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 — 2011
Date: 2012-07-17
Institutions: European Commission
Subjects: EU financial instrument, European Investment Fund, distribution of EU funding, job creation, micro-enterprise, microloan, social integration

EUROPEAN COMMISSION 

Brussels, 17.7.2012  
COM(2012) 391 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 — 2011 

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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 — 2011 

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CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

3.3. 

4. 

5. 

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

Implementation at the level of microcredit providers .................................................. 4 

Contracts concluded ..................................................................................................... 4 

Actions funded ............................................................................................................. 6 

Applications accepted and rejected.............................................................................. 8 

Impact at micro-borrower level.................................................................................... 9 

Microloan volumes and the number of beneficiaries................................................... 9 

Types of final beneficiaries........................................................................................ 10 

Social and employment impact of Progress Microfinance ........................................ 11 

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

Conclusions and outlook............................................................................................ 14 

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1. 

INTRODUCTION 

The  European  Progress  Microfinance  Facility  (Progress  Microfinance)  for 
employment  and  social  inclusion  was  established  in  March  2010  by  Decision  No 
283/2010/EU (hereinafter referred to as the ‘Decision’). 

Microcredit  providers  in  EU  Member  States  can  apply  to  the  European  Investment 
Fund  (EIF)  for  guarantees  or  funded  instruments  (debt,  equity  and  risk-sharing 
instruments), so they can become intermediaries under Progress Microfinance1. They 
provide  microloans  (loans  of  less  than  EUR  25 000)  to  micro-enterprises  or 
individuals, particularly to people who are unemployed, at risk of losing their jobs, at 
risk  of  being  socially  excluded  or  otherwise  at  a  disadvantage  when  it  comes  to 
securing  a  traditional  loan.  The  aim  of  the  microloans  must  be  to  establish  and/or 
develop  micro-enterprises.  For  the  period  2010–13,  the  European  Union  makes 
available EUR 103 m for Progress Microfinance2, and the European Investment Bank 
(EIB) has committed itself to adding another EUR 100 m for funded instruments. The 
total of EUR 203 m is divided between the two windows as follows: EUR 25 m for 
guarantees  and  EUR  178 m  for  funded  instruments.  Progress  Microfinance  is 
implemented by the EIF on behalf of the Commission and the EIB. 

2011  was  the  Progress  Microfinance  Facility’s  first  full  year  of  operation.  In  line 
with  Article  8  of  the  Decision,  this  report  covers  implementation  at  the  level  of 
microcredit  providers,  including  contracts  concluded  with  the  EIF,  geographical 
distribution, actions funded and applications accepted and rejected. The second part 
of  the  report  analyses  the  impact  at  micro-borrower  level,  including  the  types  of 
beneficiaries and distribution per sector, based on the data available at this stage. The 
last  sections  look  at  complementarity  between  Progress  Microfinance  and  other 
instruments  and  the  outlook  with  regard  to  future  developments.  The  report  covers 
the year 2011, but it includes more recent data where possible. 

2. 

IMPLEMENTATION AT THE LEVEL OF MICROCREDIT PROVIDERS 

2.1. 

Contracts concluded 

Types of intermediaries 

Progress Microfinance is open to a wide range of intermediaries at national, regional 
or local level, including banks and non-bank institutions as well as private and public 
institutions.  The  sector  has  shown  considerable  interest  in  the  instruments  the 
Facility offers. By March 2012, the EIF had signed 18 contracts with 16 microcredit 
providers: 

• 

eight non-bank institutions: microStart (BE), Mikrofond and JOBS MFI (BG), 
Créasol  (FR),  Qredits  (NL),  Inicjatywa  Mikro  (PL),  FAER  and  Patria  Credit 
(RO); 

1 
2 

For more details see the 2010 Implementation Report, COM(2011) 195. 
In  addition  to  the  EUR  100m  initially  foreseen,  another  EUR  3m  have  been  added  from  a  European 
Parliament Preparatory Action (For more details see the 2010 Implementation Report). 

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• 

seven  banks:  Central  Cooperative  Bank  (CY),  Pancretan  Cooperative  Bank 
(EL),  Siauliu  Bankas  (LT),  FM Bank  (PL),  Millennium  Bank  (PT),  Banca 
Transilvania (RO) and Volksbank Slovenia (SI); 

• 

one public institution: ICREF (ES). 

