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 [email protected] 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

36 2.6 EU Policy Initiatives Recognising the potential of microcredit in promoting social inclusion and entrepreneurship on the one hand and the challenges facing the sector in terms of scale and sustainability on the other hand, the European Commission has launched a series of initiatives to support the development of the sector. JASMINE Technical Assistance is one such support scheme. Other EU instruments supporting the microcredit sector over the multiannual financial framework are as follows: The European Progress Microfinance Facility, launched in 2010, aims to increase the availability of microcredit loans below 25,000 for setting up or developing a small business. Progress Microfinance does not directly finance entrepreneurs, but enables selected microcredit providers in the EU to increase lending by issuing guarantees, thereby sharing the providers potential risk of loss or providing funding to increase microcredit lending. The microcredit providers may be private or public banks, non-bank microfinance institutions and not-for-profit microcredit providers CIP Micro-credit Guarantee Window provides, through EIF, guarantees to partially cover the risk of portfolios of micro-credit financing granted by financial institutions to very small enterprises. The risk-sharing arrangement aims to stimulate micro lending. JEREMIE programme, developed in cooperation with the European Commission and the EIF, offers Member States the opportunity to use their Structural Funds to set-up financial instruments providing equity, loans or guarantees. Similar stimulation of micro lending is intended. Box 4 Summary of key messages Microcredit fills a market gap by providing finance to disadvantaged individuals, unemployed individuals and microenterprises who are not served by mainstream commercial institutions. The EU policy recognises that microcredit can play an important role in creating small businesses, reducing unemployment, and addressing financial and social inclusion, by providing finance to underserved markets. The European microcredit sector is however, young, diverse and fragmented. It has certain distinctive features such as focus on microcredit (instead of a wider array of microfinance services seen in the developing world) and a focus on addressing social exclusion and promoting entrepreneurship. These unique features make sustainability a particularly challenging issue for European microcredit providers. 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. Data and intelligence on the microcredit sector in Europe are generally weak (JASMINE OnLine can play an important role in addressing this going forward). Back of the envelope calculations however, suggest a scale of demand which considerably challenges the current supply of finance across many Member States. Given the potential gaps in market and the current, nascent stage of the sector, a number of complementary initiatives have been launched at an EU level to support the development of the sector through provision of funding (Progress Microfinance)and capacity building support (JASMINE Technical Assistance Facility).

37 3 Evaluation Findings and Conclusions This section presents a synthesis of the evidence collected in response to each evaluation question. The findings and conclusions have been grouped under the three core issues raised in the Terms of Reference: (i) performance of JASMINE Technical Assistance; (ii) performance of JASMINE Business Development Services and (iii) (indirect) employment and social impacts of JASMINE Technical Assistance Pilot Phase. 3.1 Performance of JASMINE Technical Assistance Assess the main characteristics of the selected beneficiaries: (i) Number of active clients over the past three calendar years (ii) Percentage of loans of the beneficiaries dedicated to professional microloans (iii) Domains / areas of business best known by the beneficiaries (iv) Domains / areas of business less known by the beneficiaries (v) Microcredit products offered to their customers Table 3.1 summarises the key characteristics of the beneficiaries. It is compiled from a number of sources: internet search results, beneficiary websites (where these exist), online survey results and Assessment/ Rating Reports. The key observations that can be drawn from this table are as follows: Reflecting the diversity of the European microcredit sector, JASMINE beneficiaries represent a range of institutional forms including foundations, associations, cooperatives, credit unions etc. However, about half of the beneficiaries are Non Bank Financial Institutions (NBFIs). The majority of the beneficiaries focus on micro lending, with a few also providing larger loans (13 out of 48). This is in line with the characteristics of the European microcredit sector which is dominated by specialised institutions (focusing the main part of their activity on micro lending). Of those that also provide larger loans, the share of micro loans in their total lending portfolio ranges from 1 per cent to 83 per cent (as measured by the value of outstanding loans). The majority focus on providing microenterprise lending (just over 60 per cent), about a quarter provide social inclusion lending and a few provide both microenterprise lending and social inclusion lending (13 per cent). A few beneficiaries target specific groups such as marginalised communities or women or agriculture sector. Microcredit products offered include micro loans, investment readiness support and other business support. Beneficiaries represent a mix of young and established institutions. Additional analysis conducted on the basis of information collected from an online survey of beneficiaries and available Assessment/ Rating Reports reveals that the number of micro borrowers ranges from 5 to ~ 7,000 across the JASMINE cohort, with the average number of borrowers being According to the latest EMN survey ( ), the average number of loans per institution in Western Europe amounts to 1,226 loans (average number of borrowers for JASMINE beneficiaries = 626) and in Eastern Europe 1,575 loans (average number of borrowers for JASMINE beneficiaries = 1,091). JASMINE beneficiaries thus, tend to be smaller than their peers. 41 Excludes Patria Credit, Banca Carpatica, Bank of Valetta as the borrower number for these institutions appear to include borrowers of larger loans

38 Table 3.1 Overview of JASMINE beneficiary characteristics MS Year of Beneficiary Beneficiary Year of Est. Institution Type Business Model Client Groups Products Larger Loans Business Development Services BE 2011 Crédal 1984 NBFI Microenterprise & Social inclusion lending Associations & social economy businesses, individuals & entrepreneurs Business Loans & Consumer Loans BE 2012 MicroStart 2010 NBFI Social inclusion lending Excluded individuals Individual professional loans & group loans BG 2010, 2011, 2013 Nachala 2007 NBFI Microenterprise lending Small and microentrepreneurs & individuals Business Loans & Consumer Loans BG 2010, 2011 Mikrofond 1999 NBFI Social inclusion lending BG 2010 USTOI 2005 NBFI Microenterprise & Social inclusion lending BG 2011 BDB Jobs MFI 2011 NBFI Social inclusion lending Micro-entrepreneurs & excluded individuals Micro businesses & farmers Excluded individuals in agricultural sector Business loans, home improvement loans & consumer loans Individual loans, group loans & agricultural loans Leasing products BG 2012 SIS Credit 2006 NBFI Microenterprise & Social inclusion lending Young companies, start ups, individuals & agricultural producers Business loans, consumer loans, specific financing (e.g. agricultural) DE 2012 MONEX 2005 NGO Microenterprise lending SMEs Basic loan, business loan & social loan DE 2012 KMG 2012 Cooperative Microenterprise lending Microenterprises, majority with migration background Business loan DE 2012 KIZ Finanzkontor 1997 Cooperative Social inclusion lending Small entrepreneurs & unemployed persons Small business loans & individual consumer loans DE 2012 Regios 2007 Cooperative Microenterprise lending Entrepreneurs have difficult access to finance Basic loan, business loan & social loan DE 2012 MKSH 2010 NBFI Microenterprise lending Entrepreneurs have difficult access to finance (looking to target women) Basic loan, business loan & social loan DE 2012 Gründungsmanager 2003 NBFI Microenterprise lending Small entrepreneurs and startups with finance difficulties Start-up loan, growth loan & impulse loan DE 2012 Indaro 2010 NBFI Microenterprise lending Small entrepreneurs (target women and migrants) Loan for SMEs DE 2012 Mozaïk 1998 Cooperative Microenterprise lending Micro entrepreneurs & micro businesses - start-ups and General loan, craftsmen loan, fast loans & car loans 26

39 MS Year of Beneficiary Beneficiary Year of Est. Institution Type Business Model Client Groups Products established Larger Loans Business Development Services DE 2012 DAVW/ARTEL Microenterprise lending Young and micro businesses Business loan DE 2012 Pro Unicus 2003 NBFI Microenterprise lending DE 2012 KapitalInstitut Microenterprise lending ES 2010 C'PAC 2001 Foundation Social inclusion lending ES 2012 CEEI Burgos 1994 NGO or Foundation FR 2010 Creasol 2005 Foundation Social inclusion lending HU 2010 PRIMOM 1990 Foundation Microenterprise lending HU 2010 Mikrohitel 2005 NBFI HU 2010 Fejer Enterprise Agency (FEA) IT 2010 PerMicro 2007 NBFI IT 2011 Fondazione Risorsa Donna Micro entrepreneurs situated in Turkish community Start ups and established SMEs Excluded individuals & unemployed Microenterprise lending SME's and entrepreneurs - Microenterprise & Social inclusion lending 1992 Foundation Microenterprise lending Microenterprise & Social inclusion lending 2001 Foundation Social inclusion lending IT 2012 BCC Mediocrati 1999 Credit Union Microenterprise lending Start-ups and young micro businesses & unemployed persons Urban and rural micro entrepreneurs NGOs & Marginalised Roma community in Hungary Urban and rural micro entrepreneurs Excluded micro-entrepreneurs and households Non-bankable women-led microenterprises (more so start-ups) Person or SME for start-up or development of microenterprise Business loan Basic loan, business loan & social loan Individual loans Business loans and personal consumer loans Business loans suited to startups, existing businesses & agricultural sector Business loans and personal consumer loans Business loans for start-ups, existing businesses, agricultural sector & those affected by crisis Microbusiness loan & household loans Individual loans for start-ups Business loan LV 2012 Capitalia 2007 NBFI Microenterprise lending SMEs Express microloan MT 2012 Bank of Valetta 1974 Commercial Bank Microenterprise & Social inclusion lending Enterprises and individuals Business loans, business overdrafts, home loans and personal loans NL 2011 Qredits 2009 NBFI Microenterprise lending Enterprises & individuals Business loans PL 2012 Fundusz Mikro FM NBFI Microenterprise lending Established entrepreneurs and micro enterprises Various business loans 27

40 MS Year of Beneficiary PL 2012 PL 2012 Beneficiary Centre for Entrepreneurship and Development, Sucha Dzialdowska Development Agency Year of Est. Institution Type 1995 NBFI Microenterprise lending Microenterprise lending RO 2010, 2012 FAER 2005 NBFI Social inclusion lending Business Model Client Groups Products Micro and small enterprises, micro entrepreneurs Development of SME sector and start-ups Farmers and rural family businesses RO 2010, 2012 LAM 2005 NBFI Social inclusion lending Agricultural sector & SMEs RO 2010 RO 2010 Opportunity Microfinance Romania Express Finance (now Vitas) 2000 NBFI Microenterprise lending 1996 NBFI Microenterprise lending Individuals, predominantly in rural areas Small and microentrepreneurs & individuals Various enterprise loans Business loans & guarantee products Individual loans Business loans & consumption/household loans Individual Loans Various Individual Loans & Business Loans Larger Loans Business Development Services RO 2011 Patria Credit 1996 NBFI Microenterprise lending RO 2011 ROMCOM 1991 NBFI Microenterprise lending RO 2011 AIPPSMEs n.a. Government Agency Microenterprise lending RO 2012 RoCredit 2007 NBFI Microenterprise lending RO 2012 Banca Carpatica 1999 Bank Microenterprise lending SE 2012 MFI AB 2011 NBFI SK 2012 NADSME 1993 UK 2010 Prince's Scottish Youth and Business Trust 1989 Government Agency NGO or Foundation Social Inclusion Lending Micro-business and Agroproducers in both urban and rural areas Those involved in production, services and agriculture activities Young people from years old and start-up microbusinesses Urban and rural micro entrepreneurs Small and microentrepreneurs & individuals Migrants and women entrepreneurs Urban focus on micro and small companies; loans to Agricultural Producers; Consumer Loans to individuals Various Individual Loans & Business Loans Various Individual Loans & Business Loans Various Individual Loans & Business Loans Various Individual Consumer & Business Loans Business Loans Microenterprise lending Small and micro-enterprises Business Loans Social Inclusion Lending Young people from years old Business Loans, Grant for startup Business 28

41 MS Year of Beneficiary UK 2011 UK 2011 Beneficiary Manchester Credit Union Business Finance Solutions Year of Est. UK 2012 WCVA 2006 Institution Type 1991 Credit Union Business Model Client Groups Products Social Inclusion Lending 2002 CDFI Microenterprise lending NGO or Foundation Excluded Individuals (poor and extreme poor) Existing and start-up microbusinesses Individual Consumer Loans Larger Loans Business Development Services Business Loans Microenterprise lending Third Sector Organisations Business Loans Sources: Institutional Assessment s/ Rating Reports made available by select beneficiaries; beneficiary websites; online searches; beneficiary survey 29

