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 — 2012
Date: 2013-07-31
Institutions: European Commission
Subjects: European Investment Fund, financial statistics, job creation, micro-enterprise, microloan, social integration













EUR-Lex - 52013DC0562 - EN











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52013DC0562

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 — 2012 /* COM/2013/0562 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 — 2012
TABLE OF CONTENTS
1........... Introduction.................................................................................................................... 4
2........... Implementation at the level of
microcredit providers......................................................... 4
2.1........ Contracts concluded....................................................................................................... 4
2.2........ Actions funded............................................................................................................... 6
2.3........ Applications funded and rejected.................................................................................. 10
3........... Implementation at micro-borrower
level........................................................................ 10
3.1........ Microloan volumes and the number
of beneficiaries........................................................ 10
3.2........ Social and employment impact of
Progress Microfinance............................................... 11
3.2.1..... Outreach to disadvantaged groups................................................................................ 11
3.2.2..... Small amounts to make a big impact.............................................................................. 13
3.3........ Sector and regional distribution
of supported enterprises................................................ 13
4........... Complementarity and coordination
with other European Union instruments..................... 15
5........... Conclusions and outlook............................................................................................... 16
1.           Introduction         

In March 2010, Decision No 283/2010/EU (hereinafter
the ‘Decision’) established the European Progress Microfinance Facility for employment
and social inclusion.

Public and private entities, both banks and
non-banks, can apply for support from Progress Microfinance in the form of a
guarantee or a funded instrument (debt, risk-sharing instruments and equity). EUR
25 m out of the overall budget has been allocated for guarantees, funded
by the European Commission. The remaining budget, for funded instruments, is
composed of EUR 75 m from the Commission and EUR 100 m from the
European Investment Bank (EIB), which agreed to match the Commission’s
contribution and has already fostered the anticipated leverage effect of
Progress Microfinance[1].
To the initial budget of EUR 75m additional EUR 3 m have been added in
2010 from a European Parliamentary Preparatory Action[2] and EUR 2 m in 2013 from
the previous year Global transfer procedure. In total, EUR 205 m is the
budget available for Progress Microfinance for both guarantees and funded
instruments. The European Investment Fund (EIF) issues the guarantees and
manages the funded instruments on behalf of the Commission and the EIB. Entities
selected for participation become financial intermediaries, providing
microloans of up to EUR 25 000, although most have opted for smaller
ceilings. Beneficiaries of all supported microloans are individuals and
microenterprises who would, under market conditions, be considered as
disadvantaged and unlikely to be granted a loan[3].        

This report looks at the implementation of
Progress Microfinance after more than two years of operation. Most of the EIF’s
data were provided by 30 September 2012. More up-to-date information is included
where possible. The structure of the document follows the requirements set out in
Article 8 of the Decision. Its first part includes detailed information on concluded
contracts. Its middle section reports on data collected as a part of the
Facility’s social impact assessment. The following section describes complementarity
and coordination of Progress Microfinance with other programmes. The last part
identifies possible future implications and trends.

2.           Implementation
at the level of microcredit providers        

2.1.        Contracts
concluded            

Types of intermediaries
Progress Microfinance offers a wide spectrum of
financial instruments. The diversity of its product portfolio is reflected in the
diverse nature of intermediaries. They
include public and private entities, both from the banking sector and from beyond.
Currently there are 26 participating institutions in 15 Member States using either
or both of the Facility’s windows[4].
A contract with a UK-based provider (non-bank) was due to be completed by May
2013. 

·              
1 public institution: ICREF (ES)
·              
11 non-bank institutions: Adie (FR), Créa-Sol
(FR), Crédal Société Coopérative (BE), FAER (RO), Inicjatywa Mikro (PL), JOBS
MFI (BG), Microfinance Ireland (IE)[5],
microStart (BE), Mikrofond (BG), Patria Credit (RO), Qredits (NL)
·              
14 banks: Banca di Credito Cooperativo
Mediocrati (IT), Banca di Credito Cooperativo Emilbanca (IT), Banca Popolare di
Milano (IT), Banca Transilvania (RO), Banco Espirito Santo (PT), Cooperative
Central Bank (CY), Erste Bank der österreichischen Sparkassen AG (AT), FM Bank
(PL), Millennium bcp (PT), Pancretan Cooperative Bank (EL), Sberbank banka (SI)[6], SEFEA (IT), Societe Generale
Expressbank (BG), Šiaulių bankas (LT)         

