REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT,  THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Implementation of the European Progress Microfinance Facility — 2010
Date: 2011-04-11
Institutions: European Commission
Subjects: EU financial instrument, European Employment Strategy, microfinance, microloan, social integration

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EUROPEAN COMMISSION 

Brussels, 11.4.2011 
COM(2011) 195 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT,  
THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND 
THE COMMITTEE OF THE REGIONS 

Implementation of the European Progress Microfinance Facility — 2010  

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT,  
THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND 
THE COMMITTEE OF THE REGIONS 

Implementation of the European Progress Microfinance Facility — 2010  

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CONTENTS 

1. 

2. 

3. 

3.1. 

3.2. 

Introduction .................................................................................................................. 4 

Key features of the European Progress Microfinance Facility .................................... 5 

Guarantees under Progress Microfinance .................................................................... 6 

Setting up the guarantees window of Progress Microfinance...................................... 6 

Key features ................................................................................................................. 6 

3.3.  Who benefits?............................................................................................................... 8 

4. 

4.1. 

4.2. 

Funded instruments ...................................................................................................... 9 

Setting up the fonds commun de placement for funded instruments............................ 9 

Key features ............................................................................................................... 10 

4.3.  Who benefits?............................................................................................................. 11 

5. 

6. 

7. 

8. 

Monitoring and reporting ........................................................................................... 12 

Communication .......................................................................................................... 12 

Complementarity and coordination with other instruments....................................... 13 

Outlook and conclusions ............................................................................................ 14 

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1. 

INTRODUCTION 

Micro-enterprises1 are the mainstay of the European Union’s economy and account for more 
than  95 %  of  the  2 million  enterprises  established  each  year.  One  third  of  micro-  and  small 
enterprises are set up by unemployed people. 

One precondition for starting a business is access to finance. The economic crisis has severely 
reduced bank lending, thus exacerbating the structural problems which disadvantaged groups 
face when trying to gain access to banking services.  

Microfinance2,  and  in  particular  microcredit,  i.e.  loans  of  less  than  EUR  25 000,  offer  a 
solution. Before the crisis, potential demand for microcredit in the EU in the short term was 
estimated  at  over  700 000  new  loans  worth  approximately  EUR  6 296  million3.  Most 
microcredit  in  the  EU  is  provided  by  non-commercial  microfinance  institutions  (NGOs, 
foundations, government bodies, Member States’  promotional banks and non-bank financial 
institutions), but these providers do not currently have the capacity or resources to meet this 
heavy demand.  

The European Parliament has recognised the problem and asked the Commission to step up its 
efforts to develop microcredit in the EU with a view to supporting growth and employment4.  

In response to the crisis5, on 2 July 2009 the Commission adopted two legislative proposals, 
one to set up the European Progress Microfinance Facility, the other to use resources from the 
PROGRESS programme to fund it. Parliament and the Council reached agreement on them in 
early 2010 and then signed Decision No 283/2010/EU of the European Parliament and of the 
Council  of  25  March  2010  establishing  a  European  Progress  Microfinance  Facility  for 
employment and social inclusion6 (‘the Decision’), which entered into force on 8 April 2010. 

The  financial  contribution  from  the  EU  budget  adds  up  to  EUR 100  million  for  the  period 
1 January  2010  to  31  December  20137.  Of  that  sum,  EUR 60  million  comes  from  the 
PROGRESS programme8 and EUR 40 million from the margins of the budget. The possibility 
of the budgetary authority deciding a ‘payback’ of up to EUR 20 million to the PROGRESS 
programme  via  the  draft  annual  budget  over  the  period  2011  to  2013  was  part  of  the 
agreement. 

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The Annex to Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of 
micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36) defines ‘micro-enterprise’ as 
‘an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance 
sheet total does not exceed EUR 2 million’. 
‘Microfinance’ is a broader concept which includes microcredit, but also other financial services such 
as savings, micro-insurance or transfers.  
See  the  Communication  ‘A  European  initiative  for  the  development  of  micro-credit  in  support  of 
growth and employment’ (COM(2007) 708 final/2 of 20 December 2007) 
European Parliament resolution of 24 March 2009 making recommendations to the Commission on a 
European  initiative  for  the  development  of  micro-credit  in  support  of  growth  and  employment 
(2008/2122(INI)). 
See the Communication ‘A Shared Commitment for Employment’ (COM(2009) 257 of 3 June 2009). 
OJ L 87, 7.4.2010, p. 1. 
Article 3(1) of the Decision. 
Decision  No  1672/2006/EC  of  the  European  Parliament  and  of  the  Council  of  24  October  2006 
establishing  a  Community  Programme  for  Employment  and  Social  Solidarity  —  Progress,  OJ  L  315, 
15.11.2006, p. 1. 

