EVALUATION OF THE JASMINE TECHNICAL ASSISTANCE PILOT PHASE

Transcription

1 November 2013 EVALUATION OF THE JASMINE TECHNICAL ASSISTANCE PILOT PHASE FINAL REPORT Prepared by Regional and Urban Policy

2 Europe Direct is a service to help you find answers to your questions to your about questions the European about Union. the European Union. Freephone number (*): Freephone number (*): (*) Certain mobile telephone operators do not allow access to numbers or these calls may be billed. (*) Certain mobile telephone operators do not allow access to numbers or these calls may be billed. European Commission, Directorate-General for Regional and Urban policy REGIO DG 02 - Communication Mrs Ana-Paula Laissy Avenue de Beaulieu Brussels BELGIUM regio-publication@ec.europa.eu Internet: European Union, 2014 Reproduction is authorised provided the source is acknowledged. More information on the European Union is available on the Internet ( ISBN doi /18708

3 EVALUATION OF JASMINE TECHNICAL ASSISTANCE PILOT PHASE FINAL REPORT A report submitted by ICF GHK

4 Specific Contract implementing Multiple Framework contracts for the provision of evaluation and evaluation related services to DG EMPL, including support for Impact Assessment Activities fvt/2008/087 - Lot 5 Contract title Renewal no. 3 of VC/2009/0054 Contract ref. no. VC/2012/0223 Disclaimer: This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

5 Contents List of Acronyms and Abbreviations... i Executive summary... iii 1 Introduction JASMINE Technical Assistance Pilot Phase Scope and Objectives of the Evaluation Evaluation Methodology The Structure of this Report The Context for JASMINE: an Overview of the EU Microcredit Sector Origins of Microcredit in Europe The European Model Today European Market Infrastructure Demand for Microcredit in Europe Market Gap EU Policy Initiatives Evaluation Findings and Conclusions Performance of JASMINE Technical Assistance Performance of JASMINE Business Development Services (Indirect) Employment and Social Impacts of JASMINE Technical Assistance Pilot Phase Conclusions and Recommendations Conclusions Recommendations List of tables Table 1.1 Main Features of the institutional assessment and the rating exercise... 2 Table 1.2 Overview of Research Methods used for the Evaluation... 6 Table 2.1 Global overview of microcredit loans Table 2.2 Key differences amongst Western and Eastern Europe Microcredit Market Model Table 2.3 Framework for estimating demand Table 2.4 Overview of Methodologies to estimate microcredit demand Table 2.5 Estimated Demand for Microcredit across Member States and Microcredit Penetration Table 3.1 Overview of JASMINE beneficiary characteristics Table 3.2 JASMINE Beneficiaries participating in a Rating Exercise Table 3.3 Characteristics of Beneficiaries opting for the Different Products Table 3.4 Microcredit Market in Countries with no take-up of JASMINE Table 3.5 Beneficiary Feedback on the Selection Process Table 3.6 Number of JASMINE Applications Received and Selected, Table 3.7 Comparison of Institutional Assessment Process: Planet Rating and MicroFinanza Rating Table 3.8 Beneficiary Feedback on the Quality of the Assessment/ Rating Reports Table 3.9 Beneficiary Feedback on Training Table 3.10 JASMINE Training: most frequently addressed topics (based on an analysis of the number of training days) Table 3.11 Details of Training days by Topic Area Table 3.12 Overview of the Characteristics of JASMINE Workshop Participants Table 3.13 Summary of Post Workshop Feedback Collected by the EMN... 64

6 Table 3.14 Examples of changes to Beneficiaries Operational Models introduced following the Institutional Assessments/ Rating Exercises Table 3.15 Examples of changes to Beneficiaries Operational Models introduced following the Training List of figures Figure 1.1 Overview of JASMINE Technical Assistance (TA) Facility... 1 Figure 1.2 JASMINE Beneficiaries (2010 to 2012) per Member State and Potential Demand for Microcredit... 4 Figure 2.1 Classification of microcredit lending model types Figure 2.2 Total share by institutional type Figure 2.3 Commencement of lending (as proportion of responding MFIs) Figure 2.4 Types of businesses supported by micro lending across Europe Figure 2.5 Demand estimation using European Commission Methodology Figure 2.6 Figure 3.1 Number of Microcredit Providers and Estimated Potential Demand for Microcredit in the EU (Number of Potential Borrowers) Percentage of Respondents Agreeing or Disagreeing with the following Statement: The Calls for Expressions of Interest were well publicised Figure 3.2 Percentage of Respondents Agreeing/ Strongly Agreeing with the Following Statements Figure 3.3 Percentage of Respondents Agreeing/ Strongly Agreeing with the Following Statements Figure 3.4 Distribution of Training Days across Beneficiaries and Themes Figure 3.5 JASMINE Helpdesk: user categories Figure 3.6 JASMINE Helpdesk: topics of enquiries... 71

7 List of Acronyms and Abbreviations BDS: BoD: CDFA: CDFI: CEO: CoGC: Business Development Services Board of Directors Community Development Finance Association Community Development Financial Institutions Chief Executive Officer European Code of Good Conduct for Microcredit Provision CIP: Competitiveness and Innovation Framework Programme ( ) DG REGIO: DMI: EIB: EIF: EMN: ESF: EU: Directorate-General for Regional and Urban Policy Deutsches Mikrofinanz Institut (the German Microfinance Institute) European Investment Bank European Investment Fund European Microfinance Network European Structural Funds European Union EUR: Euros ( ) GNI: JASMINE: JEREMIE: MFC: MFI: NBFI: NGO: SME: Gross National Income Joint Action to Support Micro-finance Institutions in Europe Joint European Resources for Micro to Medium Enterprises Microfinance Centre Micro Finance Institution Non Bank Financial Institution Non-Governmental Organisation Small and Medium Enterprises Countries AT BE BG CH CY CZ DE DK EE EL ES FI FR Austria Belgium Bulgaria Switzerland Cyprus Czech Republic Germany Denmark Estonia Greece Spain Finland France i

8 HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK Croatia Hungary Ireland Italy Lithuania Luxembourg Latvia Malta Netherlands Poland Portugal Romania Sweden Slovenia Slovakia United Kingdom ii

