Access to credit is a major concern for many EU companies, in particular for Small and Medium Entreprises (SMEs) and for entrepreneurs who want to start their own business or get new projects off the ground.

Without financing, companies and entrepreneurs can lose out on important employment opportunities. This has become even more worrying in the current economic context.

That is why the European Commission has  just launched the first EU microfinance project in the Netherlands with the European Investment Fund (EIF). This EU-wide initiative will allocate various European funds to the Dutch Microfinance Institution Qredits to facilitate loans of over EUR 20 million to small businesses and people in the Netherlands who have lost their jobs and want to set up their own company.

As part of the EU's Europe 2020 strategy for smart, sustainable and inclusive growth, the EU Microfinance Facility is one of the concrete actions taken at European level to address the consequences of the crisis (IP/09/1070)

The EU Commissioner for Employment, Social Affairs and Inclusion László Andor said "This new Microfinance Facility will help boost entrepreneurship and the social economy in Europe. Its core aim is to create jobs and specifically help vulnerable groups find an alternative route out of unemployment. Over the next eight years, we hope to provide small loans to around 45,000 European entrepreneurs. "

The European Progress Microfinance Facility (Progress Microfinance) is a new initiative established with EUR 200 million of funding from the European Commission and the European Investment Bank Group, managed by the European Investment Fund (EIF). Progress Microfinance aims to increase access to finance for micro-entrepreneurs, including the self-employed.

The facility aims to make it easier for people who might have difficulties in accessing funds for business start-ups. Although it has a particular focus on groups with limited access to the conventional credit market, it is not restricted to these. Examples include female entrepreneurs, young entrepreneurs, entrepreneurs belonging to a minority group, entrepreneurs with a disability, sole traders etc.

Financial products (micro-credit guarantees and funded instruments) are made available through eligible intermediaries such as Qredits participating in the facility. Through the European Progress Microfinance Facility, the European Investment Fund provides a guarantee to institutions like Qredits, enabling it to lend to micro-entrepreneurs.

Micro-credit in the EU means loans under €25,000. It is tailored to micro-enterprises, employing fewer than 10 people (91% of all European businesses), and unemployed or inactive people who want to go into self-employment but do not have access to traditional banking services. 99% of start-ups in Europe are micro or small enterprises and one third of these are launched by people who are unemployed.

How does it work?

The European Progress Microfinance Facility does not directly provide financing to entrepreneurs, but enables microfinance institutions in the EU countries to increase lending to them. This is done in two ways: by issuing guarantees to providers of microfinance thereby sharing their risk of loss, and by increasing their micro-credit volume through funded instruments (i.e. loans and equity).

For the guarantees, the European Investment Fund (EIF), who manages Progress Microfinance on behalf of the European Commission, has published a call for expression of interest in the Official Journal of the EU and on the EIF website, inviting interested providers of microfinance to apply. The selection takes into account the compliance of applicant institutions with standard banking requirements and experience in microfinance.

For the funded instruments, a Special Investment Fund, whose investors are the European Commission and the European Investment Bank, provides loans and equity to microfinance institutions allowing them to increase their lending activities towards (future) entrepreneurs.

How can I apply?

As a (future) entrepreneur or an enterprise with fewer than 10 employees looking for a micro-credit (i.e. a loan under €25,000), you can get further information from a microfinance provider in your country that has been selected as an intermediary by the European Investment Fund. You can check whether there are selected intermediaries in your country on the EIF website.