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This first annual report takes stock of implementation of the European Progress Microfinance 
Facility  (Progress  Microfinance).  In  line  with  Article  8  of  the  Decision,  it  is  based  on  the 
implementation  reports  submitted  by  the  European  Investment  Fund  (EIF).  Since  Progress 
Microfinance  was  established  only  recently,  this  report  focuses  on  the  key  features  of  the 
instrument, the  design  of the  products and the first stages of implementation. The  last three 
sections  describe  communication  work  undertaken  by  the  Commission  and  the  EIF,  how 
Progress  Microfinance  complements  other  EU  instruments  and  the  outlook  for  further 
development.  

2. 

KEY FEATURES OF THE EUROPEAN PROGRESS MICROFINANCE FACILITY  

The  aims  of  the  European  Progress  Microfinance  Facility  are  twofold:  on  the  one  hand,  it 
makes microfinance more readily available to persons who wish to start up or develop micro-
enterprises, including with a view to self-employment, in that it enables microcredit providers 
in the EU to increase their lending to them. On the other, it improves access to microfinance 
by reducing the risk borne by microfinance institutions. This allows providers to reach out to 
groups  who  could  not  normally  be  served,  for  instance  because  they  could  not  put  up 
sufficient collateral or because the interest rates would have to be very high if they were to 
reflect the real risk. Progress Microfinance targets a broad range of final beneficiaries: 

•  Persons who have lost their jobs or are at risk of losing them or who are having difficulty 
entering or re-entering the labour market, individuals facing the threat of social exclusion 
and  vulnerable  people  who  are  at  a  disadvantage  when  it  comes  to  gaining  access  to  the 
conventional credit market; 

•  Micro-enterprises,  especially  in  the  social  economy,  which  employ  persons  in  the 

categories mentioned in the previous paragraph9.  

To  reach  this  wide  range  of  final  beneficiaries,  a  variety  of  financial  instruments  should  be 
made available to microcredit providers. The Decision10 therefore provides for four types of 
financial instruments: guarantees, risk-sharing instruments, equity and debt. These are made 
available to public and private bodies established at national, regional and local level which 
provide  one  final  product  –  microcredit  –  to  persons  and  micro-enterprises  in  the  Member 
States.  

To develop these instruments, two separate structures have been set up:  

•  a guarantee instrument; 

•  a  structured  investment  vehicle,  in  the  form  of  a  fonds  commun  de  placement-fonds 
d’investissement spécialisé (FCP-FIS) under Luxembourg law, offering funded instruments 
(debt, equity and risk-sharing).  

The  Commission  estimates  that  the  Union’s  contribution  of  EUR 100  million  will  leverage 
microloans of more than EUR 500 million over eight years thanks to:  

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Article 2 of the Decision. 
Article 4 of the Decision. 

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•  Additional  funding  from  other  investors.  It  is  assumed  that  the  EU’s  investment  can 
attract  funding  from  third  parties.  The  European  Investment  Bank  (EIB)  is  already 
committed to matching the EU contribution and making EUR 100 million available for the 
‘funded instruments’ part. A further EUR 47 million is expected from other investors.  

•  The  revolving  nature  of  the  funds.  The  funds  can  be  used  more  than  once  during  the 
lifetime  of  the  Progress  Microfinance  Facility.  The  Decision  provides  for  the  last 
(re-)investment to be made in 2016.  

•  Leverage  generated  by  the  products.  Estimates  suggest  that  every  euro  committed  in 
guarantees  could  generate  at  least  six  euros  in  microcredit,  while  the  funded  instruments 
are expected to have a leverage effect of between one and three. 

Sections 3 and 4 describe the setting-up and key features of the guarantees window and of the 
funded instruments respectively and who benefits from them.  