42 Are these changing over time? The JASMINE beneficiary profile has evolved overtime. The following patterns can be observed: Greater institutional diversity more recent years have seen the participation of different types of institutions, including banks (as can be expected given the broadening of JASMINE eligibility criteria and the Facility gaining more visibility); Focus on smaller microcredit lenders the average size of participating institutions (as measured by the number of microcredit borrowers) has decreased over time. In 2010, the average number of microcredit borrowers per beneficiary was 1,088, in 2011 it was 512 and in 2012, it was 771. These averages should however, be treated with caution as they are based on partial data availability. Greater involvement of less specialised institutions recent years have seen the participation of a wider range of institution types such as banks and Government agencies in JASMINE, reflecting the broadening of the beneficiary eligibility criteria. Greater geographical coverage JASMINE s country footprint has expanded over the years from 7 Member States in 2010 to 14 Member States in Do different beneficiaries opt for different programmes? By design, an institutional assessment or diagnostic is more suitable for young, emerging institutions, while the rating exercise is more appropriate for mature institutions. Between 2010 and 2012, circa 80 per cent of the beneficiaries opted for an institutional assessment (39 out of 48). Out of these, 3 beneficiaries received both an institutional assessment as well as a rating evaluation. Overall, 12 beneficiaries opted for a rating exercise (Table 3.2). Almost all beneficiaries who opted for a rating exercise are based in Eastern Europe (primarily Romania and to a lesser extent, Bulgaria) which has a relatively more mature microcredit sector as compared to Western Europe. Table 3.2 JASMINE Beneficiaries participating in a Rating Exercise MS MFI Year of Ben. Rating Agency Rating or Assessment BE 1. Crédal 2011 Planet Rating Rating BG 2. Nachala 2010, 2011 MicroFinanza, Planet Rating BG 3. Mikrofond 2010, 2011 MicroFinanza, Planet Rating Assessment, Rating Assessment, Rating BG 4. SIS Credit 2012 Planet Rating Rating MT 5. Bank of Valetta 2012 Planet Rating Rating RO 6. FAER* 2010, 2012 MicroFinanza Rating RO 7. LAM 2010, 2012 MicroFinanza Rating, Assessment RO 8. Opportunity 2010 MicroFinanza Rating Microfinance Romania RO 9. Express Finance 2010 MicroFinanza Rating RO 10. Patria Credit 2011 Planet Rating Rating RO 11. ROMCOM 2011 MicroFinanza Rating RO 12. RoCredit 2012 Planet Rating Rating *received 2 rating evaluations 30

43 The following generalisations can be drawn as regards the characteristics of beneficiaries opting for the different products: Table 3.3 Characteristics of Beneficiaries opting for the Different Products Characteristic Institutional Assessments Rating Exercise Geography Maturity Mainly chosen by microcredit providers from Western Europe Mainly chosen by young, emerging institutions Average beneficiary age = 9 years although it varies from <1 to 21 years Mainly chosen by microcredit providers from Romania Mainly chosen by mature, established institutions Average beneficiary age = 16 years although it varies from 6 to 38 years Average size (no. of borrowers) Smaller (770) Larger (1,046) Motivation To access funding To identify weaknesses and to improve systems, procedures etc Are potential beneficiaries being missed? To check if potential beneficiaries are being missed, the evaluation examined: The geographical spread of the beneficiaries - to look for gaps in country coverage; Their intuitional characteristics - to check if any particular types of institutions were being missed. Geographical coverage of JASMINE Overall, 48 microcredit providers have received JASMINE technical assistance during the period 2010 to This represents approximately 15 per cent of the known pool of microcredit providers in the EU (not taking into account credit unions and commercial banks) 42. Almost half of JASMINE beneficiaries are concentrated in three countries: Romania, Germany and Bulgaria. Looking at Table 2.5 (presented earlier in section 2.5), one can say, that microcredit providers from certain countries are under-represented, Spain and Italy being the most notable examples. Countries where there was no take-up of JASMINE are generally those lacking a microcredit sector see Table 3.4. Table 3.4 Microcredit Market in Countries with no take-up of JASMINE Country No. of known MFIs* No. of JASMINE Beneficiaries Czech Republic Denmark Non-existence of microcredit providers Non-existence of microcredit providers Estonia 1 Limited market size; one known provider Ireland 1 Greece 1 One known specialist microcredit provider who is also a Progress Microfinance beneficiary. Ireland has credit unions which provide microcredit but are not included One identified microcredit provider (a cooperative bank) who is also a Progress Microfinance beneficiary 42 EMN estimates that there are between 500 and 700 organisations providing microcredit in Europe (including non-eu countries). The latest EMN survey identifies 376 microcredit providers in Europe (excluding commercial banks and credit unions), of which 332 are located in EU countries. The actual number of microcredit providers in the EU is likely to be in the order of 400 to

44 Country No. of known MFIs* No. of JASMINE Beneficiaries Cyprus 1 As above Lithuania 3 Luxembourg 1 Austria 1 Limited number of specialist microcredit providers, although there are credit unions "Coup de pouce" (part of FUSE) 43, provide loans up to (prêt sur l'honneur). Fondation des Universitaires en Sciences Economiques (FUSE ) aims to use professional/academic economists for public good. Their activities are organising conferences, seminars and promoting entrepreneurial spirit. Lack of specialist microcredit providers. Microcredit programmes run by some Government agencies. Portugal 2 Microcredit is granted by commercial banks Slovenia 3 Limited number of microcredit providers Finland 1 Organizations that offer microloans are cooperative banks, savings funds and, one of the most important, the development bank Finnvera *as per EMN survey (not including credit unions and commercial banks) Coverage by type of institution As regards institutional forms, the eligibility criterion of JASMINE is quite broad and inclusive. It has evolved over time to include different types of microcredit providers as well as those at different stages of development: 2010 call: the initial intention was to restrict JASMINE to non-bank microcredit providers and to focus on small/ pure microcredit providers, based locally and with strong local roots; 2011 Call: a shift towards more mature microcredit providers (at least 2 years old, and with 300+ clients); 2012 Call: JASMINE was opened up to greenfield organisations, smaller organisations (<150 clients) and also banks for the first time. As shown in Table 3.1, JASMINE beneficiaries represent a variety of institution types. Overall, the evaluation has not found any evidence of potential beneficiaries being missed; although JASMINE could be more proactively promoted particularly to non-emn members and efforts could be made to reach out to the less visible microcredit providers operating at a local scale Was the selection process of the beneficiaries clear for the candidates? Was the selection process of the beneficiaries well organised? Beneficiary selection is based on pre-defined eligibility and award criteria which are set out in the calls for expression of interest. The EIF follows a two-stage selection process: Basic eligibility check of applications: this is largely an administrative check to ensure that the requisite information has been provided and in the correct format. Two staff from the EIF conduct eligibility checks. According to the EIF, roughly 10 to 20 per cent of the applicants fail this step

45 Evaluation of applications by a panel: in line with EIF procedures, all applicants are assessed by a panel composed of at least three individuals, from at least two different internal teams. The panelists score each application against a set of award criteria (as set out in the calls for expressions of interest), and then meet as a panel to debate and generate a final score. There is a threshold score that all applicants must meet, in order to qualify for JASMINE. A fixed number of successful applicants are selected on the merit of their final score. All applicants are informed of their selection (or rejection) within three months of submission of their application. The feedback provided by beneficiaries on the selection process is broadly positive (Table 3.5). A handful of beneficiaries thought otherwise, but did not elaborate the reasons for their response. Although one respondent suggested that the timetable for the application and selection process could be made clearer in the call documents and reminders could be sent to target beneficiaries as the deadline approaches. Feedback on the selection process was also collected from a limited number of rejected applicants. Those interviewed, found that the eligibility criteria and timetable were clearly specified in the call documentation. However, most rejected applicants stated that the selection process lacked transparency. Communication between the EIF and the rejected applicant was flagged as a problem, with the outcome stated in a rejection letter which did not provide substantial feedback. Table 3.5 Beneficiary Feedback on the Selection Process Strongly Agree/ Agree Neither Agree nor Disagree Strongly Disagree/ Disagree The Technical Assistance available through JASMINE was clearly explained The list of documents to be submitted along with the Expression of Interest were clearly specified in the Call Documents The eligibility criteria for participation were clear and unambiguous The eligibility criteria for selection of beneficiaries for technical assistance is fair 80% 13% 7% 100% 0% 0% 77% 10% 13% 74% 20% 7% Award criteria were clear and unambiguous 70% 23% 6% The award criteria is fair 67% 30% 3% The application process is not cumbersome 77% 17% 7% The timetable for the selection process was acceptable 84% 7% 10% The EIF s response times for enquiries were timely and appropriate 94% 3% 3% The selection process was transparent 63% 27% 10% The selection process was fair 67% 33% 0% Source: Online survey of JASMINE beneficiaries conducted by ICF GHK. N=48; n=30 33

46 3.1.3 Was there enough publicity on the Calls for Expression of Interest launched? The EIF uses European and national microcredit networks as gateways for publicising the calls for expression of interest. Links to the calls are also placed on the EMN and MFC websites, along with the websites of the national networks, such as the Community Development Finance Association (CDFA) in the UK 44. These publicity measures appear to have worked well over the period covered by this evaluation, as evident by the growing interest in JASMINE (Table 3.6) and positive beneficiary feedback. Table 3.6 Number of JASMINE Applications Received and Selected, No. of applications received No. of applications selected % success rate 67% 50% 69% 68% Source: EIF According to 60 per cent of the respondents to the online survey of JASMINE beneficiaries and the two non-beneficiaries interviewed in the context of this evaluation, the calls for expression of interest were well publicised (Figure 3.1). A couple of respondents however, expressed the view that the calls could be more widely advertised using tailored communication channels to reach out to new microcredit providers (who might not be members of any networks). The EMN was the most cited channel of communication regarding calls for expression of interest (27 per cent of respondents to the online survey of beneficiaries reporting hearing of JASMINE via EMN). Other microcredit providers were the source of information for 20 per cent. A further 18 per cent had heard of JASMINE from the EIF. Other sources of information cited by respondents included the MFC (15 per cent), press release (three per cent), notifications (three per cent), via a national network (three per cent), through the local authority (three per cent), via a broad internet search (three per cent) and via DG REGIO (three per cent). Rejected applicants who were interviewed in the context of this evaluation, also listed the same channels as sources of information for JASMINE calls. Figure 3.1 Percentage of Respondents Agreeing or Disagreeing with the following Statement: The Calls for Expressions of Interest were well publicised Source: Online survey of JASMINE beneficiaries conducted by ICF GHK. N=48; n=30 44 These dissemination channels are however, not available in certain countries. Countries like Greece, Czech Republic etc. do not have networks of microcredit providers. 34

47 The two Rating Agencies however, expressed diverging views on this issue. To quote one Rating Agency: the EIF has done a good job of reaching out to known and visible microcredit providers. It can be hard to identify microcredit providers in Europe. Microcredit providers have struggled to emerge due to small scale. Many microcredit providers are setup with first funding from the public sector and then disappear after the first funding is used up as they have problems developing a sustainable business mode. In the view of the other Rating Agency however, the EIF could have been more proactive in reaching out to the less visible providers by using market intelligence Why do the beneficiaries opt for an assessment or rating? This issue was explored in detail with the 22 beneficiaries selected for interviews. They were asked how they had chosen between an institutional assessment and a rating report, and if they had selected the former, whether they were now interested in a rating report. Most of the interviewees believed that a rating report was not suitable for their organisation, viewing it as an exercise that was appropriate for larger, well-established microcredit providers seeking finance from commercial investors. Since a wish to learn and improve, was the primary motive for participating in JASMINE for many of the interviewees, an institutional assessment was seen as the more useful form of assistance. One beneficiary regarded the rating report as an exercise that was best suited to organisations that aspired to be banks, and organisations that wished to secure finance from international investors. It may also be the case that there is a lack of understanding within some areas of the microcredit sector as to the difference between an institutional assessment and a rating exercise. In some interviews, interviewees used the terms interchangeably, whilst one interviewee repeatedly indicated that they had received a rating report when in fact records stated that they had received an institutional assessment. One beneficiary noted that it applied for an assessment exercise after being advised to do so by the rating agency, though it stated that from the outset it did not understand the difference between the assessment and rating exercises. Of the beneficiaries that opted for an institutional assessment, most did not wish to have a rating report in the near future, because they believed that they were still not at a stage where they saw a rating report as a useful exercise. One organisation indicated that they had been warned by the rating agency that carried out their institutional assessment that their legal structure would contribute negatively to their rating, and concluded that no rating at all was better than a poor rating. Some organisations however, did express their intention to have a rating exercise in the near future, noting that they saw this as the next step having had an institutional assessment (and a way of tracking progress) Was the planning and intervention of the rating agencies and coordination with the selected beneficiaries well organised? Successful applicants are assigned to one of the two Rating Agencies. The allocation of the beneficiaries amongst the two Rating Agencies is a negotiated process, based on a set of ground rules agreed at the start of the programme. These are as follows: 1. If the beneficiary is an existing client of a particular agency, then that beneficiary is assigned to the Agency concerned. 2. Repeat beneficiaries are assigned to the same agency for efficiency reasons. 3. If an agency had been operating in a particular country for one year prior to getting involved in JASMINE, then that country is treated as their market. 4. Big countries are divided between the two agencies. The EIF proposes an initial allocation of selected applicants to the two agencies for review and comment. The agencies have the option to suggest changes and propose a new distribution before approval. The allocation of beneficiaries to Rating Agencies is typically finalised through a couple of half hour meetings. Both Rating Agencies expressed their satisfaction with this crude, but pragmatic approach. 35