Microcredit providers’ activity in Member
States    

Requirements have been set within Progress
Microfinance to ensure widespread access to microcredit in a large number of
Member States. The EIF is required to issue guarantees in at least twelve Member
States. By March 2013, providers from nine countries had been given guarantee
cover (for details see section 2.2). A concentration limit of 16% is set for
each country. Similarly, a 10% concentration limit for each country is envisaged
for the funded instruments. These requirements are meant to contribute toward a
balanced deployment of resources in Member States. Following signature of a
contract with Societe Generale Expressbank, this maximum exposure has been
reached in Bulgaria. Two other countries, Romania and Italy, are close to reaching the ceiling for funded instruments (currently EUR 18.0 m),
with commitments of EUR 16.5 m and 15.8 m respectively.
Since the 2011 Implementation Report, eleven new
financial beneficiaries have signed contracts under Progress Microfinance. Six
of these providers come from countries not previously covered by Progress
Microfinance: Austria, Ireland and Italy. They include both banks and a
non-bank provider.  

Geographical distribution of Progress
Microfinance by March 2013
By March 2013, intermediaries from nine Member
States had acquired guarantees (BE, IE, EL, FR, NL, AT, PL, PT and RO) as
opposed to only six in the previous period. Funded instruments were being
applied in ten countries (BG, ES, FR, IT, CY, LT, PL, PT, RO, and SI), one more
than last year. The difficulty in expanding into the other Member States could
be explained in part by competing national schemes and in part by the lack of
capacity among microcredit providers themselves (see section 4).         
2.2.        Actions
funded         

Guarantees
The Commission, which is, the sole funder of
this instrument[7],
guarantees up to 75 % of losses incurred on the providers’ portfolio of
microloans. All providers so far benefit from the highest possible coverage in
terms of guarantee rate (75%). A cap of 20% has been set for loss cover, i.e.
the part of the portfolio, which could potentially default and would be covered
by the guarantee. Until now, it has been in the range of 5.5% to 20%.
No fees are charged for the use of this
instrument, though intermediaries are bound by a condition of achieving a
disbursement of at least 90 % of the agreed portfolio. Should they fail to
reach this volume, a commitment fee is charged. This threshold is an incentive
for the microcredit institutions to actively reach out to final beneficiaries. More
generally, guarantees allow microcredit providers to extend their activities to
riskier groups. Millennium bcp, for example, does not apply its scoring system
to clients of guaranteed microloans, as these are clients who would most likely
not have been able to pass banks’ standard criteria. Alternatively, a guarantee
could be, and is, used to ease standard loan conditions by reducing interest
rates or collateral requirements, or extending microloan maturities.
The 2011 Implementation Report indicated the
need to extend the term of guarantees from three to six years, as
intermediaries were unable to deliver the expected results in terms of disbursing
the guarantees. This was done by way of an amendment in October 2011. Empirical
evidence shows that this change has resulted in a significant rise in demand
for guarantees, with the overall volume more than doubling since last year.   

Funded instruments
Demand for funded instruments is even higher than
for guarantees. This justifies the distribution of funds within Progress
Microfinance, where EUR 180 m[8]
of the budget is earmarked for them. Of the range of instruments, it is senior
loans that keep attracting most interest. One subordinated loan was issued in
2012 (Sberbank banka). A first risk-sharing loan deal has also been signed with
Banca Popolare di Milano, for an amount of EUR 8.8 m. While no equity
participation contracts have been signed yet, negotiations on a direct equity
investment with a potential Italian non-bank provider are currently ongoing.
The sustained interest in senior loans may lie in
their technical characteristics. Unlike the other more sophisticated and detailed
financial products, senior loans are simpler and easier to manage. The downside
is that their leverage effect is smaller than with a risk-sharing or subordinated loan, where intermediaries are required
to on-lend greater amounts to final beneficiaries than under a senior
loan. Stricter requirements are also required of those who are the target of
the investment. When Progress Microfinance invests in a provider, it requires of
the provider to create a microloan portfolio at least three times the size of the
equity investment (see also the section below on leveraging potential). In
order to increase the product leverage effect, in some cases the senior loans
have been issued with a multiplier requirement of 1.5 to 2.0, particularly for
senior loans with banks and in repeat transactions with intermediaries which
have secured co-financing from third parties.
Overall 29 contracts have been signed for both
guarantees and funded instruments. One provider uses both of these instruments,
while two others have already signed two consecutive contracts with the EIF.
These are summarised in the following table[9].
Overview
of Progress Microfinance operations as of 31 March 2013           