3. 

GUARANTEES UNDER PROGRESS MICROFINANCE 

3.1. 

Setting up the guarantees window of Progress Microfinance 

The  guarantees  window  was  launched  on  1  July  2010  under  a  Fiduciary  and  Management 
Agreement  (FMA)  concluded  between  the  Commission  and  the  European  Investment  Fund. 
Out of the total of EUR 100 million available for Progress Microfinance, EUR 25 million will 
be allocated to the guarantees window.  

3.2. 

Key features  

The guarantees window has essentially been modelled on the SMEG11 guarantees window of 
the Competitiveness and Innovation Programme12. 

The diagram below illustrates how the guarantees instrument works. Intermediaries can apply 
for guarantees by responding to the open call for expressions of interest published on the EIF 
website13. The EIF evaluates the applications and, after they have been approved by the EIF 
Board and the Commission, negotiates the contracts and signs them with the intermediaries.  

The EIF issues direct guarantees to microcredit providers to cover their microloan portfolios, 
or  counter-guarantees  to  guarantee  institutions  which,  in  turn,  issue  guarantees  to  cover 
microloan portfolios of microfinance institutions. In both cases, the maximum guarantee rate 
is 75 % of the underlying microcredit or guarantee portfolio, while the intermediary remains 
liable for at least 20 %. The guarantee issued by the EIF covers the first loss, but a cap is also 
agreed for each guaranteed portfolio, based on the expected cumulative losses of the portfolio. 
The maximum liability for the European Progress Microfinance Facility is set at 20 % of each 
guaranteed portfolio.  

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SME Guarantee. 
Decision  No  1639/2006/EC  of  the  European  Parliament  and  of  the  Council  of  24  October  2006 
establishing  a  Competitiveness  and  Innovation  Framework  Programme  (2007  to  2013),  OJ  L  310, 
9.11.2006, p. 15. 
http://www.eif.org/what_we_do/microfinance/microcredit_guarantees/index.htm. 

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Guarantees have a term of up to three years. In principle, they are provided free of charge, but 
intermediaries have to pay a commitment fee if they fail to reach 90 % of the agreed portfolio 
volume, i.e. if they disburse less than 90% of the agreed volume of microloans. This provides 
the necessary incentive to reach out to the final beneficiaries and achieve the agreed portfolio 
volume. 

Guarantees 

EU budget 

guarantee 

EIF 

counter-guarantee 

Microcredit 
provider 

Guarantee 
institution 

Microcredit 
provider 

guarantee 

microloans 

microloans 

Final beneficiaries

Additionality 

The agreement with the EIF provides that funds from Progress Microfinance may not replace 
equivalent  guarantees  received  by  intermediaries  under  existing  EU,  national  or  regional 
financial instruments. The criteria applied are the effect on geographical reach or on the total 
amount  of  financing  provided  to  final  beneficiaries  or  to  each  type  of  final  beneficiary,  in 
particular to groups at risk.  

Geographical balance 

The EIF will seek to promote a balanced geographical distribution for Progress Microfinance. 
The agreement requires the EIF to issue guarantees for intermediaries in at least 12 Member 
States  until  the  end  of  2016  and  to  comply  with  a  concentration  limit  on  guarantees  per 
country14.  

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As long as the aggregate budgetary commitments or further amounts available for commitments are no 
more  than  EUR 25  million,  the  concentration  limit  is  EUR  4  million  per  Member  State;  over 
EUR 25 million, it is EUR 6 million or 16 % of the aggregate budgetary commitment or further amounts 
available for commitments (the lower of these two amounts applies). 

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3.3.  Who benefits?  

Only applications from institutions serving the final beneficiaries covered by the Decision are 
eligible. They have to provide:  

•  either guarantees for microloan portfolios; 

•  or microcredit, as defined in the Decision.  

In both cases, the aim must be to establish and/or develop micro-enterprises: the microloans 
granted  to  the  final  beneficiaries  must  be  used  to  finance  investment,  working  capital, 
including acquisition of licences, and other start-up costs for micro-enterprises.  

