Responsible lending key to EU’s new €500m microfinance plan

Europe hopes to leverage support from international institutions

The European Union’s new microfinance facility, which aims to mobilise up to €500m from international financial institutions, has entered into EU law with a brief to put responsible lending at the heart of its operations.

The EU ‘decision’ on the European Progress Microfinance Facility for employment and social inclusion was placed on the EU’s Official Journal statute book earlier this month – charged with providing funds for individuals and ‘micro-enterprises’.

The EU will fund the facility with €100m between 2010 and the end of 2013 and it’s hoped this could leverage more than €500m in cooperation with international financial institutions such as the European Investment Bank and European Investment Fund.

One of the stipulations of the decision is that public and private bodies microfinance providers “should complywith principles of responsible lending” such as avoiding over-indebtedness.

The new facility will operate alongside existing EU structures such as Jasmine and Jeremie (respectively, the Joint Action to Support Microfinance Institutions in Europe and the Joint European Resources for Micro to Medium Enterprises Initiative).

“The Microfinance Facility offers an alternative to those suffering from the effects of the crisis and will help create new jobs,” said Employment and Social Affairs Commissioner László Andor at the initiative’s launch in March.
He expected it to provide small loans to around 45,000 budding entrepreneurs over the next eight years.

The Commission first proposed the facility in July 2009.