The  variety  of  intermediaries  enables  the  Facility  to  give  a  broad  range  of  micro-
entrepreneurs access to credit (see also point 3.2). 

Microcredit providers at all territorial levels are represented. Some of them cover a 
whole country, e.g. FM Bank in Poland, while others operate on a regional or local 
scale. For example, the Spanish ICREF focuses on the region of Murcia, whereas the 
Portuguese  Millennium  Bank  has  agencies  in  Lisbon,  Porto,  on  the  Azores  and 
Madeira. The Belgian microStart is active in some areas of Brussels. 

Geographical distribution 

Although  it  is  demand-driven,  Progress  Microfinance  aims  to  achieve  a  balanced 
geographical  distribution.  The  EIF  is  therefore  required  to  issue  guarantees  for 
intermediaries  in  at  least  12  Member  States  and  to  respect  a  concentration  limit  on 
guarantees per country. 

By the end of March 2012, guarantees had been issued in six countries (BE, EL, NL, 
PL, PT, RO — see Table 1 for further details). 

Contracts for funded instruments were signed in nine Member States: BG, CY, EL, 
ES,  FR,  LT,  PL,  RO  and  SI.  According  to  the  Management  Regulation  governing 
funded instruments under Progress Microfinance, exposure to intermediaries in any 
single  Member  State  may  not  exceed  10 %  of  the  aggregate  target  commitments  of 
investors, i.e. at present EUR 17.5 m. With its three contracts together amounting to 
EUR 16.5 m, Romania is the only country that is close to the limit. 

Geographical distribution of Progress Microfinance (March 2012) 

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Signed  
Approved 

2.2. 

Actions funded 

Guarantees 

Under  the  Progress  Microfinance  guarantee  window,  which  is  funded  by  the 
Commission only, the EIF can issue portfolio guarantees to microcredit providers, or 
it  can  issue  counter-guarantees  to  guarantee  institutions  which  in  turn  issue 
guarantees  to  cover  the  microloan  portfolios  of  microcredit  providers.  Having  a 
guarantee  makes  it  easier  for  a  microcredit  provider  to  serve  target  groups  that  are 
considered risky, such as business starters who do not yet have any business history, 
young people or people who belong to a minority group. This is because part of any 
defaults  that  might  occur  are  covered  by  the  guarantee  and  therefore  reimbursed 
under  Progress  Microfinance3.  Applicants  for  guarantees  are  usually  microfinance 
institutions  that  already  focus  on  risky  groups,  like  the  Belgian  microStart  that 
especially  targets  people  with  a  migrant  background,  or  microcredit  providers  who 
want  to  extend  their  lending  activities  to  risky  groups.  Thanks  to  the  Progress 
Microfinance  guarantee,  the  Polish  FM  Bank  serves  newly  created  enterprises  that 
have been operating for less than 12 months. 

In  other  cases,  a  guarantee  is  used  to  improve  the  conditions  of  the  loan  for  the 
micro-borrower, i.e. a lower interest rate or collateral requirements that are less strict. 
For  example,  in  exchange  for  a  guarantee,  the  Romanian  Patria  Credit  has  been 
required  to  lower  its  interest  rate  by  2.9  percentage  points  and  accept  a  personal 
guarantee from its clients instead of requiring them to put up real collateral. 

3 

For  a  detailed  description  of  the  guarantees,  please  refer  to  the  2010  Implementation  Report, 
COM(2011) 195. 

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As initial demand for Progress Microfinance guarantees fell behind expectations, the 
term  of  the  guarantees  was  extended  from  three  to  six  years.  This  generated 
increased interest in the guarantees, and by March 2012, six guarantee operations had 
been launched. 

Funded instruments 

Under  the  funded  instruments  window,  which  is  co-financed  by  the  European 
Commission and the EIB, four types of products are available: 

– 

– 

– 

– 

Senior loans4, 

Subordinated loans5, 

Risk-sharing loans6, 

Equity participations (direct or indirect equity). 