The  call  for  expressions  of  interest  met  with  considerable  interest  from  intermediaries, 
although in the end some of them did not apply. Most were very small microcredit institutions 
operating  locally,  which  did  not  meet  the  minimum  requirements  in  terms  of  financing 
volumes  to  be  generated  (at  least  100  microloans  per  year  in  portfolios  under  Progress 
Microfinance). This volume requirement reduces the risk to the intermediary by diversifying 
portfolios and makes sure that a greater number of beneficiaries are reached, but it does not 
exclude  small  microcredit  providers.  In  the  United  Kingdom,  for  instance,  eight  small 
microfinance institutions have pooled their resources and set up a joint fund in order to benefit 
from the Facility (funded instruments in this case).  

By  the  end  of  2010,  two  operations  were  signed  under  the  guarantees  window  of  Progress 
Microfinance,  the  first  with  the  Belgian  microfinance  provider  microStart15  and  the  second 
with the Dutch foundation Qredits16.  

MicroStart 

MicroStart  is  a  new  Belgian  non-profit  microfinance  institution  set  up  by  the  BNP  Paribas 
Fortis bank in cooperation with ADIE17, a French microcredit provider and one of Europe’s 
largest.  Progress  Microfinance  guarantees  microStart  up  to  EUR 111 375  for  a  portfolio  of 
microloans of EUR 2.7 million at a guarantee rate of 75 % and a cap rate of 5.5 %. 

MicroStart  grants  microloans  to  micro-entrepreneurs  who  have  no  access  to  conventional 
bank  lending,  in  particular  among  the  unemployed,  beneficiaries  of  welfare  payments  and 
migrants, and will provide them with support while they set up and develop their businesses. 
Microstart will concentrate its first operations on several impoverished areas of Brussels, such 
as  Saint-Gilles/Sint-Gillis18,  Saint-Josse-ten-Noode/Sint-Joost-ten-Node  and  Schaerbeek/ 
Schaarbeek,  where  the  unemployment  rate  ranges  from  27 %  to  32 %.  There  are  plans  to 
extend its operations to Wallonia and Flanders by the end of 2012.  

The guarantee from the Progress Microfinance cleared the way for BNP Paribas Fortis to get 
involved in setting up this new microcredit provider. This means that it had a direct impact on 
the  total  financing  provided  to  the  target  group.  In  contrast  to  existing  microfinance 

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Contract signed on 15 December 2010. 
Contract signed on 16 December 2010. 
Association pour le droit à l’initiative économique. 
The  Saint-Gilles/Sint-Gillis  branch  will  also  serve  parts  of  the  neighbouring  boroughs  of  Anderlecht 
and Brussels. 

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institutions  in  Belgium,  which  mostly  cover  the  higher  end  of  the  market19,  MicroStart’s 
objective  is  to  concentrate  on  the  lower  end  with  an  average  loan  of  EUR 2 000  to  3 000. 
Consequently,  microStart  will  extend  the  reach  of  microfinance  in  Belgium,  which  up  until 
now has focused on larger projects.  

Qredits 

Qredits  is  a  private  not-for-profit  foundation  that  started  operating  in  2009.  Its  founders 
include both public and private institutions, such as the Dutch Ministry of Social Affairs and 
Employment, the Fund for Employment and Living and the banks ABN AMRO, Fortis Bank 
Nederland,  ING  Nederland  and  Rabobank  Nederland.  It  receives  a  guarantee  of 
EUR 1 300 500 from Progress Microfinance for a microloan portfolio of EUR 20.4 million at 
a guarantee rate of 75 % and a cap rate of 8.5 %. 

Qredits  provides  not  only  financing  but  also  mentoring  for  established  entrepreneurs  and 
business start-ups with a viable business plan but without access to commercial financing. It 
also grants microloans to start-up beneficiaries and clients from at-risk or vulnerable groups, 
such  as  the  unemployed,  people  on  welfare  benefits,  young  people,  elderly  people,  persons 
with a bad debt registration20 and single persons. 

Before  Qredits  received  the  Progress  Microfinance  guarantee,  microlending  to  start-ups 
accounted for only 34 % of its portfolio, because such transactions pose a relatively high risk. 
The  guarantee  enables  Qredits  to  extend  lending  to  business  start-ups  (defined  as 
entrepreneurs  whose  business  history  does  not  exceed  three  years),  including  vulnerable 
groups  that  pose  a  higher  risk.  The  guarantee  also  allows  Qredits  to  relax  its  collateral 
requirements  for  certain  microborrowers  that  would otherwise not have access to finance in 
the Netherlands. 