9 Executive summary This is the Final Report of the independent evaluation of JASMINE Technical Assistance pilot phase. The evaluation was launched by the Directorate-General for Regional and Urban Policy (DG REGIO) in April 2013 and the work was undertaken by ICF GHK, a member of the European Policy Evaluation Consortium (EPEC). JASMINE Technical Assistance Pilot Phase ( ) JASMINE Technical Assistance Facility was launched as a pilot initiative in September 2008 in followup to the European Commission s 2007 Communication on the development of microcredit in Europe 1. JASMINE has an overall financial envelope of circa 6 million covering the period 2008 to The Facility is primarily funded by DG REGIO (95 per cent) and co-financed (5 per cent) by the European Investment Fund (EIF). The EIF manages the Facility on behalf of DG REGIO. In its current form, JASMINE provides two types of services: technical assistance to selected microcredit providers and business development tools and services for the entire European microcredit sector. The technical assistance services are provided free of charge to beneficiary institutions, selected on the basis of an annual call for expression of interest organised by the EIF. The technical assistance package comprises: (i) an institutional assessment or a rating exercise, delivered by specialised microcredit rating agencies based in Europe (MicroFinanza Rating and Planet Rating); and (ii) five to twelve days of tailored training delivered by Microfinance Centre (MFC) in association with Deutsches Mikrofinanz Institut (DMI) 2. The following business development tools and services are available to the entire microcredit sector: (i) the European Code of Good Conduct for Microcredit Provision encapsulating recognised good practice in the EU microcredit sector (ii) JASMINE Helpdesk to assist all individuals and institutions looking for specific information on the microcredit sector in the EU; (iii) specialised microcredit workshops to disseminate good practice in microcredit in the EU; and (iv) JASMINE OnLine, a webbased information platform (currently under development). The JASMINE helpdesk and specialised workshops are delivered by the European Microcredit Network (EMN). After an initial preparatory phase, the implementation of JASMINE technical assistance started in 2010 while the implementation of JASMINE business development services commenced the following year. Subsequently, the pilot phase of JASMINE (2008 to 2011) was extended for a period of two years until Objectives and Scope of the Evaluation The overall aim of the present evaluation is to provide an independent assessment of the implementation and effectiveness of the JASMINE Technical Assistance pilot phase (although only covering the period 2008 to 2012). The evaluation is both summative and formative, and seeks to draw lessons which could be applied to the next phase of JASMINE. It is based on a mixed-methods approach, drawing quantitative and qualitative evidence from a variety of sources: desk research; an online survey of technical assistance beneficiaries; an online survey of workshop participants and Helpdesk users; and, interviews with relevant Commission officials, the EIF, EMN, the two rating agencies, training providers, and 22 beneficiaries. Additionally, semi-structured interviews were also conducted with a limited number of rejected applicants, non-beneficiaries and microcredit experts such as Evers & Jung. 1 Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: A European initiative for the development of micro-credit in support of growth and employment COM(2007) 708 final/2 dated 13 November MFC has subcontracted the delivery of training to German based beneficiaries to DMI (an association of microcredit providers in Germany). iii

10 Evaluation Findings and Conclusions During the period covered by the evaluation (2008 to 2012), the following outputs have been delivered with an expenditure of 4.3 million: Technical assistance has been provided to 48 microcredit providers from across Europe ; Collectively, these organisations have received training days; Over 495 microcredit stakeholders (practitioners, investors, policy makers, academics etc.) have participated in 17 workshops organised by the EMN; The EMN has handled over 100 Helpdesk enquiries. The evaluation concludes that, overall JASMINE Technical Assistance Pilot Phase has met its objective of contributing to the development of the European microcredit sector by: Improving the productivity, professionalism and efficiency of beneficiary institutions; Promoting good governance within the sector; Enhancing its transparency; Developing and promoting industry standards such as the European Code of Good Conduct. This conclusion is supported by the following findings: Concrete evidence of benefits - an analysis of the survey of and interviews with the beneficiaries indicates that their involvement in the programme has been beneficial and has generated positive outcomes. All beneficiaries interviewed were able to provide at least one example of change(s) introduced following the technical assistance and resultant improvements to operational efficiency, productivity and/or external relations (with customers and/or investors). It is difficult to attribute tangible outcomes to the business development services, as can be expected. There is however, general consensus that the workshops play an important role in stimulating networking, disseminating good practice and raising awareness. Similarly, the Helpdesk fills an information gap on the European microcredit sector. Strong added value - JASMINE technical assistance and business development services are regarded as highly relevant for enhancing the capacity, professionalism and performance of the European microcredit sector. The intervention is tailored to the specific needs of the sector. Most beneficiaries were generally unfamiliar with the concept of institutional assessment / rating exercise prior to JASMINE, but found it to be relevant and useful once they had been through the process. Thus, JASMINE has played an important role in promoting the concept of independent assessments and external ratings within the sector. Moreover, all beneficiaries interviewed confirmed that they would not have been able to undertake the same training (at best, they would have undertaken the training at a much reduced scale and scope) in the absence of JASMINE. The Helpdesk is a unique single source of information on the European microcredit sector that is available free-of-charge to individuals and organisations across Europe. Without JASMINE, it is unlikely that such a tool would exist. Similarly, in the absence of JASMINE workshops, there would be reduced knowledge sharing, mutual learning and networking activity. JASMINE workshops do not involve a fee which encourages participation and as a result, a higher number of microcredit providers get exposure to good practice and current hot topics in microcredit as well as the opportunity to interact and connect with peers, than would otherwise be the case. Furthermore, There is growing demand for JASMINE technical assistance the number of applications received for technical assistance has doubled over a three year period from 21 in 2010 to 42 in Positive beneficiary experiences and feedback a vast majority of the beneficiaries have rated the quality of the technical assistance highly and have found it to be practical and useful. There is demand for a wider range of technical assistance beneficiaries and stakeholders have expressed a desire for a broader range of technical assistance in future. iv

11 Overall, implementation of the pilot phase has been smooth. However, minor glitches have been encountered such as the scheduling of assessment/ rating and training sessions within a tight implementation window. The current timetable follows a calendar year cycle which means that there is effectively an eight months window for delivery of technical assistance to the entire batch of JASMINE beneficiaries (when the application period and summer holidays are taken into account). Pragmatic and acceptable solutions have however, been found to these issues. For example, training and assessment/ rating exercises are now conducted in parallel, instead of being delivered sequentially (as was initially envisaged) to ensure implementation within a calendar year. Recommendations The pilot phase of JASMINE has generated important learning as to what works well and what can be done better as well as stimulated new ideas for testing in future. Taking into account practical considerations such as the costs and feasibility of implementing the various ideas, the main recommendations of this evaluation are as follows: Design of the Facility: JASMINE Technical Assistance Recommendations for improving the current offer : Institutional assessment/ rating and training should be offered as optional products rather than as a package. A wider choice of rating products/ assessments could be offered through JASMINE such as social rating. Create a database of accredited subject-matter experts to allow for better matching of experts/ trainers with the needs of the beneficiaries. Recommendations for enhancing the current offer to provide a wider array of technical assistance through JASMINE: JASMINE could provide co-financing grants to microcredit providers for piloting innovative approaches to microcredit provision. Specific areas supported by JASMINE could include: o o o o New, innovative low cost models of delivery; Diversification of financial products and services; Application of new technologies, particularly mobile technologies; Reaching out to under-served markets. JASMINE could provide financial assistance and/or consultancy support to beneficiaries to help them take forward the recommendations emerging from the institutional assessment/ rating exercise. Provide technical assistance to microcredit providers to help measure and demonstrate the social impact of microcredit in Europe. Design of the Facility: JASMINE Business Development Services Develop market intelligence through regular (a) commissioning of market studies and research; and (b) measurement of the social impact of microcredit in Europe. Build a repository of beneficiary assessment/ rating reports (on JASMINE OnLine) so that vital data on performance and evolution of the European microcredit sector is not lost. Create a beneficiary (alumni) forum/ platform for networking, knowledge sharing and mutual learning. Such an alumni forum could be hosted on JASMINE OnLine. Adapt the format of the workshops to make them more interactive. v

