The European Union has set up a new European Progress Microfinance Facility providing microcredit to small businesses and to people who have lost their jobs and want to start their own small businesses.
In the current context of reduced credit supply the new microfinance facility aims to give micro companies easier access to credit.
An initial budget of €100 million is expected to leverage €500 million of credit in cooperation with international financial institutions such as the European Investment Bank (EIB) Group. This could result in around 45,000 loans over a period of up to eight years.
The Facility will increase the supply and accessibility of microloans for vulnerable groups and unemployed wanting to set up or further develop their own business.
How can I apply?
The Facility will be operational from June 2010. People interested in applying for support from the microfinance facility should contact the providers of microloans in their home countries. These providers can be banks, not-for-profit micro lenders or institutions providing guarantees and other providers of microfinance products to microenterprises. Under the Facility, the European Investment Fund will make funding available for these providers to reach out to the audience targeted by the European Progress Microfinance Facility.
Micro-credit in the EU means loans under €25,000. It is tailored to micro-enterprises, employing fewer than 10 people (91% of all European businesses), and unemployed or inactive people who want to go into self-employment but do not have access to traditional banking services. 99% of start-ups in Europe are micro or small enterprises and one third of these are launched by people who are unemployed.
Because providing the financial means alone is not enough and guidance/coaching of the (potential) micro-entrepreneurs and capacity-building of the micro-finance providers is required, the Facility will be expressly designed to fit with existing instruments, in particular the European Social Fund (ESF).
Creating an interface between the ESF and the European Progress Microfinance Facility will be one of the key factors for the success of the Facility. This will be important for:
- information and communication – through the currently established channels, ESF will play an important role in informing potential micro borrowers of the new Facility;
- all Member States have prioritised entrepreneurship as part of their ESF Operational Programmes. Within this they offer support for training on setting up a business, guidance and mentoring in running a business, and can support the micro borrowers in applying for a loan and managing a micro-enterprise;
- with its traditional activities for entrepreneurship promotion, coaching, training and consultancy for job seekers, the ESF will sustain the final beneficiaries;
- the ESF is the only structural fund which can grant interest rate rebates for the individual. This possibility has a great potential to improve the access to funds for micro entrepreneurs.