Future transactions 

As  far  as  future  transactions  are  concerned,  the  EIF  is  continuing  to  receive  applications 
which are expected to lead to further operations in 2011. 

4. 

FUNDED INSTRUMENTS 

4.1. 

Setting up the fonds commun de placement for funded instruments 

Negotiations  between  the  Commission,  the  EIB  and  the  EIF  on  establishment  of  the  fonds 
commun  de  placement-fonds  d’investissement  spécialisé  (FCP-FIS)  were  concluded  in  late 
October 2010. The Luxembourg regulatory body21 gave final approval to launch the FCP on 
22  November  2010,  the  date  on  which  the  funded  instruments  window  became  operational. 
Out of the total of EUR 100 million available for Progress Microfinance for the period up to 
2013,  EUR 75 million  will  be  allocated  to  funded  instruments.  The  EIB  will  contribute 
EUR 100 million and third-party investors are expected to join at a later stage with aggregate 

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The  main  Belgian  provider  in  this  field  is  the  Fonds  de  Participation,  which  grants  microloans 
averaging EUR 15 000 (2007). 
Qredits  takes  account  of  information  provided  by  the  Credit  Bureau  to  assess  applicants’  over-
indebtedness. 
Commission de Surveillance du Secteur Financier (CSSF). 

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investments  of  up  to  EUR 50  million.  Since  the  Decision  was  adopted,  a  further 
EUR 3 million have been added by the Commission22.  

4.2. 

Key features  

To reach a wide range of final beneficiaries, a variety of products are offered under the FCP. 
Potential intermediaries can apply for four types of financial instrument:  

•  senior loans23; 

•  subordinated loans (financing subordinated to senior creditors); 

•  risk-sharing  loans  (senior  loans  combined  with  risk  participation  in  the  microcredit 

portfolio); 

•  equity  participation  (direct  or  indirect  equity  in  the  form  of  investments  in  ordinary  or 

preferred shares). 

For  funded  instruments,  potential  intermediaries  are  encouraged  to  submit  applications 
directly to the EIF. The latter then preselects proposals and carries out a due diligence check. 
After  approval  by  the  EIF  Board,  the  contract  is  negotiated  and  signed  by  the  EIF  and  the 
intermediary. 

The  diagram  below  illustrates  how  the  Facility’s  ‘funded  instruments’  window  works.  The 
FCP was set up as an umbrella fund, the EU Microfinance Platform. Currently, its only sub-
fund is the European Progress Microfinance Fund, with the Commission and the EIB as the 
founding investors and the EIF as Management Company. The Commission holds the junior 
units which are subordinate to the senior units: this means that the Commission bears the first 
net  losses  affecting  the  sub-fund’s  assets,  while  the  EIB  is  protected  as  senior  unit  holder 
against losses incurred by the junior units.  

Additionality 

The  agreement  (Management  Regulation)  which  binds  the  EIF  as  Management  Company 
states  that  operational  agreements  concluded  with  financial  intermediaries  must  increase 
access  to,  and  availability  of,  microcredit  instruments  for  final  beneficiaries  and  may  not 
replace  equivalent  agreements  concluded  by  intermediaries  under  existing  EU,  national  or 
regional instruments.  

Geographical balance 

With  a  view  to  establishing  a  geographical  balance  across  the  EU,  the  exposure  to 
intermediaries  in  any  single  Member  State  may  not  exceed  10 %  of  the  aggregate  target 

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The EUR 3 million come from the European Parliament Preparatory Action. See section 7. 
In the event that the borrower goes bankrupt, senior loans must be repaid before other creditors receive 
any payment. 

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commitments from investors.  

Funded instruments 

European Commission 

European Investment Bank 

Other investors 

Investment 

Umbrella fund: EU Microfinance Platform 

Subfund: European Progress Microfinance Fund 

Manage- 
ment 

European 
Investment 
Fund 

Direct 
investment 

(Loans, equity,  
risk-sharing) 

Indirect 
investment 

Microfinance vehicle 

Microcredit 
provider 

Microcredit 
provider 

Microloans 

Microloans 

Final beneficiaries 

4.3.  Who benefits? 

As  with  the  guarantees,  only  microcredit  providers  whose  activities  are  in  line  with  the 
objective of the European Progress Microfinance Facility24 are eligible.  