12 Create a personalised identity for the Helpdesk. To this end, the Commission can draw some inspiration from the 'Ask Howard' tool developed by the European Consumer Centre 3. Strengthen demand for institutional assessments/ ratings through awareness-raising among microcredit investors and grant providers. Furthermore, the Commission could consider adapting the financing formula for JASMINE technical assistance such that first time technical assistance is offered free of charge and any successive interventions are co-financed by the beneficiary on a declining basis (e.g. JASMINE covers 80 per cent of total costs for the second intervention and 60 per cent of total costs for the third intervention). Management and Implementation Introduce a more flexible implementation timetable. Facilitate better coordination between the two Rating Agencies so as to promote homogeneity of approaches adopted by the two Rating Agencies. The EIF should provide detailed feedback to rejected applicants explaining the reasons for rejection. Maintain emphasis on a collaborative approach to training design involving the training provider and the beneficiary. The involvement of rating agencies is not necessary in this process. Develop a monitoring and evaluation framework for the next phase of JASMINE comprising the following: o o o o o o Standardised reporting formats for the rating agencies; Systematic reporting format for the training providers; Systematic collection of data on workshop participants and post workshop feedback; Collection of baseline data on beneficiaries; Post intervention tracking of beneficiaries up to three years after the end of technical assistance; Systematic collection of Helpdesk statistics and user feedback. 3 Available online at: vi

13 1 Introduction This is the Final Report of the independent evaluation of JASMINE Technical Assistance pilot phase. The evaluation was launched by the Directorate-General for Regional and Urban Policy (DG REGIO) in April 2013 and the work was undertaken by ICF GHK. The Final Report provides a synthesis of the evidence collected within the framework of this evaluation and sets out the detailed findings and conclusions emerging from this evidence. It also provides a series of recommendations to improve the design and implementation of JASMINE going forward. 1.1 JASMINE Technical Assistance Pilot Phase JASMINE Technical Assistance Facility was launched in September 2008 in follow-up to the European Commission s initiative for the development of microcredit in support of growth and employment 4. JASMINE was initially conceived as a four year pilot (2008 to 2011) to provide technical assistance to established Microfinance Institutions (MFIs) 5 and business development services to the wider microcredit sector in the EU. The pilot phase has however, been extended for a period of two years until 2013 and the beneficiary eligibility criteria broadened over time, to also include greenfield MFIs and licensed banks that have never been rated by specialised microfinance rating agencies. JASMINE has an overall financial envelope of circa 6 million covering the period 2008 to The Facility is primarily funded by DG REGIO (95 per cent) and co-financed (5 per cent) by the European Investment Fund (EIF). The EIF manages the Facility on behalf of DG REGIO. In its current form, JASMINE provides two types of services: technical assistance to selected microcredit providers and business development tools and services for the entire microcredit sector (Figure 1.1). Figure 1.1 Overview of JASMINE Technical Assistance (TA) Facility Adapted from DG REGIO s website. 4 Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: A European initiative for the development of micro-credit in support of growth and employment COM(2007) 708 final/2 dated 13 November defined as non-bank microcredit providers established for at least two years 1

14 1.1.1 Technical Assistance The following technical assistance services are provided free of charge to beneficiary institutions, selected on the basis of an annual call for expression of interest organised by the EIF: An institutional assessment or a rating exercise: JASMINE beneficiaries can opt either for an institutional assessment or a rating exercise depending on their needs and stage of development. The main features of these two products are summarised in Table 1.1. The EIF has selected two specialist Rating Agencies for conducting institutional assessments/ rating evaluations. These are Planet Rating and MicroFinanza Rating. Tailored training: beneficiaries are also entitled to five to twelve days of training which is tailored to their specific needs. Training is delivered by the Microfinance Centre (MFC), a network of microfinance experts and consultants based in Warsaw and active in Europe and Central Asia 6. Table 1.1 Main Features of the institutional assessment and the rating exercise Strand Institutional Assessment Rating Exercise Target Group Scope Output Younger and emerging institutions that wish to identify their strengths and weaknesses in order to improve their institutional strength, to attract donor funding and to strengthen their social impact A detailed analysis of an institution s internal policies and procedures and comparison with internationally recognised best practices in microfinance. The focus is less on financial performance and risk management and more on operational and organisational aspects. The specific aim is to assess the level of development of the Microcredit Provider and to identify the main internal weaknesses and external threats jointly with the existing opportunities for the institution. The output of this analysis is an Assessment Report. Assessment Reports are not made available to the public and are shared only by the JASMINE beneficiary staff and management, the Rating Agency, the European Investment Fund and the European Commission Mature microcredit providers that wish to obtain new financing, to have a comprehensive assessment of their risk profile and social impact and to enhance their international visibility A detailed and complete assessment of the financial and operational performance and of the most relevant risk areas of the JASMINE beneficiary, according to recognised international standards. A rating report indicating the final rating grade and an appraisal of the institution s ability to absorb new funds. Rating reports are made available to the JASMINE beneficiary staff and management, the Rating Agency, the European Investment Fund and the European Commission and also to the subscriber s section of the Rating Agency s website Business Development Tools and Services In addition to the technical assistance provided to selected beneficiaries, JASMINE provides tools and services that are available to the entire microcredit sector of the EU: The European Code of Good Conduct (CoGC) for Microcredit Provision encapsulating recognised good practice in the EU microcredit sector. The CoGC 6 MFC has subcontracted the delivery of training in Germany to DMI (an association for microcredit providers in Germany). 2