Senior loans help provide intermediaries with liquidity that they can use to on-lend as 
microcredit. With 13 microcredit providers opting for senior loans, this product has, 
in line with expectations at the outset, been the most popular so far. One reason for 
the prevalence of senior loans is that they are relatively simple products and quicker 
to  use  than  the  more  sophisticated  subordinated  or  risk-sharing  loans  or  equity 
participations. 

Subordinated  loans  provide  capital  relief,  particularly  for  small  banks  seeking  to 
boost their capital adequacy to satisfy legal requirements. These instruments make it 
easier  to  obtain  more  funding  from  other  investors,  hence  they  create  a  leverage 
effect.  For  subordinated  loans,  intermediaries  are  required  to  generate  a  microloan 
portfolio  of  at  least  twice  the  amount  of  the  loan  received.  By  March  2012,  one 
microcredit  provider  (Volksbank  Slovenia)  had  signed  an  agreement  for  a 
subordinated loan. 

Risk-sharing loans combine elements of a senior loan with portfolio risk-sharing. For 
risk-sharing  loans,  intermediaries  are  required  to  match  the  amount  of  the  loan 
received. This means that the leverage effect is also at least double the initial amount. 
Risk-sharing loans are most likely to be chosen by banks, particularly in the context 
of down-scaling projects.7 

Equity can take the form of direct investments in a microcredit provider or indirect 
investments  in  a  fund  which  invests  in  microcredit  providers.  Since  equity  helps 
microcredit providers obtain more funding, intermediaries are required to generate a 
microloan  portfolio  of  at  least  three  times  the  amount  of  the  equity  investment 
received8. 

Complementarity between guarantees and funded instruments 

4 
5 
6 
7 
8 

If the borrower goes bankrupt, senior loans must be repaid before other credits receive any payment. 
Financing subordinated to senior creditors. 
Senior loans combined with risk participation in the microcredit portfolio. 
A first risk-sharing loan agreement is likely to be signed in 2012. 
An indirect equity agreement is likely to materialise with a fund in the UK in 2012. 

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With  its  wide  range  of  products,  Progress  Microfinance  serves  a  broad  range  of 
intermediaries  in  different  parts  of  Europe.  In  addition,  the  two  windows  under 
Progress Microfinance are complementary. Firstly, the availability of both guarantees 
and  funded  instruments  has  a  positive  effect  on  outreach  in  geographical  terms  as 
they tend to be used in different countries (see section 2.1). Secondly, in cases where 
a  microcredit  provider  has  received  support  under  both  windows,  the  products  are 
used in a complementary way. For example, the Pancretan Cooperative Bank (EL) 
will (i) use risk protection under the guarantee to cover a riskier portfolio of start-ups 
with a business history of less than three years or new borrowers who cannot provide 
sufficient  collateral  and  (ii)  draw  on  financing  under  a  senior  loan  to  generate  a 
separate portfolio targeting existing enterprises that would have difficulty accessing 
microloans in the current economic climate. 

Table 1: Overview of Progress Microfinance operations as of 31 March 2012 

Member State 

Intermediary 

Instrument 

Support to 
intermediary 
(EUR) 

microStart 
Mikrofond 
JOBS MFI 
Cooperative  Central 
Bank 
Créasol 
Pancretan 
Cooperative Bank 
Siauliu Bankas 
Qredits 
FM Bank 
Inicjatywa Mikro 
Millenium Bank 
Patria Credit 

FAER 
Banca Transilvania 

Volksbank Slovenia 
ICREF 
16 microcredit 
providers 

Guarantee 
Senior Loan 
Senior Loan 
Senior Loan 

Senior Loan 
Guarantee 
Senior Loan 
Senior Loan 
Guarantee 
Guarantee 
Senior Loan 
Guarantee 
Guarantee 
Senior Loan 
Senior Loan 
Senior Loan 

Subordinated Loan 
Senior Loan 
18 contracts 

111 375
3 000 000
6 000 000
8 000 000

1 000 000
803 250
8 750 000
5 000 000
750 000
1 940 000
4 000 000
309 488
960 000
8 000 000
1 000 000
7 500 000

8 750 000
8 000 000
73 874 068

BE 
BG 
BG 
CY 

FR 
EL 

LT 
NL 
PL 
PL 
PT 
RO 

RO 
RO 

SI 
ES 
12 Member 
States 

Financial volumes 

As  of  31  March  2012,  the  EIF  has  made  commitments  to  microcredit  providers  of 
EUR 73.87 m in total. 