48 Once the allocation of selected applicants to each Rating Agency is finalised, the agencies liaise directly with the beneficiaries. The overall assessment/rating process lasts approximately three months and comprises the following steps. 1. Desk review: beneficiaries are contacted by the Rating Agency and asked to submit background documents and data, including for instance evidence of their policies and procedures; 2. On-site mission: about a month later, analysts from the Rating Agency carry out an on-site mission to interview the relevant staff and key managers, also possibly visit clients of the JASMINE beneficiary to collect further evidence; 3. Report preparation and finalisation: based on the evidence collected, the Rating Agencies prepare a report of their findings. Feedback on the above process was collected from beneficiaries via an online survey and through interviews. The majority of the beneficiaries who responded to the online survey (66.2 per cent) agreed or strongly agreed with the statement that the assessment / rating exercise was well organised. The remaining 23 per cent neither agreed nor disagreed. More detailed feedback on each of the steps of the assessment/rating process (collected via semi-structured interviews organised with 24 beneficiaries) is summarised below. Step 1: Desk review Most interviewees were satisfied with the process through which the Rating Agencies collected background material. Interviewees noted how well prepared the agencies were, and how they had a clear list of the documents and data that they required. According to one interviewee, the process seemed very professional. There was no notable difference in opinion between beneficiaries that were allocated to Planet Rating, and beneficiaries that were allocated to MicroFinanza Rating. Some smaller beneficiaries, particularly those that were relatively new, reported that they had problems meeting all of the requests for material. One interviewee noted that they were able to meet about 80 per cent of the requests, since they had been operating for less than two years at the point at which they participated in JASMINE, and did not have a sufficiently long track record of lending. Step 2: On-site mission Field visits typically involved representatives from the Rating Agencies visiting the premises of the beneficiaries (always the headquarters, but sometimes also visits to one or more other branches of the beneficiary). Visits usually lasted for around one week, during which time the Rating Agencies would meet with senior staff, loan officers, and other key personnel (e.g. HR and IT staff). Depending on the governance structure of the beneficiary, meetings were also sometimes held with members of the Board of the organisation. In some cases meetings were also held with customers of the beneficiary. Again, interviewees were typically very satisfied with this stage of the process. One interviewee described it as very thorough and professional and suggested that as a rating exercise it was more in-depth than that carried out by Fitch Ratings. Step 3: Report preparation and finalisation Rating Agencies synthesised the results of the desk review and field reports in order to prepare a draft report. Typically, this draft report was sent to the beneficiary for comment, after which the rating agency would prepare a final version. Some beneficiaries noted that they had requested that some changes be made to the draft report. These typically consisted of factual inaccuracies. One beneficiary noted that they had identified two errors and requested that they be corrected, but that the Rating Agency s need to meet a deadline had meant that the corrections were not made. Generally, however, interviewees felt that they were provided with sufficient opportunity to comment on the draft report, and that draft reports were amended in line with their requests. 36

49 As regards the quality of the institutional assessment reports, almost all interviewees were satisfied with what they had received. Reports were variously described as very clear, and having a high level of detail. One interviewee from a relatively new microcredit provider commented on how practical the report was, since it set out very specific recommendations for improvements to their operational model that could be implemented relatively simply. As regards the quality of the rating process and reports, one microcredit provider reported substantive concerns with their experience. They claimed that the draft final report that they received contained many incorrect statements (this beneficiary reported that they had 83 comments on the report), information that had been copied from a previous report that they had received, a lack of understanding of the local context, a lack of professionalism (stating the example of copy-pasting the wrong organisation s name into an official document), misunderstandings, and a rushed assessment (scheduled meetings were allegedly not held). They also noted that the suggestions and clarifications that they had provided during the discussions on the draft final report were not taken into account. The beneficiary claimed that its reputation was damaged as a result of the report and its rating. However, it must be emphasised that this was an isolated case. Four other beneficiaries (of rating exercise) were also interviewed and in their opinion, the rating process as thorough, rigorous and very professional and according to them, the rating reports were very clear and fair Were the rating agencies well-coordinated? Currently, operational coordination between the two Rating Agencies is limited to reaching an agreement on beneficiary allocation. There is scope for improving communication and coordination between the two agencies as the evaluation found some evidence of lack of consistency of approach. The two Rating Agencies differ in their approaches to conducting assessments/ ratings and reporting to the EIF. Both agencies have adapted their standard institutional assessments to incorporate a social dimension in recognition of the strong focus of microcredit in Europe towards social and financial inclusion. While Planet Rating s assessment covers eight broad areas, MicroFinanza Rating s methodology comprises ten areas of analysis for an institutional assessment and seven areas of analysis for a rating. It must also be noted that some of MicroFinanza Rating s assessment criteria varies across beneficiaries. In terms of detail, both Rating Agencies cover all key issues within these broad categories (Table 3.7). However, the results are not directly comparable due to differences in the number and coverage of areas of analysis. Moreover, Planet Rating uses a rating scale (0 to 5), whereas MicroFinanza Rating ranks the relevance of a particular issue (low, medium-low, mediumhigh and high). Similarly, the annual reports submitted by the two Agencies to the EIF differ in terms of their structure, format and level of detail. This makes it hard to compare and synthesise information from the two different sources. 37

50 Table 3.7 Comparison of Institutional Assessment Process: Planet Rating and MicroFinanza Rating Planet Rating (GIRAFFE-S methodology) MicroFinanza Rating Areas of analysis Assessment criteria Areas of analysis Assessment criteria 1. Governance (20%) Definition of social mission Decision making Planning Management team Human Resource management 2. Efficiency and profitability (15%) 3. Financial inclusion and client protection (14%) 4. Information management (10%) ROA (with donations) Revenue quality Operating efficiency Operating self-sufficiency of business development services Outreach to the underserved Adaptation of services Cost of services Client protection and ethical finance Portfolio and financial information management Social performance monitoring 1. Ownership, Governance and Upper Management 2. Strategic and Operational Planning 3. Organization Structure and Human Resources (HR) 4. Management Information System (MIS) and Information Technology (IT) Ownership structure and shareholders Professional background of Board members Degree of formalisation of the functioning of governance bodies Separation between BoD and management Economic sustainability Business planning Staff competency and commitment HR systems for performance management, training and development Organisation structure MIS policies and procedures Quality and reliability of systems 5. Activities (16%) Financial services management (credit, deposit taking, money transfer, insurance) Credit risk Risk coverage 6. Funding and liquidity (15%) Capital adequacy and funding strategy Liquidity risk Market risk 5. Market and Products Variety of products offered Markets served Use of market intelligence 6. Credit Process and Credit Risk Management Credit scoring models 7. Risk management (10%) Procedures and internal controls Internal audit 7. Accounting and Administrative Management Compliance with legislation Auditing 38

51 8. Social change (notch up potential to notch-up the overall grade) Planet Rating (GIRAFFE-S methodology) Provision of non-financial services Social effectiveness and impact on clients Long term survival rates of borrowers (businesses) 8. Financial Management and structure 9. Risk Management, Internal Control and Internal Audit 10. Social performance management and social responsibility MicroFinanza Rating Shareholding Access to funding Portfolio quality Sustainability Profitability Procedures and internal controls Risk management framework Level of outreach Client protection 39

52 3.1.7 Were the assessment and/or rating reports useful for the selected beneficiaries? Were the assessment and/or rating reports provided by the two rating agencies to the selected beneficiaries clear, complete and practical to use? Most beneficiaries who responded to the online survey provided positive feedback on the quality of the Assessment/ Rating reports (Figure 3.2 and Table 3.8). Figure 3.2 Percentage of Respondents Agreeing/ Strongly Agreeing with the Following Statements Source: Online survey of JASMINE beneficiaries conducted by ICF GHK. N=48; n=30 Table 3.8 Beneficiary Feedback on the Quality of the Assessment/ Rating Reports Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree The assessment / rating report was comprehensive The assessment / rating report was fair The assessment / rating report contained practical recommendations As a result of the assessment / rating report, we have improved our governance procedures As a result of the assessment / rating report, we have improved our operational procedures As a result of the assessment / rating 30% 63% 7% 0% 0% 27% 47% 20% 7% 0% 13% 47% 30% 7% 3% 17% 60% 20% 3% 0% 30% 53% 10% 7% 0% 17% 50% 27% 7% 0% 40

53 Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree report, we have improved our risk management procedures The assessment / rating report has increased the visibility of our organisation amongst funders As a result of the assessment / rating report, my organisation has improved investor relations As a result of the assessment / rating report, my organisation has accessed new sources of funds 10% 40% 43% 3% 3% 7% 27% 50% 17% 0% 10% 27% 40% 20% 3% Source: Online survey of JASMINE beneficiaries conducted by ICF GHK. N=48; n=30 Generally speaking, beneficiaries have found these reports to be useful in improving the following aspects of their organisation: Operational procedures (83 per cent); Governance procedures (77 per cent); Risk management procedures (67 per cent). To a lesser extent, the reports have also been useful in improving visibility, investor relations or accessing new sources of funding. According to the wider stakeholder groups (e.g. EIF, Rating Agencies) the reports also contribute to improving the transparency of the microcredit sector in Europe. However, as a number of beneficiaries are not willing to share their assessment/ rating reports, in practice this aspect of JASMINE is hugely under-exploited. JASMINE can make a significant contribution to enhancing the transparency of the sector by compiling the results of the assessments/ ratings in a database. The data compiled through the assessment/ rating exercises would be a rich source of evidence for benchmarking and for tracing the evolution of the European microcredit sector over time. It is understood that JASMINE OnLine seeks to address this issue by encouraging microcredit providers to voluntarily share financial, operational, and social performance data What topics were addressed by the rating agencies, which ones are the most frequent ones? In terms of approach, the topics addressed by the Rating Agencies are broadly similar as previously outlined in Table 3.7. Both, institutional assessments and rating exercises go through the same areas of analysis, but with different approaches: An institutional assessment highlights key areas of strengths and weaknesses offering specific guidelines for improvement and comparing the institution s procedures with industry best practices. It is directed toward internal management teams. A rating exercise on the other hand, focuses on highlighting areas of risk. Rating reports are written primarily for external audiences, including investors. 41

54 The main weaknesses, among those assessed by Planet Rating, related to: Risk management Lack of an internal audit department. Weak internal audit processes and procedures. Inadequate control mechanisms(e.g. segregation of tasks, formalised controls, limitations of power). Social impact Social impact is not articulated, measured or monitored. Business development services not being offered by beneficiary institution. Information systems Loan tracking system uses multiple platforms and data input is inefficient and not user friendly. Lack of adequate performance indicators. While the first comes as no surprise, it is indeed surprising to note that 16 out of 21 beneficiaries have rated poorly on social impact, given the focus of microcredit providers in the EU. A review of available beneficiary reports however, suggests that the low rating is due the fact that most beneficiaries do not track the social impact of their lending. The key weaknesses and issues identified by MicroFinanza Rating were as follows: Corporate Governance Separation of functions and responsibilities between the governance level (BoD) and the management team (CEO). Management accountability and authority in terms of loan approval. Strategic planning and operations Formalizing and regularly updating the business plan. Fragmented reporting capacity of the MIS; data reliability and consistency. Credit and operational risk management policies and tools. Accounting policies. Internal control and risk management systems. Credit policies and procedures Clients repayment capacity assessment techniques. Diversification of products as well as the market targets. Market positioning of the institution. Client monitoring. Internal limits and targets for loans distribution to a variety of economic sectors aiming at mitigating the concentration of portfolio. Write-off, loan loss provisioning policies and write-off recovery management procedures. Financial Management and Performance Liquidity analysis. Targets on financial and operational performance ratios and monthly monitor developments on specific ratio. Social performance and social responsibility Definition of social mission and vision, disseminating them at the staff, management and BoD levels. DMI conducted a review of the institutional assessment reports of the 19 German beneficiaries and found the following common areas of weaknesses: Strong dependence on public funds. Few organisations have a Supervisory Board. 42