15 addresses five topics: customer and investor relations; governance; common reporting standards; management information systems; and, risk management. This voluntary code was developed in close consultation with the European microcredit sector and its stakeholders. It was launched in November 2011 and piloted with nine microcredit providers from across Europe during the period November 2011 to December The purpose of the pilot exercise was to identify any implementation issues, test the practical relevance of the various clauses and collect good practice in compliance. Out of this, an update of the CoGC will be created and published later this year. A JASMINE Helpdesk to assist all individuals and institutions looking for specific information on the microcredit sector in the EU. The helpdesk can be accessed through an online form via the European Commission website 7. Specialised microcredit workshops to disseminate good practice in microcredit in the EU. JASMINE OnLine, a web based application which is currently under development. This online platform, when launched, will act as a one-stop-shop for information relating to the European microcredit sector. It will inter alia provide information on upcoming events, financial data uploaded voluntarily by microcredit providers who have signed up to JASMINE OnLine, a list of microcredit providers who have adopted the CoGG, business information from networks and service providers, and funders and investors, FAQs etc. The Helpdesk will become a part of JASMINE OnLine when it is eventually launched. The Helpdesk and workshops are delivered by the European Microfinance Network (EMN) and the contract is managed by the EIF. 1.2 Scope and Objectives of the Evaluation As per the Terms of Reference, the objectives of this evaluation are: To assess the implementation and effectiveness of the JASMINE Technical Assistance pilot phase in promoting best practises in the microcredit sector and in helping microcredit providers to deliver better services; To assess the indirect impact of JASMINE on employment as well its impact on social inclusion; To prepare conclusions including lessons learnt, success factors, suggestions for improvements to effectiveness and efficiency of the JASMINE Technical Assistance to selected beneficiaries as well as the business development services provided to the sector in the EU; To make recommendations for possible additional measures to support MFIs/microcredit institutions, spread best practises and support employment and social inclusion in the EU. In support of the above objectives, the Terms of Reference lists a series of specific evaluation questions for this study to address. In terms of scope, the evaluation covers the period 2008 to During this period: The EIF has launched three calls for expression of interest (2010 to 2012); Technical assistance has been provided to 48 microcredit providers see Figure 1.2; The Rating Agencies have carried out 39 institutional assessments and 15 rating evaluations (some beneficiaries have received multiple interventions); training days have been delivered; Over 495 microcredit stakeholders (practitioners, investors, policy makers, academics etc.) have participated in 17 workshops organised by the EMN; The EMN has handled over 100 Helpdesk enquiries. Further information on the outputs delivered by JASMINE can be found in Annex

16 Figure 1.2 JASMINE Beneficiaries (2010 to 2012) per Member State and Potential Demand for Microcredit 4

17 1.3 Evaluation Methodology The study team used a mixed methods approach to compile a comprehensive evidence base for the evaluation and to provide the basis for triangulation of results. Quantitative and qualitative evidence was collected from a range of sources: desk research; semi-structured interviews with relevant officials at the European Commission, the EIF, the bodies involved in the delivery of the programme, select JASMINE beneficiaries and also, a limited number of rejected applicants, non-beneficiaries, sector experts; and three online surveys targeting JASMINE beneficiaries, workshop participants and helpdesk users. Table 1.2 provides an overview of the methods used, while also highlighting any limitations and caveats where applicable. The evaluation methodology and the evidence base are further detailed in the Technical Annex. 5

18 Table 1.2 Overview of Research Methods used for the Evaluation Research Method Scope Caveats/ Limitations Document and data review Literature Review and Statistical Analysis Stakeholder Interviews Online Beneficiary Survey Interviews: Beneficiaries JASMINE Contribution Agreements 2008 to 2012 JASMINE Final reports of the Action 2008 to 2012 JASMINE audited accounts 2008 to 2012 Workshop reports prepared by the EMN Anonymised Helpdesk usage data Annual reports prepared by the Rating Agencies (for the years 2010, 2011 and 2012) Annual report prepared by the MFC (2012 only) Details of training provided to each beneficiary (topics and number of days) Assessment/ Rating reports of beneficiaries EMN reports on the microcredit sector for several years Literature on the following topics: Issues constraining the growth and development of the sector Specific capacity building and training needs of the sector Evidence of benefits of ratings and institutional assessments International good practice in capacity building activities and business Statistics on unemployment, self-employment, micro enterprises, access to finance etc. Interviews with: Relevant European Commission officials Relevant individuals at the EIF Delivery agents: EMN, MFC, Planet Rating and MicroFinanza Rating All 48 beneficiaries who had received assistance during 2010 and 2012 were invited to participate in an online survey. 30 responses were received (response rate = 62.5 per cent) Interviews were conducted with 22 (out of 48) beneficiaries to explore their experiences and the outcomes and impacts of JASMINE in more detail The reporting formats used by the two Rating Agencies are different which makes it difficult to compare and aggregate information. Management Information such as details of workshop participants, training days per beneficiary by theme is not systematically recorded / compiled in a database or spreadsheet. Data on European microcredit sector is scarce. For example, definitive data on the population of microcredit providers in the EU is not known. In absence of this data, the study team has used qualitative survey data (extracted from EMN surveys) and proxy measures to estimate the potential market and demand for JASMINE. Interviews provided opinions and views of the stakeholders concerned. Facts and data were collected from other sources. The online survey contained a limited number of open questions. Therefore, it did not allow for detailed exploration of feedback. Beneficiaries could not provide evidence of quantifiable and tangible outcomes that could be attributed to JASMINE technical assistance such as increase in customer base, reduced write-off rate, increased viability/ profitability etc. Beneficiaries were however, able to provide concrete examples of soft outcomes e.g. changes introduced as a result of JASMINE. 6

19 Research Method Scope Caveats/ Limitations Interviews: Rejected Applicants Interviews: Nonbeneficiaries Online Survey: Workshop Participants Online Survey: Helpdesk Users A contact database of rejected applicants between 2010 and 2012 was provided by the EIF. 27 microcredit providers were initially contacted via , with follow-up reminder s and a phone call to increase the response rate. Of those contacted, 8 provided interviews. A list of 15 non-applicants was compiled; these were identified from the EMN membership base as well as referrals by other microcredit providers. 2 telephone interviews were conducted with microcredit providers based in the UK and Ireland. A database of 495 workshop participants was compiled by the EMN. The survey invitation was sent out by the EMN on behalf of ICF GHK due to data protection issues. Online survey was launched on 29 May Two rounds of reminder e- mails were sent out following the initial invitation to participate. A database of 141 users (including those submitting an enquiry in 2013) was compiled by the EMN. The survey invitation was sent out by the EMN on behalf of ICF GHK due to data protection issues. The online survey was launched on 29 May Two rounds of reminder s were sent out following the initial invitation to participate. The results cannot be regarded as representative as the full breadth of non-beneficiaries was not achieved. However, the limitations of this source were known in advance and it should be seen as a complementary source of evidence for the evaluation. The sample is too small to provide a comprehensive picture. However, the limitations of this source were known in advance and it should be seen as a complementary source of evidence for the evaluation. The results cannot be regarded as representative due to a low response rate (2%). Overall, 15 responses were received, corresponding to a response rate of 13 per cent. The results of the survey cannot be regarded as representative due to a low response rate. 7