Under the guarantee window, commitments amount to EUR 4.87 m (out of the total 
EUR  25 m  available  for  the  guarantees).  This  is  considerably  below  the  EUR  8 m 
expected for the end of 2011. However, the EIF has confirmed that there is a rising 
demand for guarantees. This should materialise in a number of additional contracts in 

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2012 including for larger volumes. The rise in demand is also due to the extension of 
the term of the guarantees from three to six years. 

Under the funded instruments window, the EUR 69 m of commitments to microcredit 
providers  exceeds  the  expected  EUR  44 m.  This  is  due  to  strong  demand  from  the 
sector and the EIF’s sustained deal origination efforts. 

Disbursements under the senior loan agreements are made in instalments over a 18 to 
24  month  period.  The  operations  signed  in  2011  are  therefore  expected  to  be 
disbursed  fully  in  2013.  The  first  instalment  is  paid  once  the  microcredit  provider 
fulfils  certain  conditions,  such  as  those  in  relation  to  operational  preparedness  or 
enhancement  of  client  lending  practices.  Each  disbursement  typically  does  not 
exceed  50 %  of  total  commitments.  Subsequent  disbursements  are  made  only  once 
the previously negotiated microloan generation targets have been met. 

By March 2012, EUR 19.1 m had been disbursed: EUR four million to Cooperative 
Central  Bank  (CY),  EUR  four million  to  ICREF  (ES),  EUR  four million  to  Patria 
Credit  (RO),  EUR 2.5 m  to  Siauliu  Bankas  (LT),  EUR  two million  to  JOBS  MFI 
(BG),  EUR  1.5 m  to  Mikrofond  (BG),  EUR  0.89 m  to  Inicjatywa  Mikro  (PL)  and 
EUR 0.24 m to FAER (RO). 

2.3. 

Applications accepted and rejected 

To become an intermediary under Progress Microfinance, microcredit providers have 
to  reply  to  the  call  for  expressions  of  interest  for  the  guarantees  or  submit 
applications  directly  to  the  EIF  for  the  funded  instruments9.  The  EIF  assesses  the 
proposals and carries out a due diligence on applicant microcredit providers. For the 
guarantees, the Commission’s approval is also needed. After the approval of the EIF 
Board has been obtained, a contract is negotiated and signed between the EIF and the 
intermediary. 

So  far,  no  applications  for  financing  under  Progress  Microfinance  have  been 
formally  rejected.  However,  after  first  making  contact  with  the  EIF,  a  number  of 
microcredit  providers  chose  not  to  apply.  For  guarantees,  this  happened  partly 
because  microcredit  providers  found  that,  in  the  end,  the  funded  instruments  were 
better suited to their needs. 

For the funded instruments, operations that are no longer part of the formal pipeline 
include senior loan agreements with two microcredit providers who no longer needed 
support  from  Progress  Microfinance.  Direct  equity  participation  in  a  peer-to-peer 
lending platform was abandoned because of uncertainties about compliance with the 
Decision. In more general terms, some early-stage contacts did not result in concrete 
operations because the amounts requested were too high, the size and risk quality of 
the microcredit provider insufficient or their lending practices questionable. 

Furthermore, a number of agreements approved by the EIF Board have not yet been 
signed  and  their  future  remains  uncertain.  This  is  the  case  for  an  indirect  equity 
investment  in  a  UK-based  fund,  already  approved  in  December  2010.  Due  to 
developments with regard to the structural set-up of the intermediary, there does not 
seem  to  be  any  further  interest  in  concluding  the  agreement  with  the  EIF.  The 

9 

http://www.eif.org/what_we_do/microfinance/progress/index.htm. 

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negotiation of an agreement with an Italian provider approved by the EIF board has 
been  put  on  hold  pending  confirmation  of  a  new  capital  injection  at  intermediary 
level. Finally, the future of a counter-guarantee agreement with an Italian guarantee 
institution  is  uncertain  due  to  a  recent  change  in  national  legislation.  The  change 
hinders the ability of the guarantee institution to fulfil the additionality requirements 
under Progress Microfinance. 

