Microfinance in EU and other European countries

European microfinance has grown for the last decade

Microfinance in European countries is quite heterogeneous, which depends on the legal regulations and on the economic context and needs of the countries or local communities. It depends on the problems they face as well. Despite all these, it has grown in numbers of portfolio, clients, created jobs, etc.

Some crucial notifications on microfinance in EU:

  •  in most countries there is a specific legal framework, such as in France, Italy, Romania or in the countries of our region,
  • or positive laws do not forbid or interfere with the work of non-banking institutions, such as: the Netherlands, Belgium, Britain or Hungary.
  • today, there are several hundred non-banking institutions in Europe. More detailed about it at the web presentation of the EMN– European Microfinance Network.


  • The first microfinance institutions appeared at the end of the 1990s in Central and Eastern Europe as a result of the need to address problems arising during the transition and due to the fact that banking sector failed to meet the needs of certain categories of population – victims of transition.
  • Later on, in early 2000s, the first microfinance institutions in Western Europe emerged due to different necessities and target groups. Microfinance, as a model, have managed to satisfy or resolve unemployment, poverty and similar problems of disadvantaged people needs or social gaps. In final it contributes to social cohesion, economic growth and the financial and social inclusion of specific groups such as Migrants, Youth, Women, the Elderly population or Micro-entrepreneurs.


Findings in the recent Report of two microfinance networks, EMN – European Microfinance Network and MFC- Microfinance Center have proven the growing curve:


  • Microfinance in Europe is mainly operated by non-banking institutions (NGOs, credit unions, foundations), while the involvement of commercial banks and governmental bodies is minor.
  • Banks are generally not motivated to finance business initiatives of marginalized groups and micro companies, due to higher risks and higher operating costs, and because of their own strategic goals.
  • On the other hand, clients, i.e. demand gap, are successfully covering non-banking or microfinance institutions – MFIs.
  • There are, however, examples of banks’ initiatives and programs in order to support and fund MFIs, or there are examples of banks’ down-scaling.
  • At the end of 2015, the microcredit portfolio in European MFIs amounted to EUR 2.5 billion in the hands of 750,000 clients. The annual growth of the last couple of years is about 15%. More about it in the Report, which has recognized the importance and potential of microfinance, primarily from the social aspect, and has created funds and instruments in order to strengthen the capacity of MFIs as well as their clients.
  • For such purpose European Commission created EaSI program
  • Especially important instrument is a guarantee fund that enable easier lending since certain larger part of the risk of bad loans is taken over by the EIF -European Investment Fund. The purpose of those guarantees is to leverage the effect and expectation that the supported institution will additionally attract private investors.

European Code of Good Conduct – microfinance standards

  • At the same time, the European Commission  launched the Standards – European Code of Good Conduct  for Microcredit Provision and requires their implementation by institutions applying for funds and instruments assigned to microfinance. Application of standards relates to customer protection, governance, risk management, reporting etc.
  • Nowadays, microfinance, as an alternative source of funding, besides its inclusive component and it has become a complementary source for innovative projects and start-up initiatives. All these, in addition to self-employment, contribute to economy growth.

The unique value of microfinance is the double bottom line:

      • Main objective of MFIs to be self-sustainable, but also to refer to certain social problems, which is basically in nature of social entrepreneurship.
      • Such goals have created the need for financial support from public and private donors and investors, who by giving support, fulfill and promote the idea of ​​social impact.
      • Another specific issue, which at the same time gives the sense to microfinance, includes non-financial services that clients receive in the form of education, counseling or mentoring. According to the survey, more than half of the MFIs provide some of the above services, mostly free of charge or at low price, in order to strengthen clients’ business capacity and their survival at the market.
      • Due to the digitization process, almost half of the education services are provided, both, personally and through on-line platforms. Parallel, with the appearance of FinTech, microfinance also gets an online version, so we have variants of crowdfunding or P2P lending, the new ways of investing and collecting financial resources in the microfinance.


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