55 Sub-optimal strategic planning. Absence of up-to-date 3-5 year business plans. Lack of full use of marketing strategies, MFI advised to build up reserves. The need for more elaborate internal controls and written guidelines on risk management. Lack of regular portfolio analysis, diversify funding sources. Weak measurement of the organization s key data (efficiency, impact, effectiveness). Lack of systematic data collection on customer satisfaction and the social background of the borrower / internal (e.g., immigrant, welfare benefit receipt) and the social impact of microcredit (e.g., success rate, job creation). The need for a stronger incentive system for staff for training and career opportunities as well as bonuses What recommendations were made by the rating agencies as regards the evolution of JASMINE? The two Rating Agencies have made the following recommendations for the next phase of JASMINE: A more flexible timeline: for example, o o A three month window for conducting assessment/ rating exercises to facilitate capacity planning. Flexibility outside the 12 month window for delivery of JASMINE technical assistance. However, one Rating Agency suggested that time limits (e.g. three months) could be introduced to ensure that beneficiaries complete the assessment/ rating exercise within a reasonable time frame. Improving the link between assessment and training: it was suggested that the training could be delivered in two stages: o o The first part of the training could take place before the assessment/ rating exercise and could focus on known areas of weaknesses. The second part could follow-up on the issues identified in the rating/ assessment exercise. This recommendation has cost implications for the Commission. Moreover, training and assessment/ rating exercise are not necessarily inter-dependent and linked. The former aims to enhance workforce skills and competencies while the latter seeks to strengthen organisational systems and processes. Development of a knowledge sharing platform similar to MIX market 45. MIX market provides MFIs with a platform to self-report financial and portfolio data. MFIs are awarded diamonds of transparency according to the amount of information posted. Given the lack of data about the microcredit providers in Europe, it was suggested that a similar tool tailored to the EU context could be developed within the framework of JASMINE. It should be noted that JASMINE OnLine which is currently under development will provide such a tool. Market studies such as compilation of statistics on interest rates, survey of funding needs, survey of investors, demographics etc

56 Market information about best practice and benchmarking. Broadening of JASMINE product range to include Social Ratings, Micro Finance Institutional Rating as additional options for beneficiaries to choose from. Providing targeted and potentially more intensive support to microcredit providers to help them implement and embed the European Code of Good Conduct. Coaching/ consultancy to facilitate and support the implementation of recommendations contained in the assessment/ rating reports. Tracking of beneficiaries post-rating or post-institutional diagnostic to see how they are progressing. Clarify positioning of JASMINE. Making JASMINE more selective and needs based. Formalising the results of the assessments/ ratings by compiling a database. Facilitating direct exchanges between beneficiaries of Eastern and Western European countries. Summarising the lessons learned since More systematic exchange of information between the Rating Agencies and the training provider(s). Support for translation costs of assessment/ rating reports Were the rating agencies well-coordinated with the training providers? JASMINE technical assistance was conceived of as a sequential process: with the assessment/ rating exercise taking place first in order to flag areas of weaknesses and to then serve as inputs for the needs analysis and design of training. In practice, it has not been feasible to schedule the assessment/ rating and training in a sequential manner, due to the tight timetable for delivery of assistance (effectively an eight month window for delivery of assistance to all selected beneficiaries). In case of all 22 beneficiaries interviewed, training programmes were designed even before a draft of the institutional assessment/ rating exercise report was available from the Rating Agencies. From the beneficiary perspective, this has not been an issue for two reasons: The assessment/ rating exercise looks at systems, processes and procedures, whereas training is designed to enhance the skills and competencies of people. The two elements are viewed as complementary, but not necessarily inter-dependent/ linked. Senior management at the beneficiary organisation generally have a good understanding of the training needs of their staff and do not require external assistance to identify these. MFC also does not consider this to be an issue since training needs are typically identified through discussions with the management and staff of beneficiary institutions rather than the Rating Agencies. Nonetheless, as a practical solution to the tight timetable, since 2012, MFC has started liaising with the Rating Agencies to discuss the training needs of the beneficiaries. The Rating Agencies now receive draft training proposals from MFC for validation and sign-off. There is no evidence to suggest that as a result of this change, the training delivered in 2012 was more tailored and effective than in previous years. If anything, this new process creates unnecessary extra work for both the training provider and the Rating Agencies. The Rating Agencies are not particularly well placed to identify training needs given the focus of the assessments / rating exercises and it is not necessary for them to be involved in the design of the training package. 44

57 Are the trainers considered competent and motivated? Almost all respondents provided positive feedback on the competence of the trainers, except for one German beneficiary (Figure 3.3 and Table 3.9). For the most part, beneficiaries indicated that they were very satisfied with the training that they had received. Trainers were mostly considered to be professional, competent and engaging. Interviewees particularly those form start-up organisations with little experience of microlending noted that they appreciated the opportunity to learn from experts with several years of lending experience. Figure 3.3 Percentage of Respondents Agreeing/ Strongly Agreeing with the Following Statements The training was tailored to the needs identified in our organisation s rating / assessment report The trainers understood the needs of my organisation 74% 80% The trainers were competent 90% The training was well organised 89% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Online survey of JASMINE beneficiaries conducted by ICF GHK. N=48; n=30 Table 3.9 Beneficiary Feedback on Training Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree The training was well organised 25% 64% 4% 7% 0% The trainers were competent 43% 47% 7% 0% 3% The trainers understood the needs of my organisation The training was tailored to the needs identified in our organisation s rating / assessment report 37% 43% 17% 0% 3% 27% 47% 20% 3% 3% Source: Online survey of JASMINE beneficiaries conducted by ICF GHK. N=48; n=30 In some cases, however, interviewees expressed dissatisfaction with some or all of the training that they had received. On occasions there were practical problems: some beneficiaries highlighted linguistic difficulties which limited interaction and knowledge exchange (despite the availability of translators). Other issues raised by interviewees included: One large lender reported that they had received training in loan appraisal and monitoring, but that the individuals receiving the training were loan officers with several years of experience. It was acknowledged that this was more of a problem with the design of the training programme than the specific trainer. A representative from one beneficiary complained of a trainer who was poorly motivated and lacked enthusiasm for the training that they were providing. The training session was ended early by the beneficiary. More broadly, some interviewees noted that training was too generic and insufficiently tailored to the national contexts within which they operated, or the business models of 45

58 their organisations. Interviewees in these cases often complained of a lack of flexibility amongst some trainers, such that they would not alter the content of their courses even though it became apparent that their training material was not entirely relevant. It should however, be noted that to some extent, the success of training also depends on the beneficiaries being able to clearly articulate their training needs and effectively communicate these to the training provider. The interview with the MFC suggests that sometimes there was a lack of communication/ understanding between the beneficiaries and MFC, leading to a mismatch between expectations and delivery. The MFC however, tries to minimise such risks by providing detailed information to the beneficiary as regards the agenda, expected outcomes etc. In Germany a different model was employed in order to deliver the training element of JASMINE. Given the similarities between microcredit providers in Germany (many of which started around the same time), and regulatory restrictions on their operational models (interest rates are fixed, for instance), the MFC subcontracted the delivery of training to the DMI (an association for microcredit providers in Germany). The DMI designed a standard 12-day training programme. The MFC provided recommendations for the design of the training, and approved the final program. The training was then delivered to the German beneficiaries through a series of regional workshops. Content-wise the training was similar to that delivered by the MFC, except that it was tailored to the German context. Interviewees from Germany were generally very satisfied with the quality of the training that they had received. Some however, noted that a few of the training modules had been too basic for their level of experience, but for the most part interviewees believed that training had broadly been suitable given their limited experience of microlending. It was noted by all interviewees that the content of the training was tailored to their national operating context. Interviewees contrasted this to elements of the institutional assessment, which they saw as insufficiently tailored to the German context, such that they were unable to implement some of the recommendations from the rating agencies Are the subjects of the tailor-made trainings at the attention of the beneficiaries focusing on the needs suggested by the rating / assessment reports? This question has already been addressed. See section Were the recommendations of the rating agencies followed for the trainings? If not, why? This question has already been addressed. See section What topics were addressed by the training providers, which ones are the most frequent ones? The two most common areas where training is focussed were: risk management (representing 51 per cent of the total training days) and strategic planning (representing 33 per cent of the total training days) Figure

59 Figure 3.4 Distribution of Training Days across Beneficiaries and Themes Source: MFC Within these broad thematic areas, the most frequently addressed topics were as follows: Table 3.10 JASMINE Training: most frequently addressed topics (based on an analysis of the number of training days) Training Theme Risk Management Strategic Planning Eastern European Beneficiaries Credit officer training: credit methodology and delinquency management Strategic marketing Training for loan officers - sales and analysis techniques Financial Analysis Risk management, best practice and application appraisal techniques. Over indebtedness and collection technique Mobile banking Social Performance Management Marketing management and strategic positioning Marketing Strategies for Microfinance Tools Main Topics Western European Beneficiaries Credit officer training: credit methodology and delinquency management Legal question in microfinance Risk management Telephone communication with clients Scorecard methodology and policies and procedures Monitoring and crises intervention Annual business planning for MFI Introductory training in microfinance Business plan review and action planning workshop Marketing Strategies for Microfinance Tools Social Performance management 47

60 Training Theme Good Governance Eastern European Beneficiaries Procedural and functional modes, standard requirements of EU CoGC, drafting supplemental organisational solutions, preparing action pan on implementation solutions Main Topics Western European Beneficiaries Product development and cooperation Quality control and structures of MFIs Client servicing/ quality management Management Information Systems MIS development Training in emerge application Software for MFI (MIS, CRS, ERP) Creation of a statistical platform IT Audit Table 3.11 provides a detailed breakdown of the number of training days by topic area. 48

61 Table 3.11 Details of Training days by Topic Area Theme Topic Area Training Days Client servicing/quality management 8 Integrated communication: using web and traditional communication utilities in an integrated way 0.5 Governance Quality control and structures of MFIs 11 Training for board members in best practices in microfinance 1 Procedural and functional modes, standard requirements of EU COGC, drafting supplemental organisational solutions, prepare action plan on implementation solutions Sub-total Advisory in selection of new MIS software platforms (needs vs functionality) 2 Creation of a statistical platform 8 IT Audit 7 IT system: review of customer interface 3 Management information Systems Management Information Systems 3 MIS development 8 Revision of MIS reporting - TA with re-programming of MIS system 3 Software for MFI (MIS, CRS, ERP) 11 Structuring MIS system for leasing 3 Training in emerge application 5 Review of IT needs and potential application for MFI 5 Sub-total 58 Adjusting existing policies and procedures to balance micro-client needs and the credit risk 8 Risk Management Collection techniques 2 Communication 3 Consumer loan 3 49

62 Theme Topic Area Training Days Credit methodology and delinquency management 4.5 Credit officer training 2 Credit officer training: credit methodology and delinquency management 33 Credit officer training: credit methodology and risk management 8 Credit policies and procedures 13.5 Credit process and methodology - follow up consulting 3 Credit Risk Management 6 Credit selling and communication skills 2 Delinquency management 2 Delinquency management and loan collection techniques 2 Developing risk management function - consulting services 2 Risk Management Development of loan officer selling skills 3 Financial Analysis 8 Internal audit procedures development 2 Internal Control 2 Introduction to financial ratios, financial sustainability and delinquency management 1 Job safety 0.5 Legal question in microfinance 22 Loan analysis and decision 9 Loan collection techniques 4 Loan officer training 8 Loan sale techniques 3 Loan techniques 2 Modern approach to microfinance and microcredit 4 50

63 Theme Topic Area Training Days Monitoring and crises intervention 10 Overview of existing risk management, drafting and amending procedural solutions, preparing action plan to implement 8 Policies and procedures 3 Portfolio management and delinquency management 5 Portfolio management and financial analysis 2 Privacy law 0.5 Recovery utilities: strategies, cultural approach 1 Requirements for microenterprise start up with focus on different economic sectors 1.5 Review of credit scoring methodology 2 Risk assessment and related reports: comparison with European best practices 1.5 Risk management 16 Risk Management Risk management - overview, for loan officers, credit risk management and developing risk management functions 3 Risk management for loan officers 4 Risk management in MFIs: overview of best practices 1 Risk management in microfinance 2 Risk management policies and procedures 6 Risk management reporting 2 Risk management, best practice and application appraisal techniques. Over indebtedness and collection techniques. 8 Sales and collection techniques 4 Scorecard methodology and policies and procedures 10 Strategic marketing 12 Telephone communication with clients 10 Training for loan officers - sales and analysis techniques 12 Training for loan officers and FM staff 3 51