3. 

IMPACT AT MICRO-BORROWER LEVEL 

3.1.  Microloan volumes and the number of beneficiaries 

Targets 

In  terms  of  microcredit  for  final  beneficiaries,  the  total  budget  of  EUR  203 m  is 
estimated to leverage to  a  volume of EUR 500 m  in microcredit, i.e. around  46 000 
microloans. 

Based  on  the  contractual  terms  of  the  current  18  agreements  with  microcredit 
providers, it is expected that the EUR 73.87 m committed as of March 2012, i.e. over 
one  third  of  the  total  budget  available,  will  result  in  more  than  EUR  170 m  in 
microloans over the coming years. A number of incentives for intermediaries ensure 
that this will be the case: failure to reach the agreed microloan generation targets, e.g. 
under a senior loan, would mean the microcredit provider must repay the loan early. 
This  creates  a  clear  incentive  to  on-lend  to  micro-borrowers  effectively  and 
efficiently.  A  similar  incentive  is  used  for  guarantees:  while  they  are,  in  principle, 
provided free of charge, microcredit providers have to pay a commitment fee if they 
disburse less than 90 % of the agreed volume of microloans. 

Microloan volumes generated and the number of beneficiaries 

As of March 2012, a microcredit volume of EUR 26.8 m in total (EUR 17.8 m under 
the guarantees and EUR 9.1 m under the funded instruments) had been generated by 
microcredit  providers  in  BE,  BG,  ES,  LT,  NL,  PL  and  RO10.  This  corresponds  to 
15.72 %  of  the  volume  expected  to  be  reached  under  the  18  agreements  signed  by 
March 2012. 

In  terms  of  numbers,  by  March  2012,  these  microcredit  providers  had  disbursed 
2 933  microloans  (1 834  under  the  guarantees,  1 099  under  the  funded  instruments). 
This amounts to 17.8 % of the expected total for the 18 agreements. 

According  to  the  EIF’s  estimations,  the  current  figures  are  broadly  in  line  with  the 
typical pattern for the build-up of microcredit portfolios over a 2 to 3 year inclusion 
period following each contract signature. Implementation patterns typically indicate 
a  non-linear  portfolio  build-up  with  a  slower  start  followed  by  a  stronger  rise  in 
volumes. After an agreement is signed, a microcredit provider must prepare to begin 
micro-lending  activities,  especially  when  a  new  micro-lending  product  is  launched. 
For example, before the first microloan can be disbursed, a public institution might 

10 

These  figures  refer  to  the  microloan  portfolios  built  up  by  microcredit  providers  thanks  to  Progress 
Microfinance.  

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have  to  go  through  a  tendering  process  to  find  a  bank  to  cooperate  with.  This  can 
take several months. 

Guarantees usually have an availability period of two years, senior loans an inclusion 
period of two to three years. This means that between 2013 and 2015, the microcredit 
providers  who  have  signed  agreements  so  far  should  reach  their  target  microloan 
volumes and numbers.  

3.2. 

Types of final beneficiaries 

Microcredit  providers  supported  by  Progress  Microfinance  target  a  wide  range  of 
final beneficiaries. 

Some focus on self-employed people and/or micro-enterprises in general, e.g. Banca 
Transilvania (RO), which presents itself as the ‘Bank for Entrepreneurial People’, the 
Cooperative  Central  Bank  (CY)  with  its  sole  trader  facility,  or  the  Pancretan 
Cooperative  Bank  (EL),  which  targets  existing  micro-enterprises  that  are  having 
difficulty accessing finance. 

A  number  of  microcredit  providers  target  entrepreneurs  in  rural  areas,  focusing  on 
the agricultural sector. This is particularly significant in countries where banks tend 
to be concentrated in big cities. FAER and Patria Credit thus fill an important gap in 
Romania, as Mikrofond does in Bulgaria. Inicjatywa Mikro (PL) also targets the self-
employed, especially agro-producers. 

