EUROPE - The European Commission is seeking to support the development of microfinance initiatives across Europe by implementing a regime to improve access to the non-banking credit scheme.
The EC's Regional Policy Commissioner Danuta Hübner launched an initiative today encouraging each member State to adapt their national institutional, legal and commercial frameworks "to promote a more favourable environment for the development of micro-credit".
Microcredit regimes are being set up globally, more often in the Far East and Africa, to help small businesses gain access to more affordable small loans, in the hope they may set up self-sustaining businesses and in turn help develop the local economies.
There is still debate internationally about whether microcredit should be considered as helpful to small businesses, and microfinance is still seen as a relatively niche investment option for pension funds at this stage.
That said, it has been gaining momentum in recent months, and has seen Dutch and Swiss pension funds - including ABP, the €12bn railways pension fund SPF and the €10bn scheme for the printing industry GBF, consider investing in microfinance as one way of supporting their socially-responsible investment (SRI) principles.
Dutch investment house SNS Asset Management is one firm which has sought to tap into this demand, and launched a €100m institutional investment fund earlier this year.
Data presented by the European Commission suggests demand for this type of finance - with loans averaging around €7,700 - is overwhelmingly from people setting up small companies in the service sector, in turn making up approximately 91% of businesses, but who are unable to obtain loans because they do not have access to traditional banking services.
"This initiative is intended to set out a framework to coordinate our efforts at EU level by improving the legal and institutional environment in which micro-credit providers operate, and increasing the availability of capital. With micro-credit, we could have € 6.1bn more invested in Europe," said EC Commissioner Hübner in a speech earlier today.
As well as encouraging changes to national competition and policy frameworks, the EC is looking to set up a new European-level facility staffed to help develop micro-finance institutions in Member States, as well as create a "good regulatory practices"
The aim is to establish companies or organisations which not only provide the financing but which also deliver mentoring support to the borrower, to help ensure business success of their business.
Part of this initiative will see the creation of a micro-credit provider fund, which could yet be run by the European Investment Bank (EIB) and European Investment Fund (EIF), to in turn help finance the micro-creditors