 Member State || Intermediary || Instrument || Support to intermediary (EUR) 
 BE || Crédal Société Coopérative || Guarantee || 250 000 
 BE || microStart || Guarantee || 110 000 
 BG || Mikrofond || Senior Loan || 3 000 000 
 BG || JOBS MFI || Senior Loan || 6 000 000 
 BG || Societe Generale Expressbank || Senior Loan || 8 500 000 
 IE || Microfinance Ireland (First Step) || Guarantee || 1 627 875 
 EL || Pancretan Cooperative Bank || Guarantee || 750 000 
 ES || ICREF || Senior Loan || 4 000 000 
 FR || Adie || Guarantee || 2 200 000 
 FR || Créa-Sol || Senior Loan || 1 000 000 
   ||   || Senior Loan II || 1 000 000 
 IT || BCC Mediocrati || Senior Loan || 3 000 000 
 IT || SEFEA || Senior Loan || 2 000 000 
 IT || BCC Emilbanca || Senior Loan || 2 000 000 
 IT || Banca Popolare di Milano || Risk-sharing Loan || 8 800 000 
 CY || Cooperative Central Bank || Senior Loan || 8 000 000 
 LT || Siauliu Bankas || Senior Loan || 5 000 000 
 NL || Qredits || Guarantee || 1 300 000 
   ||   || Guarantee II || 1 700 000 
 AT || Erste Bank || Guarantee || 473 644 
 PL || FM Bank || Guarantee || 1 880 000 
 PL || Inicjatywa Mikro || Senior Loan || 3 771 000 
 PT || Banco Espírito Santo || Senior Loan || 8 750 000 
 PT || Millenium bcp || Guarantee || 310 000 
 RO || Patria Credit || Guarantee || 960 000 
   ||   || Senior Loan || 8 000 000 
 RO || FAER || Senior Loan || 973 000 
 RO || Banca Transilvania || Senior Loan || 7 500 000 
 SI || Sberbank banka || Subordinated Loan || 8 750 000 
 15 MS || 26 microcredit providers || 29 contracts || 101 605 519 
Financial volumes    

The total amount committed to the guarantees
(cap amount), covering ten transactions with nine microcredit providers detailed
in the table above, is EUR 11.6 m.
Guarantees are activated only in the event of a
default of a participating loan. Depending on microproviders’ portfolios of
clients, the guarantees issued to them may never have to be called. Providers
are also expected to use other means (e.g. legal, restructuring) before
resorting to calling the guarantees. Only two providers (microStart and FM
Bank) have had to call guarantees so far, with aggregate amounts of EUR 40 000
and EUR 200 000 respectively. The amount of guarantee calls is likely to
go up in the future, though, as the volume of microloans disbursed to
beneficiaries and covered by the guarantees increases.     

Senior and subordinate loans funded from
Progress Microfinance are disbursed in accordance with the agreed rules of
payments in instalments. A payment can be initiated only once conditions set
for a given intermediary are fulfilled.
By March 2013, EUR 55.0 m out of the total
committed amount of EUR 90 m had been disbursed[10]:
 Intermediary (Member State) || Disbursement to intermediary (EUR) as of March 2013 
 Mikrofond (BG) || 1 500 000 
 Patria Credit (RO) || 6 000 000 
 Siauliu Bankas (LT) || 2 500 000 
 Cyprus Cooperative Bank (CY) || 4 000 000 
 JOBS MFI (BG) || 4 000 000 
 FAER (RO) || 700 000 
 ICREF (ES) || 4 000 000 
 Inicjatywa Mikro (PL) || 2 800 000 
 Sberbank banka (SI) || 8 800 000 
 Banca Transilvania (RO) || 7 500 000 
 BCC Mediocrati (IT) || 1 500 000 
 SEFEA (IT) || 1 100 000 
 BCC Emilbanca (IT) || 1 100 000 
 Societe General Expressbank (BG) || 4 500 000 
 Banco Espiríto Santo (PT) || 4 000 000 
 Créa-Sol (FR) || 1 000 000 
 Total disbursements || 55 000 000 
Leveraging potential            