Several  microcredit  providers  aim  to  give  access  to  finance  to  start-ups,  which  are 
generally considered comparatively risky. FM Bank (PL) concentrates on enterprises 
that are less than 12 months old. Qredits (NL) has a portfolio guaranteed by Progress 
Microfinance  that  finances  start-ups.  Volksbank  Slovenia  and  the  Pancretan 
Cooperative  Bank  (EL)  target  micro-enterprises  that  are  less  than  three  years  old. 
The Pancretan Cooperative Bank also targets new borrowers with a viable business 
plan who cannot provide sufficient collateral. 

Finally,  some  Progress  Microfinance  intermediaries  target  particularly  vulnerable 
groups, such as young people and women (ICREF (ES)). JOBS MFI (BG) provides 
microloans and microleases to unemployed people or job seekers who want to start 
their own business. microStart (BE) has above all clients with a migrant background, 
while  Siauliu  Bankas  (LT)  has  set  itself  the  target  of  financing  at  least  50 %  of 
female entrepreneurs and micro-enterprises that either employ a majority of women 
or  are  owned  only  by  women.  Millennium  Bank  (PT)  has,  as  part  of  its  portfolio, 
established  cooperation  with  an  association  that  supports  people  who  are  socially 
excluded, such as homeless people or former drug addicts and Roma. Créasol (FR) 
targets unemployed people, often with a migrant background, who want to create a 
business  or  develop  their  business  and  who  have  been  rejected  by  a  bank  in  the 
region. 

3.3. 

Social and employment impact of Progress Microfinance 

The EIF reports to the Commission on the social and employment impact of Progress 
Microfinance  based  on  information  provided  by  the  microcredit  providers  the 
Facility  supports.  This  kind  of  social  impact  reporting  is  not  a  common  market 
practice and therefore required some adjustments of internal procedures and systems 

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so  microcredit  providers  could  report  to  the  EIF.  Social  reporting  is  currently  only 
required once a year, with September 30 as the deadline. 

By  that  date  in  2011,  only  five  microcredit  providers  had  started  lending  under 
Progress  Microfinance,  but  data  on  some  aspects  is  only  available  from  two 
microcredit providers. The fact that this was the first time this kind of reporting was 
done  explains  some  of  the  problems.  Data  on  the  employment  and  social  impact 
cannot  therefore  be  considered  representative.  It  is  also  too  early  for  data  on  the 
sustainability of businesses that have been supported. 

Job and business creation 

The job creation effects of Progress Microfinance can be measured by the number of 
unemployed and inactive people who started a business with the help of a microloan. 
Based  on  the  information  given  by  microStart  (BE)  and  Mikrofond  (BG),  this  was 
the case for 27.46 % of clients. In addition, anecdotal evidence suggests that some of 
those who had previously been employed had only been working part-time. 

For some of the micro-enterprises already operational at the time the microloan was 
provided, the information given shows that almost 60 % of the enterprises supported 
are  less  than  one  year  old.  They  therefore  belong  to  the  group  of  micro-borrowers 
considered  ‘risky’.  More  than  a  third  of  enterprises  supported  are  less  than  six 
months old. 

Table  2:  History  of  enterprises  supported  by  Progress  Microfinance 
intermediaries (data as of September 2011) 

Up to two years 

Up to one year 

Up to six months 

FM Bank 
Mikrofond 
microStart  
Patria Credit 
Qredits 
Total 

100 %
40.93 %
90.74 %
90.21 %
75.42 %
 73.01 %

94.39 %
30.38 %
85.19 %
79.02 %
55.87 %
58.63 %

58.88 %
13.50 %
79.63 %
73.43 %
24.39 %
34.69 %

Outreach to disadvantaged target groups 

Individuals  with  a  higher  level  of  education  are  more  likely  to  be  involved  in  an 
entrepreneurial activity than those with a lower level of education11. Data provided 
by microStart and Mikrofond on the educational background of their clients shows, 
however,  that  more  than  three  quarters  of  the  micro-borrowers  financed  had  either 
completed secondary education (71 %) or primary education (5 %) only. This shows 
that these intermediaries also serve people who are in a more fragile position in the 
labour market. 

In terms of age disadvantage, around 5 % of the micro-borrowers were under 25 and 
13 % were older (over 54). However, the group aged between 25 and 54 is certainly 
not homogeneous. Gauging the representation among end-beneficiaries of the group 

11 

European Commission, Flash Eurobarometer 283, Entrepreneurship in the EU and beyond. A survey in 
the EU, EFTA countries, Croatia, Turkey, the US, Japan, South Korea and China, May 2010. 

