Microcredit in Europe: The Experience of the Savings Banks

This paper argues that microcredit is an economically viable solution to fight against financial exclusion in Europe. The paper sees microcredit as a means of facilitating access to finance and fighting financial exclusion and states that:

• Financial exclusion amounts to the prevention of economic empowerment;
• Microcredit prevents the development of a black market for financial products in Europe.

It explains the similarities behind the concept microcredit and the origins of the savings banks, stating that:

• The original aim of the savings banks was to allow the social advancement of the lower classes by giving them an opportunity to be an active part of the financial system;
• Savings banks have also been connected with the provision of micro-loans, savings and other financial services to the poor.

Further, the paper:

• Highlights the work of the savings banks in the provision of microcredit as well as microfinance support activities;
• Describes the activities of various European banks grouped under the following three main business models:
  • Balance sheet-based model;
  • Off balance sheet-based model;
  • Agency-based model.

The paper concludes by responding to a number of questions and suggestions put forward by the European Union in its publication on microcredit, putting forward a number of recommendations for its attention that include:

• Strengthening European and national partnerships;
• Improving regulation;
• Fighting financial exclusion via microcredit.