The aim of Progress Microfinance is not only to
make EU funding available but also to create a leverage effect for total
investment of some EUR 500 m, i.e. five times the EU contribution. This
leverage effect is achieved by co-investment from other partners, by the
revolving nature of the funds, and by the products offered.
The partnership with the EIB which matched the
amount from the Commission doubled the initial amount. The combined amount
(together with the additional contribution from the EPPA and the Global
transfer procedure) is now being multiplied through the microloans issued by financial
intermediaries.
The guarantees have an especially strong leverage
effect. By March 2013, guarantees worth EUR 11.6 m had been issued to
microcredit providers. They are expected to translate into potential microloans
with an aggregate volume of EUR 134.8 m, meaning that the leverage ratio
achieved through this product would be 11.6. Funded instruments provide
leverage of approximately 3.7. For some loans, such as the first one for
Créa-Sol, the only leverage effect comes from the additional funding from the
EIB, as the provider was only expected to sign loan agreements with final
beneficiaries equal to the size of the loan. The second Créa-Sol loan is
expected to generate a microloan volume of 1.5 times the amount of the provided
loan. Other providers, most notably Banca Popolare di Milano (risk-sharing
loan) or Sberbank banka (subordinated loan), create additional leverage when
distributing microloans of at least twice the size of the amount received from
Progress Microfinance. The aggregate multiplier effect for the whole Progress
Microfinance portfolio, as agreed in the contracts with intermediaries, is 5.5.    

2.3.        Applications
funded and rejected    

To be able to benefit from Progress
Microfinance, applicants need to be successful in a call for proposals
organised by the EIF and, in the case of guarantees, receive the Commission’s
approval.
An official rejection might occur in the EIF Board,
or the Commission might not approve a guarantee. No applications have been rejected
since the creation of Progress Microfinance as only proposals which pass the
EIF’s screening and due diligence process are submitted for approval.
Since the introduction of Progress
Microfinance, the EIF has been in contact with over 180 potential providers.
With 27 intermediaries[11]
having signed a transaction by March 2013, the successful deal origination rate
is 15 %, partly a result, as we have seen, of national schemes and other
available funding, most notably in the Nordic countries and in Germany. Other reasons for the low deal origination rate might be the EIF’s focus on larger
amounts due to high transaction costs or strict credit assessment. As the
Commission covers the first loss, there might be room for re-evaluating this
policy.
3.           Implementation
at micro-borrower level      

3.1.        Microloan
volumes and the number of final beneficiaries            

The current multiplier effect of 5.5 is in line
with the expected leverage target. Further agreements with microcredit
providers and full utilisation of disbursed volumes in the coming years will be
needed in order to reach the estimated amount of EUR 500 m distributed through
some 46 000 microloans by the time the facility closes in 2020.
By the 2012 reporting date, the aggregate
guarantee portfolio consisted of 2 920 microcredits for 2 836 clients[12] worth EUR 28.05 m.
The offer of microloans based on the funded instruments
resulted in 3 358 contracts being signed with 3 253 final
beneficiaries. These loans were worth EUR 21.1 m in September 2012.
Compared to the utilisation reported in 2011,
the volume of guarantee-based microloans increased by 61 % and that of microloans
backed by funded instruments by 122 % in six months. The utilisation
pattern is in line with the initial assumption that Progress Microfinance would
experience a slow start, but would steadily pick up and show strong growth in
the latter part. By September 2012 a higher level of utilisation was already
evident, most significantly in the Netherlands, where a follow-up agreement
with Qredits has been signed, increasing the guarantee cap to EUR 3 m. Good
levels of utilisation were also noted in Bulgaria, Poland and Romania. A second agreement for a senior loan has been also signed with a beneficiary in France as the initial amount has already been completely disbursed.
EIF projections are even more optimistic about
future growth, with the aggregate volume of microloans provided through current
intermediaries expected to reach EUR 142.4 m by September 2013 and EUR
288.8 m by March 2015. One possible explanation for why strong growth has
not been experienced in the earlier stages of Progress Microfinance operations
is the lack of institutional capacity of microcredit providers. This is why complementary
action is needed, as analysed in section 4 of this report.           

