sector specific statistics• Many stakeholders involvedMany stakeholders involved• Opposed views of interest groupsOpposed views of interest groups• Subsidiarity Subsidiarity
DifficultiesDifficulties
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11/2007: Micro-credit initiative 11/2007: Micro-credit initiative (COM 2007/708)(COM 2007/708)
1. Improve the legal & institutional environmentImprove the legal & institutional environment
2. Further develop entrepreneurshipFurther develop entrepreneurship
A Communication on micro-credit
3. Develop Capacity Building for MFIsDevelop Capacity Building for MFIs4. Provide Funding for MFIs with financial standingProvide Funding for MFIs with financial standing
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Examples of changes to the legal Examples of changes to the legal and institutional environmentand institutional environment
• Development of micro-credit providers/MFIsDevelopment of micro-credit providers/MFIs
• Relaxing interest caps for micro-credit operationsRelaxing interest caps for micro-credit operations
• Allowing MFIs access to borrower databases and Allowing MFIs access to borrower databases and facilitating their evaluation of the risksfacilitating their evaluation of the risks
• Reducing operating costs applying favourable tax Reducing operating costs applying favourable tax schemesschemes
• Adapting national regulationAdapting national regulation
• Ensuring single market rules are applied to micro-credit Ensuring single market rules are applied to micro-credit
• Incorporating micro-credit into regulation and accounting Incorporating micro-credit into regulation and accounting standardsstandards
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JASMINE
11/2007: Micro-credit initiative 11/2007: Micro-credit initiative (COM 2007/708)(COM 2007/708)
1. Improve the legal & institutional environmentImprove the legal & institutional environment
2. Further develop entrepreneurshipFurther develop entrepreneurship
4. Provide Funding for MFIs4. Provide Funding for MFIs
3. Develop Capacity Building for MFIs
A Communication on micro-credit
3.3. Develop Capacity Building for MFIsDevelop Capacity Building for MFIs
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• Institutional assessment and/or rating Institutional assessment and/or rating for selected MFIs for selected MFIs
• SubsequentSubsequent training training to selected MFIs. to selected MFIs.
• A range of A range of business support servicesbusiness support services available for all MFIs. available for all MFIs.
• AA code of good conductcode of good conduct for MFIs to provide guidelines and advice for MFIs to provide guidelines and advice to MFIs on raising the standard of their services and operations to MFIs on raising the standard of their services and operations ((Vademecum on micro-creditVademecum on micro-credit).).
• JASMINE on lineJASMINE on line
• AA quality labelquality label to be awarded to “good” MFIs.to be awarded to “good” MFIs.
JASMINE toolkitJASMINE toolkit
R
T
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EPMF
11/2007: Micro-credit initiative 11/2007: Micro-credit initiative (COM 2007/708)(COM 2007/708)
1. Improve the legal & institutional environmentImprove the legal & institutional environment
2. Further develop entrepreneurshipFurther develop entrepreneurship
3. Develop Capacity building for MFIs3. Develop Capacity building for MFIs
4. Provide funding for MFIs
A Communication on micro-credit
4. Provide funding for MFIs4. Provide funding for MFIs
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• Part of the response to rising unemployment and social Part of the response to rising unemployment and social exclusion resulting from the financial crisis.exclusion resulting from the financial crisis.
• To To ‘offer a new chance to the unemployed and open the road to entrepreneurship for some of Europe’s most disadvantaged groups’
(Commission communication June 2009: ‘A shared (Commission communication June 2009: ‘A shared commitment for employment’)commitment for employment’)
European Progress European Progress Microfinance FacilityMicrofinance Facility
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EPMF – Key featuresEPMF – Key features
Micro-credit to Final Beneficiaries troughMicro-credit to Final Beneficiaries trough
• 1. 1. GuaranteesGuarantees (implemented through EIF)(implemented through EIF) on microcredit portfolios on microcredit portfolios ((€ 25 million € 25 million from EU resources)from EU resources)
• 2. 2. Debt and equity instrumentsDebt and equity instruments
by means of a Fonds Commun de Placement – Fonds by means of a Fonds Commun de Placement – Fonds d’Investissement d’Investissement Spécialisé Spécialisé (FCP-FIS)(FCP-FIS)(up to (up to ++ € 225 million € 225 million = € 75m from EU + up to € 100m = € 75m from EU + up to € 100m from the EIB + up to € 50m from other investors)from the EIB + up to € 50m from other investors)
• 3. 3. Expected total leverageExpected total leverage: : € 500 million € 500 million ((+ 46 000 loans) 46 000 loans)
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Improving the provision of micro-credit has Improving the provision of micro-credit has the potential to develop entrepreneurshipthe potential to develop entrepreneurship
• It is a complex issue involving many actors, It is a complex issue involving many actors, but can be a win-win undertaking for all. but can be a win-win undertaking for all.
• Quality makes the differenceQuality makes the difference
• Both the banking and non-banking sector Both the banking and non-banking sector
have a part to playhave a part to play
ConclusionsConclusions
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Announcement on JASMINE Announcement on JASMINE Two messages:Two messages:
Continuation of JASMINE after 2011 • Unanimous positive feedback received from actual JASMINE stakeholders• Adaptation of the scheme from 2012 on to include greenfield MFIs• Increased provision of business support services for MFIs (JASMINE online)
Availability of a Code of Good Conduct for MFIs
• Help MFIs raising standards in micro-credit lending & operating practice• Micro-credit stakeholders actively involved in the draft of the content• Document under final revision: Final version available by end of June 2011
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Challenging Micro-creditChallenging Micro-credit
Thank you
Your suggestionsYour suggestions
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Thank you for your attention
DG REGIO – Unit D3 ‘Financial Engineering – Major Projects‘