20 1.4 The Structure of this Report This Report continues in the following sections: Section 2 describes the context for JASMINE; Section 3 provides a synthesis of the evidence collected and analysed in response to each evaluation question; Section 4 sets out the recommendations emerging from this evaluation. The main report is supplemented by a separate Technical Annex which contains the detailed evidence base for the evaluation and is structured as follows: Annex 1: Intervention logic for JASMINE Technical Assistance Facility; Annex 2: Framework for estimating the potential demand for microcredit in Europe; Annex 3: Synthesis of the beneficiary interviews; Annex 4: Results of the online survey of beneficiaries; Annex 5: Results of the online surveys of workshop participants and Helpdesk users; Annex 6: Feedback collected from rejected applicants and non-beneficiaries. 8

21 2 The Context for JASMINE: an Overview of the EU Microcredit Sector The European microcredit sector is relatively young and under-developed. It is characterised by a diversity of players and business models. A significant proportion of the microcredit providers are believed to be lacking in scale and sustainability. The main challenges faced by microcredit providers in the EU, and especially in the EU 15, are improving outreach and operational performance. JASMINE seeks to address these issues through the provision of tailored and specialised technical assistance to participating microcredit providers and more generic support to the wider sector. The ultimate aim of JASMINE is to help develop the capacity of the microcredit sector in Europe and to improve its professionalism and performance. This section examines the current state of the European microcredit sector and the challenges facing the industry to put the JASMINE Technical Assistance Facility and this evaluation in context. 2.1 Origins of Microcredit in Europe Systems of credit provision have a long history. Some estimate informal beginnings of microcredit as far back as the eighteenth and nineteenth century, involving intermediation between micro-savings and microcredit 8. However, the modern microcredit movement began as a tool for economic development in the 1970s, rapidly gaining prominence following the success of Grameen Banking in Bangladesh. Muhammad Yunus vision for Grameen Banking aimed to reduce poverty by providing small loans to the country s rural poor. It has had great success, with over 2,565 branches reaching over 81,000 villages. The total number of borrowers is now 8.35 million, with women forming 96 per cent of this 9. Such schemes are now being implemented throughout the world; in Asia, the Pacific, Africa, Latin America and more recently, in Eastern and Western Europe 10. In Western Europe, a handful of organisations pioneered microcredit schemes in the 1990s. The majority active today, began lending in the first decade of the twenty first century, however. In this period, persistent unemployment and pressure on the welfare state focused attention on microcredit as a tool to foster self-employment for financially and socially excluded persons. In Eastern Europe, microfinance began in the 1990s after the economic transition from centrally planned to market economies, which led to large numbers of unemployed urban and rural workers. Microfinance institutions were created with significant donor support. Their purpose was to provide services to people not reached by formal financial institutions due to the collapse of the financial sector 11. Box 1 What is microcredit? As defined by the European Commission, microcredit refers to loans smaller than EUR 25,000. Microcredit is typically tailored to micro enterprises (defined as having 10 employees or less), to social economy enterprises, to individuals wishing to become self-employed, to people working in the informal economy and to the unemployed and others living in poverty who are not considered bankable and therefore are lacking access to traditional sources of capital 12. The EU microcredit concept is somewhat different to the models in other regions of the world; this is 8 Seibel, H.D Does History Matter? The Old and the New World of Microfinance in Europe and Asia. Working Paper, University of Cologne, Development Research Centre, No. 2005,10. Available at: 9 Bank for the Poor: Grameen Bank Grameen Bank at a Glance. Available at: 10 The European Microfinance Network Background of Microfinance in Europe. Available at: 11 KFW,2007, Microfinance in Germany and Europe. 12 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 9

22 a reflection of the EU s stage of development, social welfare infrastructure and bank penetration rates. In the EU, microcredit remains the main financial service offered. Microfinance, a broader concept integrating financial services such as savings, micro-insurance or transfers, is very limited Table 2.1 provides an overview of the various models of microcredit, its goals and the varying average loan amounts. Table 2.1 Global overview of microcredit loans Greatest Prevalence Typical Average Loan Amounts Number of Borrowers per Country Financial Performance Social Goals Developing countries South America, Asia, Africa > 2 million Profitable, in part subsidised Fighting poverty & promoting selfemployment Transitional countries Eastern Europe ,000 > 20,000 Profitable, in part subsidised Financing for new self-employment Industrialised countries Western Europe e.g. UK, France, Germany 1,000 25,000 > 5,000 Highly subsidised Growth financing for micro enterprises & financing new self-employment Source: Kritikos & Kneiding Microcredit: Is there Demand for this Type of Loan in Germany? German Institute for Economic Research. The following section looks at the European microcredit sector, exploring the heterogeneity and sustainability of the various microcredit models prevalent across Europe. 2.2 The European Model Today There is no common microcredit business model in Europe. The market is trending towards efficiency and self-sustainability; however, it is still very immature and fragmented 13. However, a broad classification of microcredit lending within the European market, as developed by the EMN in 2011, is shown in Figure 2.1. Microcredit in Europe can be delineated on the basis of its key purpose: microenterprise lending (lending through credit institutions to nearly bankables ) and social inclusion lending (lending to non-bankables through non-bank microcredit providers). The lending is then differentiated by the type of loan (although these are not strictly mutually exclusive): A business loan is a loan under 25,000 in order to support the development of a microenterprise or for self-employment; and A personal loan is similarly under 25,000 to cover personal or consumption necessities (e.g. rent, personal emergencies or education). Lenders who focus on SME support and job creation tend to lend larger sums, whilst those focusing on social and financial inclusion tend to issue smaller microloans Kraemer-Eis, H., Lang, F. & Gvetadze, S European Small Business Finance Outlook June European Investment Fund. Available at: 14 Bruhn-Leon, B., Eriksson, P. & Kraemer-Eis, H. 2012/13. Progress for Microfinance in Europe. European Investment Fund. Available at: 10

23 Figure 2.1 Classification of microcredit lending model types Microlending Social inclusion lending Microenterprise lending Personal loans Business loans Business loans Source: EMN Overview of the Microcredit Sector in the European Union. Although such classification exists across Europe, the European microcredit market presents a dichotomy between the Western and Central Eastern markets. This is in terms of characteristics of intermediaries, the target beneficiaries, loan sizes and sustainability of intermediaries loan portfolios 15. In Central and Eastern Europe, microcredit is seen as an effective tool to fight financial exclusion and has proved to be efficient in providing sustainable development 16. There is also much heterogeneity across this region, with varying tools, offers, demands and legal and regulatory backgrounds. In Romania, for example, there exists specific microfinance law, while in other countries (e.g. Czech Republic and Slovakia) it is insufficiently developed. The sector continues to expand and become more structured, with non-governmental organisations (NGOs) and MFIs as well as commercial banks involved in provision 17. This has resulted in the business model tending to be more sustainable and profitable. In comparison, microcredit in Western Europe is still at a preliminary stage of development 18. There exist similar levels of immaturity and socio-economic contexts across these countries. There also exists a highly developed financial market with banks reaching the majority of the population; the banks finance those micro projects they consider less risky, therefore creaming off the good risks. Therefore, typical client types of Western European microfinance schemes are people starting a business out of unemployment and social exclusion with more inherent risk. Microcredit in Western Europe has a strong focus on social inclusion and pays less (or, almost no) attention to its profitability. Government and public institutions are the main money source for microcredit providers 19. Table 2.2 below outlines the key differences characterising the Western and Eastern European microcredit market as identified by relevant literature. 15 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 16 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 17 European Microfinance Network Background of Microfinance in Europe. Available at: 18 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 19 Evers & Jung Status of Microfinance in Western Europe; an academic review. European Microfinance Network issue Paper. 11