Given that the ‘funded instruments’ window did not come into operation until towards the end 
of  the  year,  at  the  time  of  writing  only  one  contract  has  been  signed,  with  the  Bulgarian 
microfinance institution Mikrofond25. 

Mikrofond is a non-bank institution  which started  operating in 1999 with  the support  of the 
Soros  Economic  Development  Foundation  (SEDF)  and  funding  from  the  United  Bulgarian 
Bank and Raiffeisenbank. Since 2003, it has the legal status of a private limited company and 
has attracted several banks as lenders26 and the SEDF as investor.  

With  its  relatively  small  loans,  averaging  around  EUR  3 000,  Mikrofond  targets  primarily 
micro-entrepreneurs and micro-enterprises that do not usually have access to other sources of 
funding27.  While  other  microcredit  providers  focus  on  the  urban  areas  around  Sofia, 
Mikrofond has branches all over Bulgaria. This allows it also to cover rural areas where not 

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Article 2 of the Decision. 
Contract signed on 18 February 2011. 
Deutsche Bank, Dexia Microcredit Fund, Oikocredit, Coop-Est and Alphabank. 
The  largest  microfinance  provider  in  Bulgaria  is  the  ProCredit  Bank  with  78.59 %  of  the  microloan 
market. It concentrates more on SMEs than on micro-enterprises and micro-entrepreneurs. 

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many  banks  are  present,  to  fill  a  gap  in  credit  supply.  Its  client  base  includes  a  significant 
number of members of Bulgaria’s Roma community. 

The  senior  loan  of  EUR  3  million  from  the  funded  instruments  window  of  Progress 
Microfinance  will  allow  Mikrofond  to  expand  its  microlending  activities,  especially  in  rural 
areas, and to target more specifically the Roma community that is at particular risk of social 
exclusion, poverty and unemployment.  

Future transactions  

Several further operations are at an advanced stage of preparation. On 13 December 2010 the 
EIF Board approved an indirect equity investment in a UK-based fund. Another application 
from a Romanian microfinance institution for a senior loan was accepted by the EIF Board in 
January  2011.  No  proposal  has  been  rejected  so  far.  Four  more  microcredit  providers  have 
confirmed their interest in the funded instruments, and the EIF expects interest from another 
eight potential intermediaries in 2011. 

The forecast for transactions under the FCP suggests that use of funded instruments will be 
geographically  balanced:  based  on  current  visibility,  48 %  of  transactions  are  expected  with 
intermediaries  in  Western  Europe  and  52 %  with  intermediaries  in  Central  and  Eastern 
Europe.  

5. 

MONITORING AND REPORTING 

In order to ensure that the objective of Progress Microfinance, i.e. to ease availability of and 
access to microfinance for people who cannot make use of conventional banking services, is 
achieved,  it  is  of  the  utmost  importance  for  the  Commission  to  analyse  the  fund  absorption 
patterns  and  the  instrument’s  social  and  economic  impact,  notably  on  promotion  of 
entrepreneurship amongst disadvantaged groups.  

The  EIF  is  therefore  required  to  submit  semi-annual  reports  on  the  number  of  microcredit 
applications received and rejected at intermediary level, the number of agreements concluded 
with  final  beneficiaries,  the  geographical  and  sectoral  distribution  of  financing  and  the  total 
number and type of beneficiaries. The EIF in turn requires financial intermediaries to provide 
information periodically on these points.  

Every  year  the  EIF  is  required  to  submit  a  report  on  the  social  impact  of  Progress 
Microfinance. The intermediaries will therefore be involved in collecting information on the 
social profile of the final beneficiaries, in particular on their employment status at the time of 
applying,  their  educational  qualifications,  gender  and  age,  and  on  whether  they  belong  to  a 
specific group (for example, those with disabilities or minorities). Information on the number 
of employees is collected on the start and end dates of the microloan to measure the impact of 
Progress Microfinance in terms of job creation and to monitor the sustainability of the micro-
enterprises that have been granted support.  

6. 

