EMN-CERMi Seminar: Microfinance in Europe

1. EMN-CERMi Seminar:Microfinance in Europe Daniel Sorrosal (EU Liaison Officer at the European Microfinance Network) Marcella Corsi (Core Member of the EMN Research Working Group and Associate Researcher at CERMi) Thursday, 23 September 2010 3.00pm – 5.00pm Seminar Room Centre Emile Bernheim, Université libre de Bruxelles

2. Survey of 2008-2009 activities:Successful Collaborative Effort • Built on the strengths of the previous surveys conducted on EMN’s behalf in 2003, 2006 and 2008. • Shortened survey questions to focus on most relevant topics • Incorporation of new questions related to EMN working groups: Social Performance, IT, Regulation • Standardized financial indicators • Continued and improved data disaggregation: gender, ethnicity, immigrant status, youth, disability • Questionnaire available in Bulgarian, English, German, Hungarian, Italian and Spanish. 2

3. Work Coordinated by NantikLum Foundation (Spain) with the efforts of 11 collaborating organizations • RéseauFinancementAlternatif ASBL (RFA), Belgium • Centre for Entrepreneurship and Executive Development (CEED), Bulgaria • European Microfinance Network (EMN), France • DeutschesMikrofinanzInstitut (DMI), Germany • Hungarian Microfinance Network (HMN), Hungary • Giordano Dell’ Amore Foundation (FGDA), Italy • INHolland University of applied sciences, Center for Microfinance and Small Business Development , the Netherlands • EUROM Consultancy, Romania • FundaciónNantikLum, Spain • NätverkförEntreprenörerfrånEtniskaMinoriterer (NEEM), Sweden • Independent Microfinance Consultant and Director of the Centre for Responsible Credit, United Kingdom

4. Large Number of Responses • 170 institutions representing 21 countries from the European Union • 97 new respondents • More responses from institutions in Norway, Sweden, and Ireland, compared to previous survey • First time responses from Croatia, Estonia, Latvia, and Lithuania • No responses from Austria and Slovakia due to absence of current microcredit programmes

5. Great diversity in Loans Disbursed • Number of loans disbursed by country range from 6 to 28,863 for 2009. • Factors that influence loan numbers by country appear to be: • Age of sector • Number and types of actors and their geographic reach • Whether microlending is the primary activity or one of many activities carried out by the organization • E.g. in France: Two lenders in the market since the 1980s, with national coverage, but with different lending methodologies: 1 not-for-profit organization with zero-interest quasi-equity loans that allow beneficiaries to access significant complementary bank credits; 1 NGO providing standard microloans with interest • E.g. in Hungary: small foundations operate locally; a bank working on the international level disbursed 9,500 loans; • E.g. in Germany: 60% of organizations started lending after 2005, they operate locally; a government body operating internationally disbursed 7,000 loans

6. In 2009, a total of 84,523 microcredits for 828 million euros were granted*. In Western European countries, 51,027 loans were made for 477 million euros, while in Eastern Europe 18,293 loans were made for 307 million euros. 72% gave the figures for their active clients. End of 2009: 135,815 active clients. 74% of organisations have lent €49.9 billion for 237,495 loans since their creation. *The data didn’t include one major actor in Poland and the network of Procredit banks in Eastern Europe.

7. Number of loans disbursed in 2009

8. Number of active clients There are organisations that reported more numbers of loans than numbers of active borrowers:. This is the case in Germany, Hungary, Latvia, Netherlands, Sweden. In the case of Poland the difference is due to the fact that Fundusz Micro is included in number of loans disbursed but not in number of active clients.

9. Growth and Decline at the same time • Between 2008 and 2009 the number of loans disbursed decreased by 7%. • Highest Sector Growth Rates from 2008 to 2009 in: • Hungary (49%) • Italy (40%) • The Netherlands, Latvia, due to the incorporation of new institutions that began activities in 2009. - In terms of the highest growth in terms of number of loans disbursed: Hungary (3412 more loans than in 2008), France (2154), Italy (545) and Finland (485).

10. Evolution in loans disbursed by country

11. NGOs and are the main Actors

13. Young sector with many small actors • Only 40% of lenders participating in the survey were active before 2000 • Nine new actors started lending in 2008 and another nine started lending in 2009 • Most lenders in the EU/EEA disburse less than 50 loans a year (57%). • On the other hand, 13% of the organisations disbursed more than 400 loans in 2009

14. A young and growing MF sector

15. Not only microcredit for enterprise development 42% provide other types of financial services

16. Loan Products and Pricing: Diversity in Loan Sizes and Interest rates • A variety of loan sizes offered to clients. • The maximum loan size offered to clients ranges from €37,000 to €220 (even if the EU defined a microcredit as being below €25,000). • (Non-weighted) Interest rates charged range from 2% at the lowest to 22% at the highest. The average is 9%. • Average (non-weighted) interest rates vary by country - the highest rates are charged in the United Kingdom (22% average), Poland (17% average) and the lowest in Portugal and Finland (3% and 2% respectively).

17. 22.2% 17% 16.9% 14.3% 11% 9% 8.6% 8.3% 7.8% 7% 6.7% 6% 6% 4.8% 4.7% 4.5% 4% 4% 3.7% 3% 2% Euribor 5%

18. Broad Range in Average Loan Size • The average loan amount is €10,012. • It has decreased compared to 2007 (average loan size €11,002). • Despite this, we find that in some EU countries, loan disbursements are moving toward larger loans and the higher end of the market. - E.g. Netherlands – average loan size €14,745 - E.g. United Kingdom – average loan size €9,623 - E.g. Hungary – average loan size €14,545

19. Average loan size per country

20. 15,852 11,379 11,070 10,948 9,144 8,340 8,054 6,456 Credit Union/ Other Government Body CDFI Bank NGO or Savings Non-bank Average Loan Size by type of MF actor Bank Financial cooperative Foundation Institution

21. Depth of outreach • Determined using the World Bank data for 2007 GNI • per capita per country and average loan size.

22. Limited Data on Portfolio Performance • Although more institutions responded in this current survey than in previous surveys, the number of responses continues to be low. Due to: • Under-developed MIS systems • Confidentiality policies (Banks) • For the data available in 2009*: • - Average repayment rate of 83%, 6 points lower than the previous survey (around 90%) • - Percent Portfolio at risk (>30) is 16.8% (14% previous survey) • - Value of write offs was 5.2%, of average portfolio outstanding, similar to the previous survey • - Average Operational Self-Sufficiency: 98.7% * On basis of response rate (CRR: 16.5%, PAR>30: 37%, Write-offs: 35%, OSS: 28%)

23. External Funding plays still an Important Role Operational Costs: In contrast to the previous survey, 60% of survey respondents cover their operational costs through earned income (fees, interest and income earned on assets). Loan Capital: Loan capital comes from a combination of public and private sources, with public sources most important: • Public sector 50% • Own funds, Private sector, Client deposits, commercial debt

24. Crisis impact

25. Future Vision • Reaching financial sustainability remains the primary concern for the responding organizations. • Access to long-term funding • Regulatory flexibility • Growth of operations and targeting new client groups

26. Most Important Future Goals