24 Table 2.2 Key differences amongst Western and Eastern Europe Microcredit Market Model Western Europe Central & Eastern Europe Maturity Young More mature Number of loans Fewer loans average of 1,226 loans per institution More loans average of 1,575 loans per institution Average loan size Volume larger Volume smaller Social focus Commercial priority, attention to profitability Microcredit legislation Those suffering from poverty and social marginalisation Grant and donor dependency, with less financial sustainability Little specific legislation Those excluded from traditional banking service, constituting major obstacle to launch of new business activities Larger presence of commercial intermediaries with more sustainable business models Exists specific legislation, allowing market to be more commercially oriented and sustainable Source: EMN Survey ; and Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. The European Investment Fund. Across both Western Europe and Central and Eastern Europe, the main challenge for MFIs in the EU is to develop and maintain a flexible and sustainable funding model for microcredit 20. The impact of the on-going crisis on the availability of microcredit is another central issue of the sector European Market Infrastructure Information regarding the scale of the microcredit sector in Europe is very uncertain 22. No sector-wide statistics are available, with the main source of information being the EMN Survey (conducted annually). Box 2 The EMN Survey The most recent EMN survey was conducted in , covering 154 microcredit providers across 32 countries in Europe (of these countries, 18 were EU member states). The response rate to the survey was 41 per cent, with 376 microcredit providers contacted to participate. This is a decrease in the number of participants in comparison to the previous years survey. In the survey, 170 microfinance actors were interviewed operating in 21 countries across the EU. This was collected from a pool of 432 organisations contacted. EMN surveys are based on a previously identified selection of organisations providing microcredit within Europe. The total number of the organisations can only be estimated, and the EMN reports it should range between 500 and 700 (not taking into account credit unions and commercial banks providing loans below EUR 25,000). Because of the nature of this methodology, it must be noted that these 376 MFIs were already a selection of the organisations providing microcredit within Europe. Because of the selection bias that may be present, the results can only provide a partial view of the market situation. 20 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 21 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 22 European Commission Communication: A European initiative for the development of micro-credit in support of growth and employment. COM(2007) 708 final. Available at: =en 12

25 As is cited in the above blue box, the total number of organisations providing microcredit in Europe cannot be estimated with certainty. As such, this section will use the information provided by the EMN survey to extrapolate features that characterise the microcredit market in Europe Institutional Diversity The microcredit sector has much institutional diversity, with governmental bodies, savings and commercial banks, credit unions, cooperatives, Community Development Financial Institutions (CDFIs), microfinance associations, non-bank financial institutions, religious institutions and NGOs or foundations active in microcredit provision. Adding to this diversity is the growing interest of commercial and savings banks, which have become interested in downscaling and providing microloans 23. As such, two broad models of institutions providing microcredit can be distinguished: banks and non-banks 24. These can be delineated into two institutional blueprints based on their profit focus and attention to micro lending activities: Microloans provided by banks, with a specific microcredit programme that is profit oriented and dedicates between 75 to 100 per cent of activities to provision of financial services. Estimations for the amount of loans covered are not easily available, with these institutions serving microcredit clients merely as a subset of their regular client base 25 ; and The microcredit provider as a non-banking financial institution or microfinance association that is not-for-profit and concentrates its business activities (75 to 100 per cent) to the provision of microcredit. Breaking down these institutional types further, the EMN survey has shown that NGOs/ foundations have the highest share of institutions in the European microcredit market, as seen in Figure 2.2 below. As stated earlier, this is not representative of the contribution of banks, with estimations regarding their provision of microcredit difficult to disaggregate. Figure 2.2 Total share by institutional type Source: EMN Survey. Available at: n = The European Microfinance Network Background of Microfinance in Europe. Available at: 24 European Commission The Regulation of Microcredit in Europe. Available at: 25 The European Microfinance Network Background of Microfinance in Europe. Available at: 13

26 2.3.2 Maturity of European Microcredit Providers The majority of microcredit providers across Europe are very young, with 85 per cent established since As discussed earlier, the average maturity of institutions varies between Eastern and Western Europe see Figure 2.3. Figure 2.3 Commencement of lending (as proportion of responding MFIs) Source: EMN Survey. Available at: n = Products and Services As well as institutional variety, there also exists a large diversity of products and product features. The majority of European microcredit providers offer microloans as individual loans (92 per cent); this is in comparison to the international microcredit market where group loan approaches are most prominent. The average terms of the loans are as follows: The loan term varies from 6 months to 7.5 years, with the most common average loan term being around 2 to 3 years; The average interest rate ranges from 4 per cent to 16 per cent, with an average of 9 per cent. The average loan size depends on the development of the country s economy. Using the EMN survey results, high average loan amounts 26 were reported for Belgium, Finland, Germany, Hungary, Ireland, Lithuania and the Netherlands (in comparison to the average loan size European wide). Smaller average loans were found for Bulgaria, Italy, Latvia, Poland, Romania and the United Kingdom. Most microcredit providers additionally offer other services, including business development services, entrepreneurship training and financial education programmes Funding Sources There is a wide range of funding sources in the European microcredit market, from national and EU level funding to regional or local resources. Funds provided by public institutions are the most predominant, with commercial or savings bank another commonly cited source 27. As it stands, many microcredit providers in Europe cannot operate profitably enough, and their sustainability relies on grants with limited access to capital forming a bottleneck Deflated by GNI per capita (per country) to correct for national income differences 27 The European Microfinance Network Background of Microfinance in Europe. Available at: 28 European Commission The Regulation of Microcredit in Europe. Available at: 14