64 Theme Topic Area Training Days Web marketing: search engine optimisation activities, content management, copywriting 1.5 Sub-total Annual business planning for MFI 20 Business and strategic planning 3 Business financial model review 6 Business model development 1 Business plan drafting: market analysis, competitor analysis, financial plan 1 Business plan review and action planning workshop 12 Business planning 4 Communication 1 Development of lending procedures 5 Strategic Planning Efficiency management in microfinance 2 Good governance and strategic planning 5 HR 1 Internal audit procedures development 2 Internal Control 3 Introductory training in microcredit for the partner bank 1 Introductory training in microfinance 12 Loan selling skills 3 Marketing 2 Marketing management and strategic positioning 8 Marketing selling techniques and communication 4 Marketing Strategies for Microfinance Tools 12 Mission understanding. Developing ways to best communicate goals and objectives deriving from the mission

65 Theme Topic Area Training Days Strategic Planning Mobile banking 12 New product development 2 new product development and implementation 2 Organisational development 2 Organisational growth 2 Product development and cooperation 10 Reading and understanding balance sheets, individual income tax return, pay sheets 1 Reflection on JASMINE assessment targeting on developing a MONEX handbook in frame of EU 2 Repositioning of microfinance products 4 Review the business model 3 Review the business model in view of market opportunities and challenges 2 Social Performance Management 11 Strategic marketing 5 Strategic marketing for microfinance institution 3 Strategic planning 6 Strategic planning and corporate governance 1 Strategic planning and market positioning 2 Sustainability/ process costing 8 Time management 2 Sub-total Grand Total Source: MFC 53

66 What recommendations were made by the training providers as regards the evolution of JASMINE? One of the training providers suggested delivery of group training to beneficiaries with similar training needs to facilitate cross-learning and cross-fertilisation of ideas. Such an approach would also generate some cost savings Do the beneficiaries find the global process useful? On balance, beneficiaries have found each of the components of JASMINE technical Assistance (assessments/ rating exercises and training) to be relevant and useful. There is evidence that some beneficiaries largely new organisations participated in JASMINE in order to receive the training, and were less interested in the institutional assessment/ rating exercise, which they did not see as relevant given their stage of development Do the beneficiaries find the assessment /rating useful? Overall, most of the responding beneficiaries were very positive about the assessment and financial rating exercise. 93 per cent of the respondents to the online survey agreed or strongly agreed with the following statement: Overall, the assessment / rating exercise was useful to my organisation. The remaining 7 per cent neither agreed nor disagreed. To ascertain the usefulness of assessment/ rating reports, semi-structured interviews with select beneficiaries further explored what they did with the recommendations contained in the assessment/ rating reports. Decisions as to whether to implement recommendations contained within institutional assessments varied; in small organisations the decision may have been made by a single individual (potentially the owner), whereas in larger organisations the process was more likely to have involved review by a Board. Interviews with microcredit providers identified numerous changes to operating models that were introduced as a result of the institutional assessments. Some microcredit providers (particularly new organisations) introduced multiple changes to their loan appraisal procedures, whilst other microcredit providers only made minor alterations to their existing systems. The codification of what was previously unwritten would appear to have been a common change introduced following the assessments. Most microcredit providers identified recommendations that they had been unable or unwilling to implement. A lack of resources prevented some microcredit providers from upgrading their MI or IT systems, for instance, whilst in other cases microcredit providers had postponed what they regarded as non-priority or medium-term proposals (e.g. enhanced social reporting). Overall, 90 per cent of JASMINE beneficiaries would recommend the assessment or financial rating exercise to other microcredit providers. For those that would not recommend the exercise, the reasons provided were predominately because of the lack of tailoring to smaller and new microcredit providers, and to the national context. A number of recommendations for the improvements of the assessment and financial rating exercise were suggested by beneficiaries. 1. A number of beneficiaries discussed the time frame for implementation. It was suggested that a time frame longer than 12 months would allow lessons learnt to be better fed into the capacity building exercise. 2. A deeper understanding of social impact to be considered as part of the exercise. 3. Better adaption to country contexts and the relative size and maturity of the microcredit provider. Some beneficiaries criticised the recommendations of the institutional assessments as being too formulaic and generic, and not suited to their particular national contexts and/or operating models. Some interviewees believed that the rating agencies have a standard operating model that they have not significantly adapted to the microcredit market in Western European, thus limiting its applicability. 54

67 Do the beneficiaries find the trainings useful? The results of the online survey show that a majority of the respondents (83 per cent) found the quality to be good and the training to be useful. However, two German organisations strongly disagreed with both statements. It should be noted that training in Germany is delivered by DMI. The feedback provided by one dissatisfied respondent is that they did not learn anything new. Beneficiary experiences and views were further explored via interviews. As regards training provided by individuals selected by the MFC, training was typically delivered through modules covering specific topics. For the most part this training was delivered in one single spell: for instance one MFI reported that they had received all 12 of their training days in an intense two-week long spell. The design of this training programme varied according to the needs of MFIs. One organisation received ten days on one topic and two on another. Another organisation received 6 out of 10 days of training on one topic, however in most cases at least a dozen topics were covered in the training. The topics covered were also variable, but centred around aspects of the operating models of MFIs. Training was delivered to whoever within the MFI required specific skills; typically this involved loan officers, back office staff, senior management etc. For the most part, the MFIs included in the qualitative interviews indicated that they were very satisfied with the training that they had received. Trainers were mostly considered to be professional, competent and engaging. Interviewees particularly those from start-up organisations with little experience of microlending noted that they appreciated the opportunity to learn from experts with several years of lending experience. One beneficiary had been trained by an academic who was an expert in the use of scorecards to aid loan appraisals. Training was usually delivered in an interactive and practical way, for instance involving role play and mock loan appraisals. One interviewee suggested that their training had been more like coaching, since their trainer had sat with their loan officers and demonstrated how to review a loan application and assess risk. In some cases, however, interviewees expressed dissatisfaction with some or all of the training that they had received. On occasions there were practical problems: some beneficiaries highlighted linguistic difficulties which limited interaction and knowledge exchange (despite the availability of translators). Other complaints raised by interviewees included: One large lender reported that they had received training in loan appraisal and monitoring, but that the individuals receiving the training were loan officers with several years of experience. It was acknowledged that this was more of a problem with the design of the training programme than the specific trainer. A representative from one microcredit provider complained of a trainer who was poorly motivated and lacked enthusiasm for the training that they were providing. The training session was ended early by this beneficiary organisation. One microcredit provider complained of poor communication during the process of training design. The resultant consultation to design the training caused delays and capacity constraints, with subsequent trouble arranging suitable external consultants. This resulted in a poorly designed training program that did not meet the microcredit providers expectations. More broadly, some interviewees noted that training was too generic and insufficiently tailored to the national contexts within which they operated, or the business models of their organisations. Interviewees in these cases often complained of a lack of flexibility amongst some trainers, such that they would not alter the content of their courses even though it became apparent that their training material was not entirely relevant. In Germany a different model was employed in order to deliver the training element of JASMINE. Given the similarities between microcredit providers in Germany (many of which started around the same time), and regulatory restrictions on their operational models (interest rates are fixed, for instance), the MFC subcontracted the delivery of training to the DMI (an association for microcredit providers in Germany). The DMI designed a standard 55

68 12-day training programme, which was approved by the MFC, which was delivered to German microcredit providers through a series of regional workshops and on-site visits. Content-wise the training was similar to that delivered by the MFC, except that it was tailored to the German context. Interviewees from German beneficiaries were generally very satisfied with the quality of the training that they had received. Some noted that a few of the training modules had been too basic for their level of experience, but for the most part interviewees believed that training had broadly been suitable given their limited experience of microlending. Most significantly, it was noted by all interviewees that the content of the training was tailored to their national operating context. Interviewees contrasted this to elements of the institutional assessment, which they saw as insufficiently tailored to the German context, such that they were unable to implement some of the recommendations from the rating agencies. Finally, it is worth noting that overall, 93 per cent of the beneficiaries would recommend the training to other microcredit providers What aspects are considered most/least useful? As mentioned in section , beneficiaries find the global process useful. However, some beneficiaries largely new organisations value the training component more than the assessment. In this context, some interviewees suggested that the institutional assessment should be decoupled from the training, with beneficiaries free to select one or both. It was argued by these interviewees that the two forms of assistance had in practice operated independently anyway, and that some organisations particularly new lenders did not need an institutional assessment at such an early stage in their development Are there additional requests beneficiaries could have as regards technical assistance? The results of the online survey indicate that 75 per cent of beneficiaries thought it would be beneficial to provide further funding to support the implementation of recommendations outlined in the assessment/ rating report. A further 55 per cent thought additional coaching would also be valuable regarding the implementation of the European Code of Good Conduct for microcredit provision. A few interviewees suggested that organisations should be able to receive multiple, successive institutional assessments, rather than being required to step up to the rating exercise if they wished to continue to receive support under JASMINE. These organisations believed that, even after having received an institutional assessment, they were not yet in a position where a rating exercise was suitable. As discussed previously, this relates to negative perceptions about the purpose and scope of the rating exercise. There was widespread support amongst interviewees for greater flexibility in terms of the timing of the technical assistance provided through JASMINE. The initial requirement that the institutional assessment and training be provided within a calendar year was felt to have resulted in a rushed and compressed delivery programme, which placed a considerable burden on participants. Several interviewees requested that JASMINE include a revenue grant in order to fund the implementation of operational changes recommended by the institutional assessment. Specifically, organisations that had been told by the rating agencies they would benefit from a new MI or IT system noted that they could not afford the up-front costs of such a system, and so this recommendation could not be implemented. Several beneficiaries requested that the number of training days made available through JASMINE be increased from the present 12, such was their level of satisfaction with the training that they received. Other MFIs suggested that training days should be spread out over the course of a year or so (including a session to refresh the learning points), since a short spell of intense training (over two weeks) placed excessive demands on staff time. Whilst translators enabled trainers to communicate with staff at beneficiary institutions, it was noted by some interviewees that at times this led to a failure to transmit some of the messages being conveyed. To resolve this, it was recommended by these beneficiaries that 56

69 national pools of experts be created, who could then be employed to deliver training in the local language. Relatedly, and as noted previously, some interviewees believed that elements of the institutional assessment and training were insufficiently tailored to the national context within which microcredit providers operate. These microcredit providers suggested that the rating agencies should seek to customise their assessments and move away from a one-size-fitsall model. Similarly, it was felt that the training should be more tailored, again potentially by drawing on pools of national experts where possible, since they were familiar with local regulatory and market conditions. Several interviewees requested that JASMINE include a forum for microcredit providers that had received technical assistance that would enable them to meet up and share good practice. It was felt that the workshops were not a suitable venue for this forum How was the assiduity of the beneficiaries and their interest in the trainings? As previously indicated, training is one of the primary reasons why a number of microcredit providers sign up to JASMINE. The assiduity and interest of beneficiaries in training is also evident from (i) the time and resources devoted to training by the beneficiary (there is a short term opportunity cost of staff time devoted to training instead of operations), and (ii) the positive changes introduced by beneficiaries as a follow up to training, which are described in section Do beneficiaries have additional requests as regards technical assistance? See response to The JASMINE Technical Assistance pilot phase covered governance, management information systems, strategic planning and risk management, including risks linked with external sources of funding. Should other topics be covered in the future? JASMINE training should continue to be needs-based and tailored to the specific skills needs of individual beneficiaries. A pre-defined menu of training topics limits the extent to which training can be tailored to individual contexts. Potential new topics that are presently not covered by JASMINE include: customer service, customer outreach, measurement of social impact/ performance Are there practical obstacles to delivering the support or to maximising its effectiveness? The main practical constraints to delivery of JASMINE are as follows: The current timetable which follows a calendar year cycle when the application period and summer holidays are taken into account, there is effectively an eight month window for delivery of technical assistance to the entire batch of JASMINE beneficiaries. Lack of known population of microcredit providers which makes it difficult to promote JASMINE. Limited number and capacity of rating agencies in Europe. Limited number of microcredit training providers although a database of independent consultants can be compiled by the EIF What is the opinion of the beneficiaries on the European Code of Good Conduct for microcredit provision : Is the Code considered as an alternative to EU microcredit legislation? The results of the online survey indicate that: 47 per cent of beneficiaries are aware of the Code of Good Conduct and use it in their organisations. A further 30 per cent are aware of it, but do not currently use it. Of these, 89 per cent plan to use the Code of Good Conduct in the future. 57

