PURPOSE: to present a report on the implementation of
the European Progress Microfinance Facility for employment and
social inclusion in 2013.
CONTENT: initiated in 2010 by the European Commission,
Progress Microfinance will continue to offer its products to
microcredit providers to allow for improved accessibility and
availability of microfinance in the European Union until April 2016
at the latest.
Aim of the Facility: its
main aim is to support microfinance via a wide range of
instruments, in particular, guarantees and funded
instruments.
In addition to EU funding of EUR 105 million, it also
benefits from an additional EUR 100 million provided by the
European Investment Bank. Progress Microfinance consists of two
parts: one provides microfinance intermediaries (MFIs) with
guarantees, and the other provides MFIs with funded investments,
such as loans and equity. Both parts are managed by the European
Investment Fund (EIF).
State of play in 2013:
the report looked at activities and developments in Progress
Microfinance in 2013. It presented information on the support to
intermediaries and final recipients. It then looked at the social
impact of Progress Microfinance and its complementarity with other
EU instruments. Lastly, it presented the outlook for the future is
outlined, including views on the successor financial instrument
under the Programme for Employment and Social
Innovation (EaSI), implementation of which will
begin in the second semester of 2014.
Its main conclusions may be summarised as
follows:
- support to intermediaries and final
recipients: microcredit providers
(i.e. public and private entities, including both banks and
non-banks) play a crucial role in reaching the Progress
Microfinances goal of disbursing EUR 500 million through 46
000 microloans to final recipients. In 2013, the expectation was
confirmed that, following a slow initial take up, there would be a
steady rise in providing microloans to final recipients. The
rise from 26 microcredit providers in 2012 to 40 providers in 2013
across 54 operations, and the increase in geographical coverage
represent an important milestone towards reaching this target. The
significant unmet demand for microloans throughout the EU has been
addressed by extending Progress Microfinance activities into
three new Member States in 2013 (Denmark, Slovakia and the UK)
with two more to come in 2014 (Sweden and Croatia). At the
reporting date, there were 12 690 final recipients, with
some of these benefiting from more than one microloan. Sector
distribution remains broadly similar to 2012, with more than half
of final recipients coming from trade (which saw a 3 % increase
since last year) and agriculture (down by 7%);
- guarantees: the number
of intermediaries supported by a guarantee increased from 12 in
2012 to 27 at the end of 2013. As more guarantee contracts are
currently in the pipeline, it is likely that the overall
guarantee budget provided by the EU will be fully used by the end
of 2014. The total commitment to microcredit providers amounts
to EUR 134.7 million (including guarantees, where the total
cap amount is EUR 20.7 million), and the total disbursement of
funded instruments is EUR 60.17 million. The net amount of called
guarantees is relatively low, at EUR 1.34 million, with FM Bank and
Qredits having called almost 90% of this amount. The net amount of
called guarantees is expected to increase significantly over time.
As of the end of March 2014, this had increased to EUR 2.11
million. When issuing new financial instruments under EaSI 2014-20,
the provision of guarantees to microfinance intermediaries will be
prioritised;
- social and employment impact: the social reports confirm that, with sufficient
funding, entrepreneurship can flourish and can help disadvantaged
groups find a way out of unemployment. Although the majority of
loan takers are in the main age group of 25-54 year-olds (84.4 %),
the data collected show that Progress Microfinance continues to
work with a significant group of final recipients aged under 25,
with 5.9 % of recipients in this age group (compared to 5.2 % last
year);
- synergies with other European Union
instruments: to better reach out to
final recipients and further develop the microfinance market in the
EU, Progress Microfinance aims to create added value by ensuring
efficient coordination and smart complementarity with other EU
instruments. All microcredit providers are required to work with
entities providing training and mentoring services, particularly
those supported by the European Social Fund (ESF). According to the
interim evaluations preliminary results, around 50 % of
microcredit providers have done this.
EaSI: the report
recalled that in 2014, activity in the third axis of EaSI will
begin. Lessons learned from Progress Microfinance have fed into the
design of the financial instruments in this axis of the programme
and in deciding to give increased attention to capacity-building
for microcredit providers. More technical assistance will
also be offered under the first axis of EaSI.
Perspectives: the report
stated that Progress Microfinance will continue to offer its
products until 2016, as planned, to keep addressing the
financing gap on the EU microfinance market. After Progress
Microfinance ends, the balance due to the EU will be used for
microfinance and social enterprise support under EaSI.