Review of the Microfinance Sector in Selected Western European Countries: Organization, Dynamics, and Potential Development

This paper presents a review of the microfinance sector in Belgium, France, Germany, Portugal, Italy, and the U.K. The review focuses on the organizational models common in each country, recent sector dynamics and potential future developments. Three main microfinance models prevalent in Western Europe are large public actors, local associations and banks. The success of a model in each country depends on:

• Structural factors, such as microfinance sector regulation;
• Large actors' commitment to microfinance;
• Financial intermediaries willingness to participate in microfinance;
• Cooperation amongst local associations to reach critical size and efficiency.

The review predicts that:

• European organizational models will further evolve;
• Countries with strong public leadership will become careful about fund use;
• This will result in private involvement and pressure on intermediaries to increase volumes and gain scale and efficiency;
• Countries dominated by NGOs will require more leadership;
• Large actors will have to gain scale and visibility to attract funding;
• Bank involvement would help the sector gain scale, increase volumes and develop innovative products.