27 European funding plays a key role in financing the European microcredit actors. Sources include the European Social Fund (ESF), EIF and the EIB. A restriction on micro lending organisations attracting savings is one hindrance identified by the EMN as part of their survey Types of businesses supported The EMN survey provides an insight into the types of businesses supported by micro lending across Europe as seen in Figure 2.4 below. Start-up enterprises are supported by over 81 per cent of responding MFIs; existing enterprises and self-employed without employees are supported by 72 per cent. Figure 2.4 Types of businesses supported by micro lending across Europe Source: EMN Survey. Available at: Challenges n = 115. The respective question allows multiple answers: the percentages will not add up to 100%. There are a number of challenges affecting the prospects of the European microcredit market. These are briefly outlined here: The lack of access to stable funding and limited prospects for growth and selfsufficiency. A number of funded instruments (for example, guarantees and funding under Progress Microfinance) go some way in addressing this challenge. Self-sustainability of the microcredit business model. This is particularly an issue for microcredit providers based in Western Europe, where they do not need to become financially sustainable or have a focus on profitability as they obtain grant funding / donations on a regular basis 29. As such, this sort of funding becomes part of the sustainable business model. The lack of homogenous regulatory and legislative framework. The legal framework for microcredit provision varies significantly across Europe ranging from dedicated legal acts to specific provisions on microlending in acts regulating the banking or NGO sector 30. Although it should be noted that the European Code of Good Conduct aims to address this issue to some extent, by promoting common standards across the EU. 29 Evers & Jung Status of Microfinance in Western Europe; an academic review. European Microfinance Network issue Paper. 30 The European Microfinance Network Background of Microfinance in Europe. Available at: 15

28 In some countries, there exist interest rate caps or rules on usury. These are implemented to protect consumers from over-indebtedness and predatory lending practices, and are in place in Belgium, Germany, Italy and Poland 31. This alters the cost-covering abilities of the microcredit provider and the ability to become sustainable, thus hindering the provision of the microcredit. 2.4 Demand for Microcredit in Europe Similar to supply statistics, comprehensive data on the potential annual demand for microcredit in Europe are lacking. Presently, two EU-wide estimates exist: one produced by the European Commission in 2007 and recent estimates prepared by Evers & Jung. These approaches (outlined in Table 2.3) are restricted to potential entrepreneurs among those at risk of poverty or social exclusion. As has been discussed, the target group for microcredit is not restricted to this cohort, and includes other potential entrepreneurs as well as established self-employed and micro enterprises excluded from traditional banking services. In light of the lack of up-to-date and holistic information, as part of this evaluation, a basic framework was created to estimate the potential demand for microcredit in the EU. It provides a more comprehensive view of all microcredit target groups (see Box 3 below for more detail). Box 3 A Framework for Calculating Demand The framework works off the assumption of the following sources of demand for microcredit: 1. Financing needs of unemployed and potential start-ups : Start-up entrepreneurs seeking external finance; and Those unemployed wishing to become self-employed. 2. Financing needs of existing businesses and those self-employed: For those established self-employed individuals seeking finance (less than EUR 25,000); and Established micro enterprises (with fewer than 10 employees) seeking financing less than EUR 25,000. The framework is underpinned by evidence gathered from a literature review and relevant data from Eurostat and the ECB surveys on SME finance. Table 2.3below outlines the framework used to estimate the demand for microcredit. A full list of sources and a discussion around caveats can be found in Annex 2. Table 2.3 Framework for estimating demand Variable Calculation Unemployed Number of unemployed A % unemployed seeking to become self-employed B = A * 7% % unbankable C = B * 34% Start-up entrepreneurs seeking finance Total population (15 64 years) D % taking steps to start a business E = D * 4% % seeking external finance (< EUR 25,000) F = E * 20% % funded by friends and family G = F * x% 31 European Commission The Regulation of Microcredit in Europe. Available at: 16

29 % those whose demand is partially met through commercial sources H = F * 4% % unsuccessful in obtaining loans I = F * 41% Self-employed individuals Number of self-employed individuals J % seeking external finance (< EUR 25,000) K = J * 15% % funded by family and friends L = K * 17% % those who are partially able to meet demand through commercial sources M = K * x% % unsuccessful in obtaining commercial loans N = K * 40% Established micro enterprises Business population (< 10 employees) O % seeking external finance (< EUR 25,000) P = O * 9% % funded by family and friends Q = P * 6% % those who are partially able to meet demand through commercial sources R = P * 18% % unsuccessful in obtaining external finance S = P * 16% The information for estimation is collected separately for each EU-27 member state. Following this, the relevant market size for each country will be estimated by: The average loan size will vary by country, using data collected by the EMN Survey The aggregate of this forms the EU-wide estimation. Application of the above framework produces a demand potential of 6.5 million borrowers stemming from the four target markets (unemployed, potential entrepreneurs, self-employed and established micro enterprises). When considering latent demand 33 as well as direct demand, it is estimated that there are 7.6 million borrowers across the EU. This is substantially higher than the European Commission s estimates in 2007, and the updated 2012 estimations (see Figure 2.5 overleaf and Section 2 in the Technical Annex). This is predominately due to the broader consideration of the market base via the inclusion of established self-employed and established micro enterprises, as well as the consideration of those potential entrepreneurs excluded from the traditional financing sector. Table 2.4 provides an overview of the three methodological approaches discussed above. The estimated value of demand ranges from 5 billion to 41 billion (or 667,000 to 5.1 million loans expressed in terms of the number of borrowers) depending on the methodology used and the underlying assumptions. The latter estimate looks more realistic when considering that a recent study conducted in the UK estimated the annual demand for community finance 34 to be in the range of 5.45 billion to 6.75 billion (~ 6billion to 7.2 billion calculated at = 1.12) serving approximately 8,181,000 clients 35. The UK estimates are higher than those calculated by the present study (for the UK). This is because the UK study 32 For those countries where information is unavailable regarding average loan sizes, information is extrapolated from similar neighbouring countries. 33 Latent demand accounts for the loans that are currently borrowed from friends and families as an alternative source of credit. 34 Similar concept to microcredit; used in the UK context to refer to provision of finance to those traditionally underserved by mainstream commercial financial institutions. 35 Glavan, H. (2013) Inside Community finance: the CDFI industry in the UK Available at: 17

30 is based on an assumption of 3.4 loans per person per annum (for personal lending) and includes demand for finance from SMEs and social enterprises. Figure 2.5 Demand estimation using European Commission Methodology Estimating demand for micro-credit in the EU - European Commission Methodology Population aged years*: EU-15 (old MS): 263,699,740 EU-12 (new MS): 71,879,306 % at risk of poverty**: EU-15 (old MS): 23.09% EU-12 (new MS): 30.08% Potential entrepreneurs***: 37% Target groups***: 4% Average amount of micro loan: Average loan size (Evers & Jung) EU-15 (old MS): 11,225 EU-12 (new MS): 7,208 *Data from Eurostat 2012 **Data from Eurostat 2012 or 2011 ***Data from Flash Eurobarometer 354 (2012)- % who would rather be self-employed ****Data from Flash Eurobarometer 354 (2012)- % respondents taking steps to start a business EU-15 (old) EU-12 (new) A: Population * % At risk of poverty 60,896,709 21,624,738 B: A * % Potential entrepreneurs 22,531,782 8,001,153 C: B * Target Group 901, ,046 Potential demand for micro-loans Number of loans Average loan size Potential demand EU-15 (old): 901,271 11,225 10,116 million EU-12 (new): 320,046 7,208 2,307 million TOTAL EU-27: 1,221,317 9,440 12,423 million Initial EC estimates (2007) 712,900 6,145 million. 18

