Vote: implementing microfinancing in the EU - Main contents

With the employment committee voting this Tuesday on a report concerning microloans, what are they exactly? Generally associated with South Asia and Latin America, where the first initiatives were launched four decades ago, microloans are growing in the EU. They aim to assist people in difficult social circumstances to find their way out of unemployment and poverty. In 2010, the EU launched the European Progress Microfinance Facility to improve conditions for borrowers to obtain small loans.

Disadvantaged groups, including the long-term unemployed, social welfare recipients, those living in deprived rural areas, migrants or ethnic minorities, often encounter difficulties in accessing conventional finance. Microfinance offers them the possibility to obtain very small loans not generally provided by banks in order to assist them to start or develop their own small businesses.

In 2006 Muhammad Yunus and his Grameen Bank won the Nobel Peace Prize for offering such credit to the poorest in Bangladesh. In Europe on the other hand, the European Progress Microfinance Facility is funded by the EU budget and the European Investment Bank, and aims to improve the conditions under which borrowers can get loans. It also makes financing available for those who would not otherwise be able to obtain it.

The EU does not finance the entrepreneurs themselves but enables banks and non-bank financial institutions to grant more loans thanks to guarantees totalling €200 million.

This Tuesday Parliament's employment committee votes on a report on the implementation so far of the microfinance facility. Speaking this week, the author of that report German EPP member Sven Schulze referred to microfinance as a "sustainable social policy" and noted the importance of offering other assistance in addition to loans, including help with creating business plans or with bookkeeping.

Schulze added: "The instrument works as a whole but unfortunately sufficient funding is not always guaranteed. The Commission must therefore find a solution quickly in order to make Progress Microfinance even better in the future."

Check the factbox to the right for more details on microloans, and find out more about the work of the employment committee.

REF. : 20151106STO01541