Microfinance in Western Europe a synopsis

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Microfinance with a Mission Learning
Together In Partnership with
Martin Jung
7-9 June, 2006 Budapest, Hungary
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What are the characteristics of microfinance in
Western Europe?

• In EU15 rather microlending than microfinance
• EU definition loan amounts up to 25 TEUR
• Focus is on people starting a business out of
  unemployment (inclusion)
• Microfinance combines Financing with Business
  Support Services
• Microfinance may never become profitable, but
  makes economically sense

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What kind of microfinance business models exist?
Institutional Support programs
NGOs, microfinance driven approach
ADIE in France, ANDC in Portugal, Aspire in
North Ireland, Street UK, ...
Finnvera in Finland, KfW in Germany, BDPME in
France, ICO in Spain, ...

• 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

• inspired by microfinance success in developing
  countries
• business support seen as added value to finance

Specialized units of banks
NGOs, target group driven approach
WEETU in UK, Hordaland Credit Circle in Norway,
Enterprise in Germany, ...
Cajas with microfinance programs in Spain (e.g.
Un Sol Mon of Caixa Catalunya)

• small scale (exception Prince Trust)
• finance seen as added value to the business
  support

• young development
• strong growth rates
• synergy effects on costs through existing bank
  infrastructure (i.e. back office, branches)

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How did microfinance develop?
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Why is microfinance not (yet) a business case in
Western Europe?
3 assumptions

No market?
Too much public money?
Not learned enough?

• Micro enterprises have other options
• Equity/assets
• Friends family
• Consumer loans/ credit cards
• very developed financial service sector
• low interest rate level

• MFIs make money with publicly funded social
  projects. Donors want social rather then business
  style.
• social benefit schemes may keep people in the
  inactivity trapp increasing welfare efficiency
  is the next step

• most MFIs are very young and small scale
• incentives for MFIs are not output oriented
• Methodology Marketing, loan appraisal, ... still
  to be improved

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• Thank You!
• martin.jung_at_eversjung.de