COMMUNICATION 

Establishment  of  the  European  Progress  Microfinance  Facility  has  aroused  strong  interest 
among both financial intermediaries and private individuals wishing to set up or develop their 
own businesses. The Commission and the EIF have joined forces to provide clear information 

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on  the  way  the  Facility  operates.  The  EIF  does  this  via  its  website  and  direct  contacts  with 
intermediaries.  The  Commission  focuses  its  communication  efforts  on  policymakers,  bodies 
managing the European Social Fund (ESF) and the general public. The large-scale stakeholder 
conference on ‘Microfinance in Europe’ held in Brussels on 9 and 10 November 201028 gave 
firmer shape to the closer cooperation and coordination to which all Commission departments 
dealing with microfinance are strongly committed with a view to achieving complementarity 
between the different instruments. All Commission departments involved and the EIB group 
contributed to the event, which marked the launch of Progress Microfinance. 

7. 

COMPLEMENTARITY AND COORDINATION WITH OTHER INSTRUMENTS 

Establishment  of  the  European  Progress  Microfinance  Facility  has  led  to  consolidation  and 
streamlining  of  funding  and  guarantees  provided  by  the  European  Union  to  support 
microfinance in the EU.  

The Competitiveness and Innovation Framework Programme for 2007 to 2013 (CIP), which is 
also managed by the EIF, is a longer-established instrument that provides guarantees. Under 
the  CIP  Microcredit  Guarantee  Window,  the  EIF  provides  loan  guarantees  to  microcredit 
organisations  (financial  intermediaries)  granting  loans  of  up  to  EUR 25 000  to  micro-
enterprises.  Since  September  2010,  Progress  Microfinance  has  the  first  call  on  microcredit 
deals.  This  means  that  these  may  be  concluded  under  the  CIP  only  where  no  transaction  is 
possible  under  Progress  Microfinance,  for  instance  where  no  budget  is  available  under  the 
latter,  where  the  intermediary  operates  in  a  non-Member  State  and  is  therefore  not  eligible 
under Progress Microfinance, where the amount exceeds the concentration limit per Member 
State or where the portfolio of the intermediary  has  a  mainly  commercial  focus.  Operations 
under  JEREMIE29  likewise  complement  those  under  Progress  Microfinance.  Under  the 
Structural Funds and shared management with the Member States, JEREMIE aims to improve 
access  to  funding  for  expansion  of  SMEs  and  investment  in  innovation  and  to  finance  the 
setting-up of new businesses, including micro-businesses.  

Making support available for capacity-building for non-bank microcredit providers as such is 
not the aim of Progress Microfinance, but of JASMINE30, which the Commission and the EIB 
group  set  up  as  a  three-year  pilot  project  (2009-11)  to  provide  technical  assistance  and 
funding  to  non-bank  microcredit  providers  established  in  the  EU.  The  Commission  has 
backed  up  JASMINE’s  technical  assistance  component  with  funds  (EUR  7  million)  made 
available by the European Parliament to the Commission in the framework of a preparatory 
action  requested  by  the  European  Parliament  (EPPA).  These  funds  support  development  of 
microfinance institutions in the EU and are used by the Commission to provide seed funding 
to  non-bank  microcredit  providers. In addition to the first two guarantees received from the 
Progress  Microfinance  guarantee  window, microStart  and Qredits  could  also  benefit  from  a 
EUR  750 000  equity  investment  and  EUR  750 000  loan  respectively  for  capacity  building 
under  EPPA.  EPPA’s  unspent  funds  (EUR 3 million)  were  committed  to  the  funded 
instruments of Progress Microfinance for efficiency reasons. 

28 

29 

30 

Conference webpage with link to presentations: 
http://ec.europa.eu/social/main.jsp?catId=836&langId=en&eventsId=300&furtherEvents=yes. 
Joint European Resources for Micro to Medium Enterprises:   
http://www.eif.europa.eu/what_we_do/jeremie/index.htm. 
Joint Action to Support Microfinance Institutions in Europe:   
http://www.eif.europa.eu/what_we_do/microfinance/JASMINE/index.htm. 

