Page 47 - Annual Report 2010

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Microfinance

RESOURCES for Microfinance

Complementing EIF’s other microfinance products, EPMF positions EIF as one of the leading microfinance provid-ers in Europe and contributes to the EU 2020 strategy by promoting smart, sustainable, and inclusive growth.

CIP SME Guarantee Facility for Microfinance

With the SMEG, and through EIF, the EU also partially guarantees portfolios of micro-credit financing granted by financial institutions (FI) to very small enterprises. The risk-sharing arrangements established between EIF and each FI aim to stimulate micro-lending.

Depending on the type of FI and its activity, EIF can is-sue either direct guarantees that provide micro-credits to SMEs or counter-guarantees that issue guarantees cover-ing micro-credits extended by microfinance institutions.

JASMINE

JASMINE is a joint initiative the EC and the EIB Group launched in September 2008 to support non-bank micro-credit providers in the EU and to increase the provision of micro-credit to micro-entrepreneurs. JASMINE was con-ceived as an umbrella initiative providing technical as-sistance, capacity building and funding to selected MFIs across Europe. JASMINE comprises:

The European Parliament Preparatory Action (EPPA)

In March 2010, the European Commission and EIF signed the EUR 4m EPPA mandate. The European Par-liament had encouraged the European Commission to launch this preparatory action to promote a more favourable environment for micro-credit in the Euro-pean Union and as a complement to the JASMINE pilot facility. EPPA supports higher risk financing to non-bank MFIs and provides seed financing to newly created MFIs with strong social credentials but which have not yet reached sustainability.

European Progress Microfinance Facility (EPMF)

EPMF aims to increase access to finance for micro-entre-preneurs including the self-employed and has a particular focus on, but is not restricted to, groups with limited ac-cess to the traditional banking system. Its launch in 2010 marked a major development for EIF’s microfinance activi-ties which, in addition to capacity, also gained the struc-tural framework needed to absorb its smaller microfinance pilot predecessors including EPPA and RCM Micro.

The EPMF initiative, comprising EUR 200m of funding from the EC and the EIB, allows EIF which manages the initia-tive on their behalf, to make a substantial contribution to-wards filling a funding gap in the EU microfinance market while proving its management expertise of microfinance initiatives.

EPMF is implemented by EIF through two separate man-dates. First, the provision of micro-credit portfolio guaran-tees to MFIs under a direct mandate with the EC. Second, further financial instruments such as debt, equity, and risk sharing are deployed to MFIs through a Luxembourg “fonds commun de placement” (FCP) structure managed by EIF.

Because of the highly diverse needs of the European mi-crofinance market, EPMF has been specifically designed to respond to the various market needs across EU coun-tries through a number of tailored instruments. Over the next six years, EPMF will provide financial instruments to support MFIs located within the EU 27, which will then on-lend to local micro-entrepreneurs and micro-enterprises.

Soon after the launch of EPMF, EIF swiftly started operations with MFIs, initially under the facility’s guarantee segment. The first MFIs to benefit from support under EPMF were MicroStart, a Belgian start-up venture aimed at underprivi-leged urban communities in two Brussels neighbourhoods, and Qredits, a young foundation in the Netherlands fo-cussed on individuals with difficulties accessing the con-ventional credit market.