70 23 per cent of the beneficiaries are not aware of the Code. 57 per cent of respondents believe the Code should be completed with EU legislation Which recommendations can be formulated as regards the participation of savings banks? Even though savings banks in Europe are engaged in providing credit to micro and smallsized companies and to individuals at risk of financial exclusion 46, they are notably absent from the JASMINE beneficiary list. This lack of take up could be due to a lack of awareness or a lack of need for the technical assistance services available through JASMINE- although it should be noted that it was only in 2012, that the eligibility criterion was expanded to include banks. At a more fundamental level, the present evaluation does not find the lack of take up of JASMINE by savings banks a particular issue. Specialist microcredit providers emerged to fill a gap in the market not covered by mainstream / commercial banks i.e. to respond to the borrowing needs of the so-called unbankables. therefore, a distinction needs to be maintained between micro-lending by mainstream banks to the bankables and provision of microcredit by specialist providers to the unbankables or nearly bankables (the un-served/ under served markets). Market failures exist in the latter category, which justify public intervention. The only area where JASMINE could potentially add value is by providing tailored advisory services to savings banks interested in downscaling. Overall this evaluation has no specific recommendations as regards the participation of savings banks What were main reasons for not applying to get the JASMINE Technical Assistance? The two non-beneficiaries interviewed in the context of JASMINE had prior knowledge of the initiative. However, one of the microcredit providers had only been established in late 2012 and could not submit an application because of the tight deadline. According to this microcredit provider, better interaction between the EIF and new microcredit providers would have allowed them to submit an application. The other microcredit provider believed the EIF had adequately publicised the programme, but decided not to apply for two reasons: the first being that in 2010 the company restructured the products it offered and understood they were no longer eligible for support. The second reason was due to this provider s perception that the assistance was skewed more towards the needs of Eastern European microcredit providers and was not relevant to their situation Did the support provided by JASMINE help in preparing to apply for Progress Microfinance (for those who applied for Progress Microfinance)? 10 out of 48 JASMINE beneficiaries are also participating in Progress Microfinance. The results of the online survey indicate that some beneficiaries had applied to Progress Microfinance prior to applying for JASMINE Technical Assistance. For others, JASMINE helped raise awareness of EIF microfinance products including Progress Microfinance, while some beneficiaries felt better prepared to apply for Progress Microfinance as a result of JASMINE Technical Assistance Would there be any specific recommendations for the JASMINE technical assistance that would better help organisations for preparing for receiving support under Progress Microfinance? JASMINE has helped raise awareness of Progress Microfinance and helped organisations become more Progress ready through an independent institutional assessment/ rating process (designed to help beneficiaries identify and address weaknesses). JASMINE technical assistance, in its current form, is adequate for the purpose of preparing 46 ESBG (2011) Microcredit in Europe - Experiences of Savings Banks 58

71 organisations to become Progress-ready. JASMINE could however, also facilitate access to national promotional schemes for microcredit by compiling information on these and raising awareness of these schemes through the business development services (JASMINE OnLine and workshops). 3.2 Performance of JASMINE Business Development Services Who goes what are the characteristics of the workshop participants? In the context of this evaluation, an online survey of workshop participants was set-up to collect information on participant profile, and their feedback on the quality and benefits of the workshops. However, due to a very poor response rate (2 per cent) the results of the survey cannot be relied upon. Of those that did respond, the organisational types represented included: Non-bank microcredit providers; Credit unions; Foundations; and NGOs. Data on participants profile (such as the organization they represent, their title and location) is collected by the EMN through the workshop registration form, but is not centrally compiled in a database. The EMN did not have the resources to compile the details of almost 500 participants specifically for this evaluation. The EMN workshop reports however, shed some light on the characteristics of the workshop participants. These are summarised in Table 3.12 overleaf. The table shows that workshop participants tend to be locally based, as can be expected (given the opportunity cost of attending a 2-3 hour workshop in another country) and typically, represent a range of institutions such as microcredit providers, consultancy companies, banks, NGOs, foundations etc Are the participants to these workshops the right people? In the absence of detailed data on workshop participants profile (such as their titles and organisations) and in view of the low response rate to the online survey of workshop participants, an independent analysis of the participants profile could not be carried out within the framework of this evaluation. On the basis of the following (partial) evidence, it can however, be deduced that workshops are appropriately targeted: Institutional profile of the participants; The limited number of responses to the online survey suggests that the workshops are targeting the right type of participant. 6 out of 20 JASMINE beneficiaries interviewed who had attended these workshops indicated that they provide a useful forum for networking with peers, investors and the EIF. 59

72 Table 3.12 Overview of the Characteristics of JASMINE Workshop Participants Workshop Date Location The EC Code of good conduct for microcredit providers Number of participants 06-Sep-11 Krakow (PL) 12 Not available Sustainability of EU MFIs 15-Sep-11 Berlin (DE) 34 Risk management in Microfinance 12-Oct-11 Reghin (RO) 31 Good governance of EU MFIs 25-Oct-11 Milan (IT) 18 Management Information System 04-Nov-11 Luxembourg (LU) 13 Characteristics of Workshop Participants Majority representing the German microfinance sector; 2 participants from a Hungarian MFI Majority representing the Romanian microfinance sector; 1 participant from a French microfinance foundation Majority from Italy, 3 from Hungary and others from France, Bosnia, Albania and Ecuador. They represented MFIs, Ministry of Labour, students and other institutions Participants from Luxemburg, Belgium, the Netherlands, Germany, France, Italy, Switzerland and Hungary. They represented various institutions among which banks, NGOs and consultancy companies Emergence of an EU model in microfinance 14-Nov-11 Valladolid (ES) 30 The majority came from all over Europe but others came from Japan, Mexico and Ecuador. They represented various institutions among which NGOs, Foundations, consultancy companies and universities Reporting standards in Europe Financial and Social performance The role of capacity building in the development of a solid EU microfinance industry focus on German context Downscaling into microfinance by banks emphasis on the situation in Sicily 12-Dec-11 Paris (FR) 14 The majority came from France; other participants came from Italy and Tunisia. They represented various institutions among which microfinance providers, NGOs, foundations, financial institutions, consultancy companies and the European Commission 20-Mar-12 Offenbach (DE) 31 Mainly from Germany as the focus was on German context 12-Apr-12 Palermo (IT) 111 Students, as well as, representatives of local government bodies and people practising microfinance for year 60

73 Workshop Date Location Number of participants Characteristics of Workshop Participants Measurement Methods: Social and Financial performance indicators and the creation of social and economic impact Business Development Services: who is going to pay for it? 05-Jul-12 Milano (IT) Oct-12 Vonyarcvashegy (HU) 16 Various institutions, among which MFIs, NGOs, financial institutions and academics. Mainly participants came from Italy especially NGOs supporting microcredit projects but there was also participation from Western Europe (Romania, Hungary and Republic of Macedonia) for MFIs Various institutions, among which MFIs, NGOs, and regional public institutions promoting SMEs. The participants mainly came from Hungary especially MFIs but there were also institutions from Romania, Germany and Spain Microfinance regulatory frameworks in EU 26-Oct-12 Katrinehol (SE) 10 Various institutions, among which MFIs, NGOs coming from the Scandinavian region (Denmark, Norway and Sweden) and representing 5 institutions Public - Private Partnership (PPP) models in Microfinance; Promotion of the European Code of Good Conduct and labelling of EU MFIs 08-Nov-12 Bucharest (RO) 39 Not available 08-Nov-12 Bucharest (RO) 25 Not available Importance of local currency lending 09-Nov-12 Bucharest (RO) 16 Not available Is there an ideal business model for MFIs in the EU? 28-Nov-12 Offenbach (DE) 19 Participants represented 13 German MFIs Accessing EU programs available for microfinance 14-Dec-12 Madrid (ES) 29 Not available 478 Source: EMN workshop reports 61

74 3.2.3 Were the themes of the workshops provided by the contractor in the framework of the Business Development services interesting? According to the EMN, workshop topics are selected on the basis of information collected from the field as well as alignment with the EIF and DG REGIO s strategic priorities. At the beginning of each year, EMN sends an to its members collecting their views and suggestions on workshop topics. In 2012, they received 30 proposals from members. Following this, a joint discussion is held with the EIF and DG REGIO to select workshop topics. Suggestions regarding future workshop themes are also collected as part of post workshop feedback. Table 3.12 above provides an overview of the workshop themes and content. The workshop themes are highly pertinent addressing key issues for the European microcredit sector such as regulation, sustainability, governance, risk management, performance reporting, CoGC etc What are they learning? Are the workshops considered good quality? The feedback provided by a limited number of JASMINE beneficiaries and workshop participants is generally positive. 100 per cent of the respondents to the online survey of workshop participants stated that they would recommend the workshops to other microcredit providers (although it should be noted that the response rate to the survey was very low). Given the short duration of the workshops and the generic nature of content, the workshops serve to raise awareness and disseminate information on particular issues. The impact on learning is thus, limited and more accurately described as improved awareness What are the evidence of effects on their behavior afterwards can they be quantified? An online survey was designed to collect evidence on changes in participants knowledge, practice and behavior that could be attributed to JASMINE workshops. However, the survey response rate was very low. Besides, the general opinion of the beneficiaries and stakeholders is that the main purpose of the workshops is to stimulate connections and to raise awareness. The workshops are quite generic and basic in terms of their content. They are not designed to trigger behavioural change Were the workshops well organized as regards announcements, planning, invitation of speakers and participants, requests for feedbacks after the workshops? JASMINE workshops are either organised within the framework of larger events or as independent events (with the help of local facilitators). The EMN uses the following communication channels to promote the workshops: Electronic mailing to circa 3,250 people (EMN members and EMN Newsletter subscribers) informing them about the event; The organisers of the event Special section on the EMN website with a link to the Active Europe registration form Use of social networks: EMN Facebook and Twitter accounts. Selection of speakers is based on a list of agreed consultants which is specified in the contract between the EMN and EIF. For specific expertise/ topics (not covered by the consultants listed in the contract), EMN also seeks recommendations from its Board members and from the EIF. The choice of speakers is also based on the composition of audience. Typically, each workshop comprises four to six speakers: A representative from the EMN who provides an overview of the EMN s activities and JASMINE Technical Assistance; Microcredit providers who share their experiences; 62

75 Consultants or specialists. After the delivery of the workshop, participants are encouraged to access the training materials through an online e-learning platform and pose further questions on the topic to the trainer during 30 days following its conclusion. As mentioned earlier, EMN collects post workshop feedback at the end of the event. The feedback which is summarized in Table demonstrates that overall participants are satisfied with the organization and content of the workshops as well as the quality of speakers and the material distributed to participants. One microcredit expert however, suggested that the workshops could adopt a more interactive format to encourage audience participation. 63

76 Table 3.13 Summary of Post Workshop Feedback Collected by the EMN Workshop Date Panelists Post Workshop Feedback The EC Code of good conduct for microcredit providers 06-Sep-11 Sandra Moreau - EMN Senior Programme Manager - moderated the session and introduced the EMN code of Conduct Pål Vik - from the University of Salford in Britain - introduced the EU CoGC Piotr Zimoląg - from Inicjatywa Mikro, a Polish MFI - gave his thoughts about the draft EU CoGC and how the majority of the CoGC s components have already been implemented in his own organisation 8 out of 12 participants provided feedback on a scale of 1 to 5 (1=bad; 5= excellent). Content, material, organisation and speakers received an average score >4. Venue received a slightly lower average score of just under 4. Sustainability of EU MFIs 15-Sep-11 Stefanie Lämmermann - EMN Programme Manager - moderated the session Fabio Malanchini - from MicroFinanza Rating/Impact Finance in Italy facilitated the workshop, giving an overview of sustainability and presented good practice examples from Europe. This was followed by a podium discussion between the workshop leader, German MFI representative Jochen Bloss and Christophe Guene from DMI 16 out of 34 participants provided feedback. Content, material, venue and workshop leader received an average score >4. Workshop organisation and MFI representative received a slightly lower average score of just under 4. Sandra Moreau - EMN Senior Programme Manager - moderated the session Risk management in Microfinance 12-Oct-11 Maria Doiciu - from EUROM in Romania - facilitated the workshop, presenting an overview on risk management with a particular emphasis on financial risks Loan Vlasa and Carmen Eften - from FAER in Romania - presented a case study on FX rate fluctuation and its impact on the MFI s clients 27 out of 31 participants provided feedback. All aspects of the workshop received an average score >4. Sandra Moreau - EMN Senior Programme Manager - moderated the session Good governance of EU MFIs 25-Oct-11 Massimo Vita - from MicroFinanza Rating in Italy - facilitated the workshop, introducing corporate governance development and the key factors implying an MFI governance development Vasil Davaliev from Horizonti (FYR of Macedonia) presented the first case study on governance systems and issues in Horizonti 12 out of 18 participants provided feedback. All aspects of the workshop received an average score >4. Henry Ariolfo Quezada Minga from Cooperativa Jardin Azuayo (Ecuador) presented the second case study Management Information System 04-Nov-11 Sandra Moreau - EMN Senior Programme Manager - moderated the session Tom Bauer - from Triodos Facet in the Netherlands - facilitated the workshop and presented the pros and cons of the three technology solutions offered to 9 out of 13 participants provided feedback. Most aspects of the workshop received an average score >4. Workshop 64