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Progress  Microfinance  also  complements  the  ESF,  for  which  supporting  entrepreneurship  is 
among  the  priorities  for  the  2007-13  programming  period.  It  is  widely  recognised  that  the 
success  rate  of  business  start-ups  can  be  increased  by  comprehensive,  high-quality  start-up 
and business support tailored to the needs of disadvantaged groups. 17 Member States have 
made this a priority in their operational programmes.  

The Commission will continue to use ESF technical assistance to help national and regional 
authorities in the Member States improve the quality of support systems for people wishing to 
consolidate  their  businesses  or  to  start  one  up.  Assistance  will  include  transfers  of  good 
practice  in  increasing  outreach  to  target  groups  and  improving  multi-sector/multi-level 
governance.  

Lastly,  individuals  taking  out  microloans  may  be  granted  an  interest-rate  rebate  under  an 
option offered by the ESF Regulation31. ESF managing authorities in the Member States may 
design specific operations for micro-entrepreneurs in order to cover all or part of the interest 
rate  on  loans,  which  would  reduce  the  financial  burden  on  micro-entrepreneurs  and,  hence, 
complement Progress Microfinance. However, to date no Member State has indicated that it 
intends to make use of this possibility in connection with Progress Microfinance.  

8. 

OUTLOOK AND CONCLUSIONS 

The agreements signed and the transactions forecasts suggest that the various instruments on 
offer are attractive to a wide range of intermediaries.  

Approximately one third of transactions under preparation are expected to be with banks and 
two  thirds  with  non-banks.  As  regards  funded  instruments  only,  53 %  of  the  contracts,  in 
terms  of  volume,  are  likely  to  be  signed  with  smaller  banks  and  47 %  with  non-bank 
microfinance institutions. This means that the first transactions will be well balanced in terms 
of  the  types  of  intermediary  targeted,  which  will  also  help  reach  the  broad  range  of 
microborrowers targeted by Progress Microfinance.  

So  far,  the  transactions  forecasts  point  to  greater  interest  in  funded  instruments  than  in 
guarantees, which means that the way the EU resources have been apportioned between the 
two  sections  of  Progress  Microfinance  (75 %  versus  25 %)  has  been  right.  Of  the  range  of 
products  offered  under  the  FCP,  senior  loans  have,  as  expected,  been  the  most  in  demand 
(63 %). Nevertheless, all available financial instruments, i.e. senior loans, subordinated loans, 
risk-sharing loans and direct and indirect equity, are included in the forecast for transactions, 
which  demonstrates  that  the  wide  product  range  reflects  actual  demand  across  targeted 
intermediaries and helps optimise EU-wide outreach.  

The  Commission  and  the  EIF  also  expect  satisfactory  fund  absorption.  Over  the  period 
2010-13, EUR 25 million will be made available each year to the Microfinance Facility.  

In  2010  EUR 10  million  was  committed  for  guarantees  and  EUR 18  million32  for  funded 
instruments.33  Another  EUR  24  million  contributed  by  the  EIB  takes  the  aggregate  amount 

31 

32 
33 

Regulation  (EC)  No 1081/2006 of  the  European Parliament  and  of  the Council  of 5 July  2006  on  the 
European Social Fund and repealing Regulation (EC) No 1784/1999, OJ L 210, 31.7.2006, p. 12. 
EUR 3 million under EPPA. 
For the guarantees EUR 6 million was paid to the Progress Microfinance account of the EIF. For the 
funded instruments, EUR 15 million was drawn down while EUR 3 million was carried over. 

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made available to the FCP up to EUR 42 million. For 2011 the Commission has committed 
close to EUR 5 million for guarantees34 and EUR 20 million for funded instruments.  

As regards guarantees, a further EUR 8 million are expected to be absorbed in 2011, while the 
forecast  for  transactions  involving  funded  instruments  suggests  that  EUR 44  million  will  be 
absorbed up to the end of the year.  

The  next  annual  report,  to  be  presented  in  June  2012  based  on  the  2011  implementation 
reports  provided  by  the  EIF,  will  assess  in  greater  detail  the  accessibility  of  funding  to 
individual  sectors  and  types  of  beneficiary,  together  with  the  geographical  and  sectoral 
distribution. It will also provide initial indications of the impact and sustainability of Progress 
Microfinance.  

34 

The  commitment  for  guarantees  totals  EUR  4 750 000.  EUR 250 000  has  been  committed  for  support 
measures. 

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