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aged 25 to 30 might give more insight into the potential of Progress Microfinance to 
help  young  people  find  a  job.  Almost  10 %  of  employees  of  the  micro-enterprises 
financed were young people under 25 and 12 % were seniors over 55. 

The figures vary a lot in terms of gender. While Mikrofond, active above all in the 
rural areas of Bulgaria, has only 28 % of female clients (which is below the national 
average  of  31 %  of  female  entrepreneurs12),  most  of  Brussels-based  microStart’s 
clients  are  women  (54 %).  This  figure  is  far  above  the  national  average  of  29 %  of 
female entrepreneurs. 

Regarding  outreach  to  other  disadvantaged  groups,  as  of  September  2011,  the  two 
microcredit providers that reported on this indicator have not financed any disabled 
entrepreneurs.  However,  Mikrofond  reports  that  18.8 %  of  its  clients  belong  to  a 
minority likely to belong to the Roma communities in the rural areas in which it is 
active. Many of microStart’s clients come from a migrant background, with 93 % of 
them born abroad. The templates would need to be adapted to reflect this in official 
reporting. 

Based  on  the  information  given  by  four  microcredit  providers,  around  1 %  of  the 
employees of micro-enterprises financed are disabled, while 8 % belong to a minority 
group. 

Given the small sample size, it is too early to draw conclusions about the social and 
employment impact of Progress Microfinance. However, the target groups indicated 
by  the  microcredit  providers  and  first  indications  regarding  the  real  impact  suggest 
that Progress Microfinance helps create jobs and serves disadvantaged groups, in line 
with the policy objective of promoting financial inclusion. 

Sector and geographical distribution of enterprises 

The 1079 micro-borrowers financed by the five reporting microcredit providers as of 
September  2011  are  active  in  a  variety  of  sectors.  The  predominant  sector  is  trade, 
accounting  for  28.5 %  of  the  micro-enterprises  financed,  followed  by  agriculture, 
which accounts for 20 %. 

12 

European Commission, Equality between women and men — 2010, COM(2009) 694 final. 

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The high percentage of micro-enterprises in the agricultural sector can be explained 
by the presence of Patria Credit and Mikrofond in the sample, which focus on rural 
areas in Romania and Bulgaria. 

4. 

COMPLEMENTARITY  AND  COORDINATION  WITH  OTHER  EUROPEAN  UNION 
INSTRUMENTS 

A  microcredit  provider  typically  needs  funding  to  build  up  its  microloan  portfolio 
and risk-sharing instruments in order to reduce the portfolio risk. It also needs seed 
funding  and  non-financial  technical  assistance  to  build  or  improve  its  institutional 
capacity. 

Over  the  past  few  years,  different  elements  of  microfinance  support  have  been 
provided under a range of complementary EU instruments: 

• 

• 

• 

Progress Microfinance fills an important gap in portfolio funding. 

Guarantees  on  microcredit  portfolios  are  already  available  under 
the 
Competitiveness  and  Innovation  Programme  (CIP).  Today,  the  CIP  and 
Progress  Microfinance  guarantee  headings  are  complementary.  In  principle, 
microcredit  guarantees  are  only  issued  under  the  CIP  when  a  contract  is  not 
possible under Progress Microfinance because of the target geography (non-EU 
countries),  the  size  of  the  cap  amount,  or  the  portfolio’s  purely  commercial 
focus.  The  EIF  has  published  guidelines  on  deal  allocation  on  its  website  to 
help microcredit providers with the application process. 

A  limited  amount  of  seed  funding  to  help  microfinance  intermediaries  build 
capacity was allocated by the European Parliament Preparatory Action (EPPA) 
to  promote  the  development  of  EU  microcredit  providers.  MicroStart  and 
from  complementary  support  under  both  Progress 
Qredits  benefited 
Microfinance  and  EPPA.  As  EPPA  was  a  pilot,  no  more  seed  funding  is 

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available for the current financial period. However, the success of the initiative 
led the Commission to include a capacity-building element in its microfinance 
support  instrument  proposed  under  the  Programme  for  Social  Change  and 
Innovation (see also section 5). 

