Microfinance within the EU Banking Industry: Policy and Practice

This European Banking Federation report discusses domestic microfinance activities of banks in the European Union (EU).

Private banks are among the main providers of microfinance in the EU. They supply microfinance independently and in partnership with other providers, such as public bodies and specialized MFIs. Private banks normally provide microfinance to bankable borrowers, who have a viable business and a relatively high probability of being able to repay debt. Other MFIs and public bodies are more likely to provide microfinance to nonbankable borrowers. They include individuals or very small companies that do not have a credit history or the ability to provide adequate collateral.

The paper makes recommendations to accommodate different approaches to microfinance, and allow public and private supply to co-exist in the EU. They include:

• Public support to nonbankable borrowers should be carefully targeted and monitored to ensure that it adds to their financial possibilities;
• Regulation governing microfinance activities of banks in the EU should ensure a level playing field for all providers;
• Different microfinance providers should exchange information and good practice.