3.2.        Social
and employment impact of Progress Microfinance
Social and employment impact is one of the key
policy considerations for Progress Microfinance. This Implementation Report is
the first one featuring data on this impact from a considerable number of final
beneficiaries. Despite the need to modify their internal procedures and
systems, providers have been able to collect data on 4 688 final
beneficiaries out of 6 089 micro-entrepreneurs participating in Progress
Microfinance. This makes it possible to analyse some trends in outreach to
disadvantaged groups, by taking into account their age, gender, educational
background, or minority group.
By assessing the collected data we can examine
both positives and drawbacks. Yet their relevance is only partial as some
beneficiaries did not complete the full questionnaire. This prevents an
aggregate analysis and renders some of the collected data less relevant. Being
aware of these obstacles can help to introduce necessary modifications to
enhance the quality and reliability of social impact reporting for the future
instrument (see also section 5), where the data collection requirements will
have to be reviewed. 

3.2.1.     Outreach
to disadvantaged groups
Youth and senior entrepreneurship
While the majority of people who have received
a microloan from the intermediaries are between ages 25 and 54 (85.04 %),
there is quite a significant group younger than 25 (5.22 %). This is more
than the average rate of self-employment in this age group (4.1 %) as
reported by the 2011 EU Labour Force Survey (LFS)[13]. Progress Microfinance thus
serves as an enabler in helping this age group become self-employed. Intermediaries
with a particularly high portion of young clients are Qredits (25.00 %),
Siauliu Bankas (14.29 %) and Millennium bcp (12.08 %). Intermediaries
also report the age profile of clients’ employees. 11.25 % of them are
under 25.
Older people (55+) account for 9.74 % of
final beneficiaries. According to the LFS, they represent 19.2 % (50-64)
and 49.9 % (65+) of self-employment in their respective age groups.
However, as the LFS indicates for these age groups, self-employment might only
serve as a postponement of retirement or an opportunity for self-sufficiency
farming after retirement. These two groups might not necessarily be in need of
a microloan. The three banks with the highest 55+ share are Mikrofond, FAER and
Siauliu Bankas. Their shares range between 14.9 – 15.91 %. 10.67 % of
final beneficiaries’ employees are above 55.
Women entrepreneurs
Available data on Progress Microfinance final
beneficiaries indicate a men/women ratio of 60.73/39.27. This is an improvement
over today’s situation in Europe, where women represent only 34.4 % of all
entrepreneurs[14].
Progress Microfinance acts remedially and supports women entrepreneurs. As
previously mentioned, some of the data collected do not provide a complete
picture and should be interpreted with caution. Two providers have a higher
share of microloans to women than to men. Siauliu Bank reported 57.14 %
female loan-takers and Millennium bcp 50.34 %. In the case of the
Lithuanian bank, this reflects their policy of trying to improve women
entrepreneurs’ access to finance. Crédal also reports a higher than average
ratio with 51.72/48.28. Intermediaries provide information on their clients’
employees, 38.30 % of whom are women. Lack of additional supporting data
renders further analysis impossible.
Job creation via self-employment and
start-ups
31.89 % of final beneficiaries said they
were unemployed or inactive at the time of their loan application. Progress
Microfinance has given them the opportunity of using the loan to start their
own business. There is also potential for a positive effect on the rest of the applicants,
who said they were either employed (67.52 %) or studying (0.59 %). The
microloan might help employed clients to avoid serious liquidity issues or
expand their business. For those still studying, the loan could be used to
start their own business after or even prior to graduation.
Available data for both microfinance windows also
show that almost 80 % of supported enterprises are less than three years
old. 40.58 % were only established six months or less before the microloan
application. This confirms that access to finance is a significant obstacle
during the start-up phase of a new business, which Progress Microfinance helps
remove. Start-up support seems stronger among guarantee-covered and non-bank
intermediaries. This would be in line with the initial assumption of guarantees
being used in cases of riskier clients, complemented by funded instruments (in
particular senior loans) used to target greater numbers of less risky clients.
Data for assessing the sustainability of business and job creation are not yet
available.
Educational background
The educational backgrounds of successful
applicants for Progress Microfinance-supported products range from no formal
education to university graduates. As educational attainment is normally
associated with a lower risk of unemployment, it is important to observe that people
with no or only primary education account for 7.28 % of all beneficiaries.
At a disadvantage when looking for a job, they might have found an alternative
in self-employment. Similar reasoning could apply to the more than 50 % of
relatively low-qualified beneficiaries with only secondary education. The rest
of the beneficiaries were educated to post-secondary or university level, which
reflects the broad focus of participating providers.
Supporting minorities
There are clear signs of a good outreach to
minority populations, even though such data are not allowed to be collected in
all Member States. This results in only a small number of all beneficiaries being
officially identified as belonging to a minority group on the aggregate level. On
the providers’ level, Mikrofond (BG) reported 18.18 %, JOBS MFI (BG) 12.5 %
and FAER (RO) 14.63 % of all their clients belonging to a minority group. It
is understood that these beneficiaries come mostly from the Roma population.
Facing obstacles on the job market, self-employment could be a solution for
them. Qredits (NL) also reports 12.5 % outreach to minority groups.
3.2.2.     Small
amounts to make a big impact
Microloans provided tend to be for smaller
amounts. It is not expected of business starters and self-employed from
vulnerable groups to seek high amounts. The most popular microloans are for
less than EUR 5 000 (37 %), followed by up to EUR 10 000 (25 %).
Microloans of up to EUR 15 000, 20 000 and 25 000 each attract
approximately one out of eight beneficiaries. The average size of microStart microloans
is EUR 4 958. MicroStart, operating in migration-background areas of Brussels, has a specific target group of clients. The microloans offered by this intermediary
fall short of the maximum of EUR 25 000, being capped at EUR 10 000.
Similarly, one of the Erste Bank’s two initiatives provides microloans of no
more than EUR 12 500. This does not mean that the needs of the final
beneficiaries will always be covered by these small amounts. It is rather expected
that once their businesses pick up thanks to a Progress Microfinance microloan,
they will be able to apply for a bigger loan outside of the Progress
Microfinance framework.        