Under  the  JASMINE  initiative,  which  aims  to  improve  the  capacity  of 
microcredit  providers  in  various  fields,  such  as  institutional  governance, 
information  systems,  reporting  standards  and  risk  management,  microcredit 
providers  can  receive  an  evaluation  and/or  a  rating  of  their  organisation 
followed by counselling and training tailored to remedy identified weaknesses. 
JASMINE  helps  prepare  microcredit  providers  to  be  eligible  for  further 
support.  Several  JASMINE  beneficiaries  have  successfully  applied  for 
Progress  Microfinance,  e.g.  JOBS MFI  (BG),  Mikrofond (BG),  Créasol  (FR), 
Qredits (NL), Patria Credit (RO) and FAER (RO). Vice versa, several Progress 
Microfinance intermediaries (e.g. Qredits and microStart) have at a later stage 
applied for JASMINE. This demonstrates the complementary nature of the two 
initiatives.13 

Progress  Microfinance  also  complements  the  structural  funds.  A  number  of 
Member States use the European Social Fund to finance business development 
services,  like  mentoring  or  training  for  starters.  These  services  are  known  to 
increase the survival rates of new businesses, even though they are costly for 
microcredit  providers.  This  is  why  the  microcredit  providers  supported  under 
Progress  Microfinance  are  required  to  cooperate  with  organisations  that 
provide these services, in particular with those financed by the ESF. 

The  Commission  has  facilitated  mutual  learning  in  this  area  by  funding  the 
Community of Practice on Inclusive Entrepreneurship (COPIE). This network 
of  ESF  managing  authorities  has  developed  several  tools  covering  action 
planning,  quality  management,  entrepreneurship  education,  access  to  finance 
and integrated business support. These tools are designed to help policy makers 
improve support systems in order to make entrepreneurship a viable option for 
all members of society, including disadvantaged groups. The tools are available 
on the internet14. 

Some  Member  States  and  regions  use  part  of  their  structural  funds 
appropriations to improve access to finance for micro-entrepreneurs directly or 
through holding funds, including through the JEREMIE initiative.  

• 

• 

• 

• 

5. 

CONCLUSIONS AND OUTLOOK  

Although Progress Microfinance has been fully operational for somewhat more than 
one  year,  several  positive  conclusions  can  already  be  drawn.  The  18  agreements 
signed demonstrate that Progress Microfinance serves the needs of a great variety of 
microcredit providers across the EU. It is expected that until the end of 2012, further 
agreements will be signed with microcredit providers in Austria, Belgium, Germany, 

13 

14 

The  proposed  successor  instrument  for  microfinance  support  under  PSCI  (see  section  5)  will  require 
microcredit providers to apply high quality standards in line with the principles of the "European Code 
of Good Conduct for Microcredit Provision". 
www.cop-ie.eu. 

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Ireland, Italy, Sweden and the UK. The reports of microcredit providers show that it 
has  had  a  positive  impact  in  terms  of  employment  and  social  inclusion.  The 
Commission  will  explore  with  EIF  how  the  social  impact  reporting  framework  can 
be improved. 

For  the  next  financial  period  2014–20,  the  Commission  has  proposed  to  continue 
supporting  microfinance  development  throughout  the  EU  under  the  Programme  for 
Social  Change  and  Innovation  (PSCI)15.  This  would  build  on  the  successful 
intermediary  model  by  offering  a  similarly  wide  range  of  products,  disseminating 
best practice and pioneering financial inclusion by strengthening underserved market 
segments.  One  of  the  criticisms  made  about  the  current  financial  period  is  that  EU 
microfinance  support  is  scattered  among  several  separate,  though  complementary, 
programmes. The proposed PSCI attempts to create a one-stop-shop for microfinance 
support. It will also make funding available for the capacity building of microcredit 
providers  based  on  experience  gained  from  the  EPPA  initiative  and  allow  the 
financing  of  technical  assistance  for  microcredit  providers.  The  financing  of 
microfinance  schemes,  capacity-building  actions  and  entrepreneurship  support 
services will still be possible across the EU under the structural funds (the ERDF and 
the  ESF),  operated  through  shared  management  between  the  Commission  and 
Member State authorities. 

15 

COM(2011) 609 final. 

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