Brussels, 19/11/2007 (Agence Europe) - The European Commission is seeking to improve access to finance for small businesses, and also for socially excluded people and ethnic minorities, who want to become self-employed. The Commission is proposing the setting up of a new European body funded by the Structural Funds in charge of providing technical assistance for the development of micro-credit in the EU. A European Commission communication, “A European initiative for developing micro-credit in Europe” was adopted last Wednesday. (EUROPE 9542) Regional Policy Commissioner Danuta Hübner had been on a visit to China and presented this initiative on Monday 19 November in Brussels.
Hübner declared: “We presented a proposal that builds a bridge between the potential for micro-credit demand and insufficient supply in the EU”. In the EU, micro-credit involves amounts of less than €25.000 According to Eurostat, potential demand for micro-credit could correspond to more than 700,000 new loans, representing an amount of around €6.1bn in the short term, explained Commissioner Hübner. She pointed out that “micro-credit is aimed at micro-enterprises that employ fewer than ten workers, as well as the unemployed who would like to be self-employed but who do not have access to the traditional banking services. 55% of people questioned would prefer to be self-employed than work for an employer”. Micro-credit is developing both in new and old member states and accounts for 91% of all European enterprises. Ms Hübner explained that the main factors involved in this initiative are: 1) it invites member states to adapt their national institutional, legal and commercial frameworks needed to promote a more favourable environment for the development of micro-credit; 2) it recommends setting up a new European-level facility with staff to provide expertise and support for the development of non-bank micro-finance institutions in member states; 3) it proposes setting up a micro-fund in the new facility in order to find more capital for micro-credit providers. This would help finance the loan activities of micro-finance institutions which can also expect to draw in contributions from a range of investors and donors. Hübner noted that this micro-fund would not be the only source of micro-credit funding.
Financial support for this new body will come from the existing technical assistance budget of the Structural Funds (European Regional Development Fund - ERDF) which the European Commission manages. The Commission said that they would be proposing that this body starts off with funding of between €10-15 million, “a kind of micro-credit that will help fund loans granted by non-banking institutions”. She explained that the new facility would be managed within the European Investment Fund (EIF), which is already a partner of the Commission in the field of micro-credit through JEREMIE, Joint European Resources for Micro and Medium Enterprises, active since 2005.
On the question of whether it was necessary to appeal to non-banking institutions, the commissioner asserted: “We are excluding all unreliable institutions. We are not excluding the banking sector as it stands but we have seen that banks in Europe do not want to get involved in the micro-credit sector”. Hübner explained that experiences varied in the different member states. She cited the example of Poland, where “we began working in the 1990s to set up micro-credit and our repayments are very weak” and France, “which has already worked in the area. France knows the social banking system well”.
A press release pointed out that micro-credit had worked very well in less developed countries and things had already begun to shift at both Community and national levels. In the EU, the kind of demand for this kind of financing is generally in the form of loans close to €7,700 and formulated by people setting up companies in the services sector to better respond to the needs of companies, individuals or households. (G.B)