3.3.        Sector
and regional distribution of supported enterprises            

Agriculture and Trade remain the two most
predominant sectors, accounting for more than a half of all supported
enterprises. Unsurprisingly, the support for agriculture comes almost exclusively
from the funded instruments, as these predominate in the countries with a high
involvement in rural areas (see map below) — Romania and Bulgaria. In Trade this support comes from both more or less evenly.
Sector distribution of financed microenterprises
Regional distribution of financed
microenterprises
Number of beneficiaries by NUTS1 region
4.           Complementarity
and coordination with other instruments         

Investment and risk coverage from Progress
Microfinance enables microcredit providers to grow and optimise their portfolio
while reaching out to riskier target groups. Various other instruments have
been created and act complementarily to it.
The intermediaries are contractually bound to
cooperate with organisations providing training and mentoring. Member States
can use the European Social Fund to provide assistance in the form of coaching
or training for business starters. Such support should have a positive impact
on the business skills of the beneficiaries and clearly complements access to
finance provided by Progress Microfinance. In Ireland, for example, the ‘Going
for Growth’ initiative, designed to support women business starters via
mentoring and coaching, is funded in part through the Human Capital Investment
Operational Programme 2007-2013. Successful participants of this initiative
might be willing to apply for a microloan, e.g. from Microfinance Ireland
(which has already signed an agreement with the EIF under Progress
Microfinance) in order to finance their newly acquired business ideas.
There is still room for improvement when it
comes to mentoring and training offered in combination with support under
Progress Microfinance. While this represents a top priority for the Commission,
the EIF could improve the way all the supported providers implement this
requirement. In particular, the EIF should have a closer look at the number and
quality of contracts between providers and organisations providing training and
mentoring and enforce better cooperation, especially with schemes supported by the
ESF.
National and EU support can be used in a
complementary way: this is the case for Austria, where one of the two products
offered by Erste Bank benefits from a reduced microcredit guarantee rate of
66.67 % as it is also supported by the Austrian government.
JASMINE is a European Commission and the EIF
initiative sought to help microcredit providers to improve their operations, to
expand and to become self-sustainable. Technical assistance is provided to
beneficiaries selected by the EIF and consists in an institutional assessment
or rating followed by tailor-made training. Twelve financial intermediaries
under Progress Microfinance have already benefited from the initiative,
including most recently BCC Mediocrati and microStart in 2012.
Eight to ten workshops are offered yearly to
provide business development support to providers, and there is a JASMINE
Helpdesk to answer questions. A ‘European Code of Good Conduct for Microcredit
Provision’, setting out good practice guidelines and common standards, was
developed under JASMINE. The Code supports the sector in dealing with the
challenges of accessing long-term finance, maintaining / raising the quality of
services, and encouraging transparency in the sector. The Code will be
complemented by JASMINE Online in the coming months, a web application
providing information on the EU microcredit providers and generating reports as
recommended by the Code. Its observance is being recommended in the successor
programme to Progress Microfinance (see section 5) and may become a condition
for providers to obtain funds.
5.           Conclusions
and outlook
Progress Microfinance satisfies a strong demand