31 Table 2.4 Overview of Methodologies to estimate microcredit demand European Commission Evers & Jung ICF GHK Reference Year 2007 (EC), 2012 (ICF GHK) Variables included in Estimation The total EU population aged years at risk of poverty or social exclusion Estimates of the proportion of these who are potential entrepreneurs Of these, the target group (i.e. those already starting a micro business) Number of loans is multiplied by average loan size for EU-15 (old MS) and EU-12 (new MS) The population aged years at risk of poverty or social exclusion per country Estimates of the proportion of these who are potential entrepreneurs per country Of these, the target group (i.e. those already starting a micro business) per country Number of loans is multiplied by average loan size per country This is essentially the same as the Commission methodology, but using data at higher level of granularity (Member State level instead of aggregate EU level figures) Four sources of demand for microcredit: Start-up entrepreneurs seeking external finance; Unemployed persons wishing to become self-employed; Established self-employed individuals seeking micro loans; Established micro enterprises (< 10 employees) seeking micro loans. For each, there is a proportion that is unbankable or unsuccessful in obtaining finance these make up the demand for microcredit Number of loans for each group is multiplied by average loan size for each country Working Assumptions Estimations calculated separately for EU- 15 (old MS) and EU-12 (new MS) Proportion who are potential entrepreneurs is assumed to be 45% in 2007 and 37% in The target group is between 3% - 4% Estimations calculated on a country-bycountry basis Proportion who are potential entrepreneurs is assumed to vary by country 38 The target group is 3% Estimations calculated on a country-bycountry basis 39 Unemployed: 2% of unemployed wish to become self-employed; 34% of these are unbankable Established self-employed: 36 An updated estimation using the European Commission methodology was undertaken as part of this evaluation, using 2012 data. See Section 2 of Technical Annex for details on estimation. 37 Extracted from Flash Eurobarometer 354 Entrepreneurship in the EU and Beyond (2007 & 2012) 38 Extracted from Flash Eurobarometer 354 Entrepreneurship in the EU and Beyond (2012) 39 See Section 2 of Technical Annex for reference base for working assumptions. 19

32 European Commission Evers & Jung ICF GHK Average loan size in 2007 for EU-15 is 10,240 and for EU-12 is 3, assumes average loan size for EU- 15 as 11,225 and EU-12 as 7,208. Average loan size similarly by country and where data was unavailable, regional averages were used 15% seeking finance; 17% funded by family & friends; 12% of those partially met commercially; 40% unsuccessful in obtaining finance. Start-up entrepreneurs: 4% of population taking steps to start a business; 15% seeking finance; 17% funded by family and friends; 12% unsuccessful in obtaining commercial loans. Established micro enterprises: 13% seeking finance; 6% funded by family and friends; 12% partially able to meet through commercial sources; 11% unsuccessful in obtaining external finance. Average loan size varied by country and where data was unavailable, regional averages were used Estimated Demand 2007: EU-27 demand is 6,145 million approximating to 712,900 loans. 2012: EU-27 demand is 12,423 million approximating to 1,221,317 loans. (See Section 2 of Technical Annex for details). EU-wide (including Norway, Iceland & Switzerland) is estimated to be 5,139 million approximating to 667,000 loans. Western Europe was estimated to have the highest demand ( 2,127million) followed by Central and Eastern Europe ( 1,202 million), Southern Europe ( 1,198 million), UK and Ireland ( 380 million) and Scandinavia 232 million). EU-wide estimation is roughly 5.1 million loans approximating to 41.6 billion. 20

33 2.5 Market Gap In a perfect market, supply would adjust to meet demand. However there are, in reality, a number of issues preventing such an outcome in the microcredit market. These include 40 : Asymmetric information for the lender, as it is difficult to gather and assess creditrelevant information about the borrower; High transaction costs; and The limited ability for the borrower to provide collateral. To gain an understanding of the potential gap in the market, the above demand estimation can be compared with the number of microcredit providers per country (as identified by the EMN Survey ). The analysis reveals that despite potential large pools of demand, countries like Greece, the Czech Republic and Denmark, lack any known microcredit providers. To further analyse the mismatch between current supply and potential demand for microcredit across the EU, the penetration rate of microcredit has been calculated for each country (potential number of borrowers divided by the number of microcredit providers) as a crude proxy measure see Table 2.5 and Figure 2.6. This crude measure is indicative of market gaps in France, Finland and Portugal, for example. Overall, this rudimentary market gap analysis suggests that there is scope for existing microcredit providers to expand their outreach in certain countries and/or for new providers to emerge to fill gaps. 40 Kraemer-Eis, H. & Conforti, A Microfinance in Europe: A Market Overview. European Investment Fund Working Paper 2009/001. Available at: 21

34 Table 2.5 Estimated Demand for Microcredit across Member States and Microcredit Penetration Country Potential Demand Latent Demand Total Demand No. of MFIs identified in EMN survey No. of JASMINE Beneficiaries Microcredit Penetration Rate* Austria 60,282 18,897 79, ,179 Belgium 74,987 23,326 98, ,386 Bulgaria 47,558 14,282 61, ,874 Cyprus 7,301 2,204 9, ,505 Czech Republic 95,341 29, ,297 Denmark 32,379 9,897 42,276 Estonia 8,352 2,497 10, ,849 Finland 39,020 12,041 51, ,061 France 386, , , ,989 Germany 535, , , ,034 Greece 142,159 42, , ,517 Hungary 66,123 19,928 86, ,776 Ireland 34,690 10,452 45, ,142 Italy 569, , , ,952 Latvia 13,920 4,099 18, ,010 Lithuania 18,779 5,587 24, ,122 Luxembourg 3, ,173 Malta 2, ,865 1 Netherlands 137,416 43, , ,823 Poland 329, , , ,322 Portugal 93,812 28, , ,978 Romania 190,499 60, , ,895 Slovakia 45,402 13,760 59,162 1 Slovenia 15,125 4,619 19, ,581 Spain 396, , , ,229 Sweden 61,387 18,705 80, ,018 United Kingdom 495, , , ,215 Total 3,902,120 1,197,633 5,099, ,361 ICF GHK calculations *Total Potential Demand divided by Number of microcredit providers 22

35 Figure 2.6 Number of Microcredit Providers and Estimated Potential Demand for Microcredit in the EU (Number of Potential Borrowers) 23