77 Workshop Date Panelists Post Workshop Feedback MFIs between buy, build or outsource Tibor Szekfü and Éva Faragó - from Fejer Enterprise Agency in Hungary explained the IT system that was developed in Hungary more than fifteen years ago content received a slightly lower average score of just under 4. Jean Pouit - from MyTransfer and the European Microfinance Platform explained the computerization phases that an MFI goes through, from a simple excel sheet to a centralised database Teshome Dayesso - from Buusaa Gonofa in Ethiopia - described his experience when the MFI introduced its MIS system in Ethiopia. Sandra Moreau - EMN Senior Programme Manager - moderated the Session Emergence of an EU model in microfinance 14-Nov-11 Mirko Bendig - from Evers & Jung in Germany - facilitated the workshop and presented the two emerging models: microenterprise lending and inclusion lending Corrado Ferreti - from PerMicro in Italy - represented the inclusion-lending model Georgie Friederichs - from Qredits in The Netherlands - represented the microenterprise-lending model 9 out of 30 participants provided feedback. Most aspects of the workshop received an average score >4. Workshop content and material received a slightly lower average score of just under 4. Daniel Sorrosal EMN Programme and Policy Officer - moderated the session Reporting standards in Europe Financial and Social performance 12-Dec-11 Bruno Dunkel from CoopEst - facilitated the workshop and presented the work of the EMN Working Group on Social Performance regarding the definition of Social Performance standards adapted to the European context. Izabela Norek - from CoopEst presented the approach of CoopEst as an investor regarding financial reporting standards. Vlad Mihut - from the MFI ROMCOM in Romania - presented examples of the different reporting requirements to which ROMCOM as an MFI has to respond including reports to its Board of Directors, financial administration, National Bank of Romania, shareholders, funders, auditors and rating agencies 11 out of 19 participants provided feedback. All aspects of the workshop received an average score >4. The role of capacity building in the development of a solid EU microfinance industry focus on German context 20-Mar-12 Eva Otanke - EMN Communications and Events Coordinator - moderated the session Izabela Norek the leader of the workshop, representing CoopEst, who introduced the audience with the basics of capacity building and her personal 15 out of 31 participants provided feedback. Most aspects of the workshop received an average score between 3 to 4. EMN Representative and MFI Representative received a higher average 65

78 Workshop Date Panelists Post Workshop Feedback experience in capacity building score (just over 4). Stephan Hiller the MFI representative from VS Finance, which is based in Berlin, Germany. Mr. Hiller shared his experience and thoughts of capacity building in Germany in the sector of microfinance and how the MFI has dealt with the matter of capacity building. Eva Otanke - EMN Communications and Events Coordinator introduced JASMINE Downscaling into microfinance by banks emphasis on the situation in Sicily 12-Apr-12 Filippo Vettorato the leader of the workshop, representing Mikrofinanza srl, introduced the audience with the basics of downscaling matters in the Sicilian context The workshop was moderated by Giamoietro Pizzo, the vice-president of the EMN Rosario Sapienza (The Hub Sicilia, Italy), Fabio Tarantini (Forgroup Consulting, Italy), Caterina Di Chiara (Presidente Comitato Impreditoria femminile della C.C.I.A.A. de Palermo, Italy) and Fabio Picciolini (Segretario NazionalCONSUM) provided MFI perspectives. All of the panellists shared their visions on microfinance sector in Sicilia, demonstrating numbers and specific cases related to the sector. 15 out of 111 participants provided feedback. Most aspects of the workshop received an average score >4. Workshop organisation received a slightly lower average score of just under 4. Micol Guarneri from MicroFinanza Rating (consultancy firm in Italy) chaired the session Measurement Methods: Social and Financial performance indicators and the creation of social and economic impact 05-Jul-12 Vasil Davaliev from Horizonti (MFI in Republic of Macedonia) described the experience to set up Social Performance Monitoring (SPM) in Horizonti through the development of an internal Poverty Scorecard to approximately measure/monitor the poverty level of the clients. Patrizia Moggia, from Polaris Investment (investment fund in Italy) talked about the growing interest of investors in funding social responsible MFIs 19 out of 30 participants provided feedback. Most aspects of the workshop received an average score >4. Workshop material received a slightly lower average score of just under 4. Francesco Grieco from EMN Business Development Services: who is going to pay for it? 17-Oct-12 Filippo Vettorato from MicroFinanza Rating (consultancy firm in Italy)chaired the session Tibor Szekfu from FEA (MFI in Hungary) described the experience of FEA in setting up training and mentoring activities for the development of 14 out of 16 participants provided feedback. All aspects of the workshop received an average score >4. 66

79 Workshop Date Panelists Post Workshop Feedback microenterprises in a long term perspective Francesco Grieco (EMN) Microfinance regulatory frameworks in EU 26-Oct-12 Maria Doiciu from EUROM (consultancy firm in Romania) who chaired the session, set up the main framework and gave basic description of the different legal frameworks regulating microfinance activities in the EU Johan Sundholm from NEEM (MFI in Sweden) described the experience of NEEM in operating within the Swedish legal framework All 10 participants provided feedback. Most aspects of the workshop received an average score >4. Workshop content and material received a slightly lower average score of just under 4. Francesco Grieco (EMN) Public - Private Partnership (PPP) models in Microfinance 08-Nov-12 Maria Doiciu from EUROM Consultancy who chaired the session, set up the main framework and gave basic description of a PPP agreement and particularly on the microfinance sector that are experimented in Europe Riccardo Aguglia from the European Investment Fund, presented some PPP examples in EU via the European Progress Micro Finance Facility (EPMF) and Joint European Resources for Micro to medium Enterprises (JEREMIE) Lorin Spinean from the Romanian SME Agency introduced the PPP microfinance model implemented through the Kogalniceanu Program by the Romanian SME Agency 29 out of 39 participants provided feedback. All aspects of the workshop received an average score >4. Marius Vieru from CEC Bank Romania presented another model of PPP implemented in Romania by the CEC Bank Jorge Ramirez (EMN) Promotion of the European Code of Good Conduct and labelling of EU MFIs 08-Nov-12 Prof. Karl Dayson from the University of Salford (Workshop Leader) presented the CoGC showing the main principles related to governance and management reflecting best practices across the sector for moving towards sustainability Georgie Friederichs from Qredits (MFI in The Netherlands) talked about the issues linked to the implementation of the CoGC highlighting both the opportunities and challenges of being part of the pilot project and trying to turn the Code into a practical guide within Qredits. 23 out of 25 participants provided feedback. All aspects of the workshop received an average score >4. Isabelle De Schryver (EC DG-Regio) talked about the rationale for introducing the CoGC and plans for its future development Francesco Grieco (EMN) 67

80 Workshop Date Panelists Post Workshop Feedback Importance of local currency lending 09-Nov-12 Bruno Dunkel (Coopest) introduced the main issues and possible hedging mechanisms that are available today for MFIs in Europe Ivona Planininc (PRIZMA) discussed their experience as an MFI operating in Bosnia-Herzegovina Adina China Birta (Patria Credit) provided a practical example of how they dealt with the issues when their local currency (LEU) depreciated significantly against USD between out of 16 participants provided feedback. Most aspects of the workshop received an average score of 4. Workshop material received an average score of 3 Francesco Grieco (EMN) Is there an ideal business model for MFIs in the EU? 28-Nov-12 Edouard Sers from Planetrating highlighted most important elements of difference between microfinance models in Western Europe and developing world Stefanie Lammermann from DMI highlighted the differences in applied business models around Europe, focusing on two countries: Spain and UK 18 out of 19 participants provided feedback. All aspects of the workshop received an average score between 3 and 4. Caroline Lentz from EMN Accessing EU programs available for microfinance 14-Dec-12 Jorge Ramirez from EMN introduced the workshop, the role and activities of EMN and provided an overview of JASMINE Silvia Rico from Nantik Lum Guzman Garcia from AUESF provided an overview of the activities of the ESF and concretely from the Spanish ESF Authority Unit and how ESF is supporting microfinance Saiyi Suzuky from EIF explained the microfinance activities of the Fund 20 out of 29 participants provided feedback. Most aspects of the workshop received an average score of 4. Workshop material received an average score of just under 4. Guillem Aris from C PAC talked about the activities of C PAC and particularly the microfinance products addressed to promoting entrepreneurship Roman Weissmann from Microbank spoke about their experience in obtaining guarantees from the CIP and their risk management procedures Source: EMN workshop reports 68

81 3.2.7 Were the events in which the workshops took place appropriate? JASMINE workshops are either organised within the framework of larger events or as independent events (with the help of local facilitators). Increasingly, there is a shift towards organising workshops independently via local facilitators (typically, network members) as they have local knowledge and contacts. For example, only 4 out of 10 workshops in 2012 were organised in the framework of larger events. According to one JASMINE beneficiary, the workshops that have been held independently have not been a success. They were not planned sufficiently in advance, so that potential participants were only given a couple of weeks of notice. The post-workshop feedback collected by the EMN is however, more positive (summarised in Table 3.13 for each workshop). An industry expert also expressed an opinion in favour of attaching JASMINE workshops with larger events Are the workshops considered appropriate for the sector? Which impact did they have on the participants? Workshop reports, stakeholder interviews and beneficiary feedback suggest that the workshops play an important role in (i) spreading awareness, (ii) stimulating networking, (iii) sharing information Are there other specific themes that should be addressed? The workshop themes should continue to be selected on the basis of feedback from the ground as well as reflect new developments/ hot topics in microcredit. Specific suggestions offered by stakeholders and beneficiaries consulted as part of this evaluation and based on recurring themes in assessment/ rating reports include: Use of technology (particularly mobile technology) in delivery of products and services; Measuring social outcomes; Sharing findings from the pilot implementation of the CoGC; Reaching out to under-served market segments; Loan appraisal techniques for specific sectors such as social enterprises or creative businesses; Developing appropriate MIS solutions; Back to basics workshops on common themes such as financial management, liquidity management etc Were the answers provided via the JASMINE Helpdesk 47 of good quality? An online survey was set-up to collect feedback from Helpdesk users. Due to data protection issues, the survey was promoted directly by the EMN (as contact details of Helpdesk users could not be provided to ICF GHK). A total of 15 responses were received, corresponding to a response rate of 13 per cent. Overall, 80 per cent of respondents indicated that they were satisfied with the services provided by the helpdesk. Only 13 per cent of those surveyed were dissatisfied. In addition: Over 80 per cent of respondents agreed that the Helpdesk had responded to their query within a reasonable time frame (five working days); and 73 per cent believed that the helpdesk understood the nature of their inquiry. However, in comparison only 13 per cent felt the helpdesk was unable to provide them with a comprehensive response or answer