from both bank and non-bank microfinance providers. EUR 101 m out of EUR 203 m
had been committed to intermediaries as of March 2013 (investments are still possible
until 2016). Based on the agreed microloan volumes to be generated by providers,
the current leverage effect of 5.5 is above the target.
The geographical coverage of Progress
Microfinance has been extended to 15 Member States. Close on EUR 50 m has already
reached the final beneficiaries, who include members of disadvantaged groups,
especially women, young people, minorities and low-skilled workers. Progress
Microfinance has significantly contributed to job creation, helping a high
percentage of people who were previously unemployed or inactive into employment.
An interim evaluation, to be presented in 2014, will provide a more in-depth
analysis of the programme.
Room for improvement has been identified for
accompanying mentoring and training for microentrepreneurs. The Commission will
continue to insist on the EIF ensuring that this contractual obligation is
fulfilled. The issue of providers’ institutional capacity, acknowledged to be a
bottleneck which slows down the disbursement of loans, will be addressed via the
successor instrument under the Programme for Social Change and Innovation 2014-20
(PSCI)[15].
In addition to portfolio funding and risk-sharing, like under Progress
Microfinance, this new instrument will offer funding for capacity building and
technical assistance to microcredit providers under a single umbrella.
The regulation establishing the PSCI 2014-20 is
currently in the last stages of trilogue negotiations. The Commission hopes
that the co-legislators will agree on transferring the balance of Progress
Microfinance that will remain after guarantees have been called and loans and
equity paid back by the end of the lifetime of Progress Microfinance to the
PSCI budget to make full use of a revolving EU-level instrument which supports
job creation and financial inclusion.
[1]               For more information on Progress Microfinance
leverage effect, please see part Leveraging potential of this report.
[2]               European Parliament Preparatory Action — ‘Promoting a
more favourable environment for microcredit in Europe’.
[3]               For information on how Progress Microfinance operates,
please see 2010 Implementation Report COM(2011) 195.
[4]               Patria Credit benefits from both guarantees and
funded instruments.
[5]               An agreement was initially signed with First Step
(IE). This provider is to cease lending, following the establishment of
Microfinance Ireland.
[6]               One contract was signed with Volksbank Slovenia. This entity has been renamed Sberbank banka after its acquisition by Sberbank.
The report will refer to this entity under its current name.
[7]               As opposed to funded instruments.
[8]               Including the EIB contribution.
[9]               The previously reported senior loan to Pancretan
Cooperative Bank is no longer being reported as this loan has not been
disbursed, and the full amount will be decommitted.
[10]             The disbursements to Banca Popolare di Milano (IT) and
of a second loan to Créa-Sol are upcoming. It proved impossible to make a
disbursement to Pancreatan Cooperative Bank (EL) because of unpredicted
systemic changes.
[11]             Including the contract signed with First Step.
[12]             The difference between the number of microloans and the
number of beneficiaries can be explained by a step-lending approach applied in
some cases, meaning that a borrower first receives a small amount and after some
time an additional loan. The total loan amount per client does not exceed EUR
25 000. .
[13]             http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-040/EN/KS-SF-12-040-EN.PDF.
[14]             http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=6358&lang=en&title=Unleashing-Europe’s-entrepreneurial-potential-to-bring-back-growth.
[15]             COM(2011) 609 final.