Policy Papers

Proposal for a revised EU definition of microfinance and microcredit

The existing EU definition of microfinance i.e. the maximum amount of 25.000 € is not satisfactory as it does not recognize the specificities and the developments of the sector. MFC and EMN joined forced and in consultation with their Members in 2017 worked out a new definition of microcredit and microfinance that helps to better identify potential beneficiaries of EU funding and support and justify the advocacy work towards policy makers.

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Note on Capital Markets Union and the development of microcredit for an inclusive entrepreneurship

One of the main issues of the capital markets union is to unlock financing of innovation and enterprises. As 92% of European enterprises are microenterprises of less than 10 employees and many of them are excluded from access to banks, it seems important to include these “missing entrepreneurs” in the total demand of the capital market. Most challenging obstacles faced by MFIs and micro-entrepreneurs in Europe relate to legal and regulatory issues, which currently falls under Member Countries’ government responsibility and for which little progress have been observed in the last years. This has made it difficult at EU level to respond to the financial needs of the self-employed and micro-entrepreneurs lacking access to banks. Considering the current importance and rapid development of microenterprises and self-employment, it is important, from the viewpoint both of employment and of suppressing an important market failure in many Member States, that the Capital Markets Union should also include microcredit.

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Note on Inclusive Entrepreneurship

92% of the total number of enterprises in Europe are microenterprises with less than ten employees. The setting up of microenterprises has become more attractive for a wider strata of population than before. However, based on several recent studies, the national frameworks for entrepreneurship in the EU member states are not yet as inclusive as they need to be for fostering inclusive growth via business creation. To address this challenge, MFC and EMN recommend that the Commission could establish a basic set of common objectives, and invite Member States to undertake a programme of reforms, aimed at improving the conditions for inclusive entrepreneurship, taking account of national circumstances and priorities. The Commission could also help the Member States by indicating quantitative targets for inclusive entrepreneurship and by compiling an inventory of good regulatory practices.

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MoU EMN-MFC and the EIB group

The microfinance sector is in rapid development within the EU at a time when micro-entrepreneurship is becoming a growing option next to salary employment or unemployment benefits. In this framework, all efforts should be developed at EU level to support the microfinance sector in terms of policies, regulation, finance and technical assistance. This MoU is to develop a privileged, non-exclusive, partnership between the EIB Group and EMN & MFC to help support the microfinance sector.

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Note on ESF Market Failures for Microfinance in Europe Findings “short mapping”

Supporting entrepreneurs setting up their own business is one of the objectives of the European Social Fund (ESF). ESF offers a range of funding opportunities for financial and non-financial services. It has been used to co-finance entrepreneurship training and guarantee funds in different countries such as Lithuania, France and Germany to name a few. Nevertheless, even when ESF have specific lining with the MF sector in Europe, MFIs are having extraordinary difficulties in order to be instrumental in channeling these funds towards the underserved. In 2017, EMN and MFC undertook a short mapping study to identify some of the difficulties faced in accessing ESF by member MFIs from different EU countries in order to promote alternative solutions to the EU institutions.

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MFC Policy Paper No.5: Demystifying the role of microfinance in job creation

The paper discusses the role of microfinance in job creation through self-employment and microenterprise. Despite high expectations, in general microenterprises have a limited however socially important contribution to job creation. It is necessary to distinguish between growth-oriented young firms that have a potential to create jobs and self-employment and microenterprises which remain small. If microfinance focuses on the latter group, its impact on job creation will remain small. It may be more economical to reposition microfinance to become a more flexible micro-venture instrument that will fund job creators while leaving support for self-employment and microenterprises to other social programs, including seed capital grant funds.

MFC Policy Paper No 4_Too Little or Too Much Credit_Small Business Indebtedness in the EU_2015MFC Policy Paper No. 4: Too Little or Too Much Credit: Small Business Indebtedness in the EU, 2015

The paper reviews the potential reasons for small business indebtedness and proposes action steps to develop better understanding of the size and scale of this phenomenon in the EU. Access to finance for small businesses draws a lot of policy attention based on the premise that small businesses face credit constraints more than larger firms. While this may be true for some types of small businesses, it is also true that small businesses over-borrow and over-invest which may lead to business closures and bankruptcies. So far this aspect of small business borrowing has attracted little attention.

MFC Policy Paper No. 3_Of Mice and Unemployed_Rethinking Micro-Enterprise and Small Business_2015

MFC Policy Paper No. 3: Of Mice and Unemployed: Rethinking Micro-Enterprise and Small Business, 2015

The paper discusses the complex relationships between firms size and job creation in the EU which shows that there is a need to better understand the dynamics of the job creation and destruction process. Promoting jobs through self-employment and small businesses is an alternative strategy that carries high hopes and attracts a lot of policy attention on the theory that small businesses create the majority of jobs in the economy. However, despite the widespread support for small business startups – from entry to the growth dynamics in the first years of their existence – their role for job creation is not well understood and the policies may be following the wrong prescriptions.


Measuring Financial Inclusion in the EU_ the New _Financial Inclusion Score_2014Measuring Financial Inclusion in the EU: the New “Financial Inclusion Score”, 2014

This paper proposes a synthetic measure of financial inclusion. A new “Financial Inclusion Score” (or FIS) uses endogenous weights for inputs and outputs, using a data envelopment analysis (DEA) method. Using these FIS scores, this paper discusses the financial inclusion ranking of 27 EU countries, and suggests how this measure can be used by national and EU policymakers for advancing financial inclusion.

MFC MFC Policy paper_Debt_Borrowing and Over-indebtedness_a Country-Level Monitoring Framework_2014Policy paper: Debt, Borrowing and Over-indebtedness: a Country-Level Monitoring Framework, 2014

Full text, summary
A review of debt burden and over-indebtedness issues shows that debt is a very complex phenomenon, which has economic impact on growth, and a social impact on the well-being of individuals and households. A lot of research and data is available on the topic offering insights into different aspects of indebtedness. What is missing is a higher level, “big picture” approach to consolidate these various strands of findings and policy initiatives, and provide higher level guidance for policy-makers and advocacy groups. The paper proposes setting up “Debt Watch” mechanism in each country for systematic revision of national policies, actions and gaps in addressing over-indebtedness issues.




MFC Microfinance Centre Policy Paper Publication 2009

MFC Microfinance Policy Monitor ‘ 2009