82 The evaluation team carried out a detailed review of the responses to Helpdesk enquiries. In the view of the evaluation team, the responses are comprehensive, well-researched, tailored and relevant. Although, one observation made was that the response to enquiries about funding opportunities for microcredit providers usually only contained descriptions of JASMINE and Progress Microfinance Facility. These responses did not contain information on CIP microcredit window or JEREMIE. JASMINE Helpdesk The Helpdesk is hosted on the European Commission s website. The EMN runs the Helpdesk with the help of EUROM (based in Romania) and Evers & Jung (based in Germany). The Helpdesk can handle enquiries in English, Spanish, French, German, Romanian and Italian. However, the online template is only available in English, so this constrains the delivery in alternative languages. When questions are received, they are logged on a spreadsheet. On this spreadsheet tool, inter alia, the following information is recorded: Response time; The number of hours spent by consultants on finding the answer; and The replies sent from the EMN. Questions received on Helpdesk are sent over to Evers & Jung and EUROM. The distribution of enquiries between the two consultants is presently done purely in geographical terms. In the future, questions will be distributed on the basis of themes, using a wider pool of experts. Some basic enquiries (and those similar to enquiries previously received) are handled by EMN. Responses are then conveyed back to the originating organisation via EMN s Is the JASMINE Helpdesk considered useful? Available data on Helpdesk usage show that: The number of enquiries handled is limited, but growing. To date about 140 enquiries have been handled by the helpdesk (40 in 2011, 67 in 2012, 33 in 2013 over a five month period); The Helpdesk is used by organisations describing themselves as Charities (24 per cent); MFIs (18 per cent); NGOs (9 per cent); Credit Unions (9 per cent); and banks (2 per cent). 39 per cent of the users categorise themselves as other and this category comprises students, research institutions, social enterprises, entrepreneurs etc. Figure per cent of the enquiries received relate to JASMINE Technical Assistance and funding possibilities Figure 3.6. A vast majority of the survey respondents consider that the Helpdesk provides a useful service. Only 20 per cent of those surveyed did not agree that the Helpdesk was a useful service. Given the general paucity of information sources on European microcredit, the Helpdesk function can be considered a useful tool. 70

83 Figure 3.5 JASMINE Helpdesk: user categories Source: Anonymised Helpdesk data; N=141 Figure 3.6 JASMINE Helpdesk: topics of enquiries CIP 1 CGAP Client Protection 3 EPMF 5 CODE OF GOOD CONDUCT 12 Other 19 Funding Possibilities 48 JASMINE 53 Source: Anonymised Helpdesk data; N= What could be done to improve the knowledge of the existence of the JASMINE Helpdesk? The inclusion of the Helpdesk within JASMINE OnLine should improve the visibility of the Helpdesk. An important first step is however, clarifying the specific objectives and target audience of the Helpdesk. Once the target user groups have been identified, tailored communication channels should be used to promote the existence of the Helpdesk. For example: To reach out to microcredit providers, national networks could be encouraged to add a link to the helpdesk on their websites/ newsletters and to promote the tool among their members; 71

84 To promote general visibility, the Helpdesk/ JASMINE OnLine could appear as a sponsored link on prominent search engines, attached to key words such as European microcredit Is there a need for additional / other forms of Business Development services? Which ones? As previously highlighted in section , the main need expressed by stakeholders is that of a knowledge sharing platform that brings together the different players (investors and funders, microcredit providers, borrowers, policy makers, rating agencies etc.) and provides a one stop shop for information on the European microcredit sector such as: Profiles of microcredit providers in each country; Data on their financial, operational and social performance; Profiles of microcredit investors and donors Benchmarking and trends reports etc. Some stakeholders interviewed in the context of this evaluation also expressed a need for more market intelligence and research into the European microcredit sector, particularly the social impact of microcredit in Europe. 3.3 (Indirect) Employment and Social Impacts of JASMINE Technical Assistance Pilot Phase Did the Technical Assistance received by the MFIs led to a behavior change towards their customers (ie the beneficiaries of microcredits)? Which ones? A number of beneficiaries were able to provide concrete examples of how the technical assistance has led to behavioral change towards their customers. For example: An Italian microcredit provider reported that as a result of the training received on negotiation skills, conflict management and phone collection, their receivables team is better equipped to handle difficult conversations with customers who are in arrears and having payment difficulties. A Romanian beneficiary organization which had received training on delinquency management stated that this training was particularly timely and useful for their newly established recovery team. The training gave the team the confidence to carry out loan collections in a professional manner. Specifically, the team learned how to assess repayment options and solutions instead of just taking away the collateral One small German microcredit provider reported improving its processes for dealing with consumers including the introduction of standard forms for recording conversation A start-up Romanian microcredit provider attributes improved client communication to JASMINE training. Following the training, the microcredit provider has enhanced the information provided to clients, particularly in relation to risk and repayment. The same microcredit provider has introduced financial education for clients following the recommendation contained in the rating report. A German microcredit provider reports improved client relations as each client now has one loan officer dealing with the account from start to finish Did the Technical Assistance bring changes as regards their customer and investor relations? Which ones? There is some evidence that JASMINE has affected the external relations of beneficiaries. 34 per cent of the respondents to the online survey agree or strongly agree with the statement that as a result of the assessment/ rating report my organisation has improved investor relations. Furthermore, results of the online survey show that at least some 72

85 beneficiaries were able to access new sources of funds as a result of the training (27 per cent) or assessment/ rating (37 per cent). One organisation reported that they had applied to the EIF for finance, and had attached their JASMINE report as part of their application. A representative from the beneficiary organisation believed that the report had enhanced their credibility with the EIF, and provided a robust and independent assessment of their ability to lend. Other organisations reported similar experiences when seeking funds from national or regional governments. None of the interviewees would attribute their success in accessing funding wholly to JASMINE, however, and generally believed that they would have achieved a similar outcome even without their report. Nevertheless, they all felt that having a JASMINE report had been made it easier for them to demonstrate their ability, and had perhaps made negotiations simpler. The evaluation was unable to identify any instances where a beneficiary had been able to access commercial funding using their rating report. For the most part this did not seem to be how beneficiaries had used their report (to date) Did the Technical Assistance received led to improvements in the way MFIs prepare their business plans, in the way they address risk, and as regards the Governance in their organization? Which ones? Most beneficiaries confirmed that the technical assistance led to improvements in their governance systems, operational procedures, strategic planning process, and management information systems. Concrete examples of improvements cited by beneficiaries are provided in Table 3.14 and Table Table 3.14 Operating area Examples of changes to Beneficiaries Operational Models introduced following the Institutional Assessments/ Rating Exercises Examples of changes introduced by MFIs Business planning A medium-sized, start-up microcredit provider developed a business plan in order to plan their growth over the short-term Client relations A relatively young microcredit provider developed a manual setting out the procedures for dealing with customer complaints Risk management A small, start-up microcredit provider introduced monthly risk monitoring (assessment of portfolio-at-risk), which replaced ad hoc observation of individual loans A relatively young microcredit provider increased the provision for loss in their loan portfolio A medium sized microcredit provider adjusted how they reported and recorded loan portfolios across branches. This allowed for more adequate tracking of loans across the branches and their risk profiles. Investment appraisal A medium-sized, start-up microcredit provider redeveloped the checklist of information that they collect as part of loan applications, in order to ensure a more systematic appraisal of applications. MI systems A small microcredit provider introduced a new MI system to integrate multiple databases into one system to track loan performance Capital access A small, start-up microcredit provider negotiated the creation of a EUR 150,000 microloan fund with its regional government, following a recommendation within its institutional assessment report that it seek to manage a fund rather than obtain its own capital Social reporting A medium-sized microcredit provider initiated a system of social reporting, whereby clients are surveyed on an annual basis (until one year after the loan has been fully repaid) in order to collect data on their employment status, indebtedness etc. This enables the microcredit provider to report on job creation, business survival etc. Business support A medium-sized, start-up microcredit provider started providing financial awareness and debt management training to its customers, in order to improve their ability to repay their loans 73

86 Operating area Examples of changes introduced by MFIs Human resources One small microcredit provider created a new role of a Finance Manager, which previously had formed part of the responsibilities of a single staff member (Finance and Risk Manager). This enabled the microcredit provider to separate the two functions: finance and risk management. Another small microcredit provider based in Eastern Europe reported introducing a more structured approach to training of loan officers and performance management of staff A recently established microcredit provider received training on topics such as recruitment process, how to integrate new staff within the organisation and how to conduct appraisals. This has led to an improvement in its approach to HR management and consequently, better staff morale and productivity. One medium-sized microcredit provider produced a Human Resource Manual following the assessment report. This is routinely used by the organisation, and has been updated annually. Governance Based on highlighted deficiencies in the management structure of one medium-sized microcredit provider, the organisation was restructured and key senior management staff were recruited. Table 3.15 Examples of changes to Beneficiaries Operational Models introduced following the Training Operating area Examples of changes introduced by beneficiaries Audit systems A small, start-up microcredit provider was trained in improvements to its audit procedures, and on the basis of this training developed a new, written audit policy and implemented a more systematic audit programme Marketing As a result of the training received, a small, start-up microcredit provider reported improving its annual communications campaign with a better approach to engaging with media and potential customers. This has generated an increased volume of enquiries. The microcredit provider has also introduced new loan products as a result of its market research. In light of the training received around marketing, a mid-sized microcredit provider appointed a marketing manager to take the action points forward. Business planning A small, start-up microcredit provider received training in strategic planning, including the process of developing a business plan. On the basis of this training the manager of the microcredit provider developed a written strategic plan setting out their short-term goals, which enabled them to better articulate growth intentions to staff and to external stakeholders, including government Another small microcredit provider reported that as a result of the training received on strategic planning, they are more investment ready and it have also improved their awareness of the market Products A small microcredit provider based in Eastern Europe modified its products such that they are better tailored to clients needs Investment appraisal A small microcredit provider received training in how to appraise loan applications, and on the basis of this designed a new set of guidelines for use by loan officers when appraising loans. It is expected that these guidelines will lead to a reduction in the amount of bad debt as the quality of loans will improve, though it was noted that it is too early to make this assessment A start-up microcredit provider developed a documents checklist for loan officers following the training received. This ensures that all relevant documentation is collected at the time of loan appraisal Another microcredit provider has developed an interview checklist following the training. This has led to a more structured and standardised approach to conducting interviews across branches The training led to the development of a new scorecard for assessing 74

87 Operating area Examples of changes introduced by beneficiaries loan applications from micro enterprises at a bank. The data collected through scorecards provides the basis for understanding risks and developing the pricing and structure of loans (interest rates to be charged and collateral requirements). Ultimately, the bank expects the new scorecard to reduce the costs of lending to micros and increase the scale of microlending A mid-sized Western European provider, in light of the value of investment appraisal training, has incorporated this into the induction process for new employees. Human resources A small, start-up microcredit provider received training in effective HR systems, and on the basis of this developed standardised, written procedures covering: appraisals, training, integration of new starters etc. The microcredit provider noted that improvements to HR procedures have improved the efficiency of the organisation, and improved staff satisfaction IT systems Following training by an IT specialist, one medium-sized microcredit provider changed its procedures in relation to data security by introducing greater automation than was previously the case. This has improved operational efficiency by freeing up loan officers time (previously spent conducting manual security checks) to focus on lending. Legal issues A small microcredit provider in Germany received training in legal issues, and as a result changed the terms and conditions associated with its lending, thus reducing its legal risks Information provided to clients One start-up microcredit provider received training in the provision of information to clients, and as a result provided more information on risk and loan repayment as part of its loans. It is anticipated that this information will improve the ability of loan recipients to repay their loans Governance Based on the training received, a beneficiary organisation has established an audit committee and is currently developing audit procedures. According to the beneficiary, these changes will ultimately lead to improved oversight and reduced risk of fraud and reputational damage Did the Technical Assistance bring changes in the way the customers are selected and assisted by the MFIs? Which ones? According to some beneficiaries, the training has led to an improvement in the skills and competencies of loan offers, particularly in carrying out pre-lending assessment of clients. Some beneficiaries explained how their loan officers are now better equipped to carry out discussions with potential clients (particularly as part of on-site visits) to obtain additional information on the financial situation/ repayment capacity of clients (that they might not have included in the application) and to cross-check information provided by potential clients Did this Technical assistance provided to MFIs help them to increase their credibility towards their customers? How? In absence of any baseline data and given the scope of the evaluation, it was not feasible to carry out a survey of the customers of JASMINE beneficiaries to determine if the technical assistance had had any impact on the credibility of the institution amongst customers. The stakeholders and beneficiaries consulted as part of this evaluation, did not cite increased credibility among customers as an outcome of JASMINE technical assistance Did this Technical assistance provided to MFIs help them to increase their credibility towards potential investors? How? This question has already been answered. See section

88 3.3.7 Did this Technical assistance provided to MFIs helped to attract new customers? Explain. A Bulgarian microcredit provider states that JASMINE training enhanced the technical and soft skills of loan officers. This led to improvements in customer relations, loan assessment, and communication skills. As a direct result of the training, loan officers are more motivated, proactive and persuasive and this in turn has helped them attract new customers and improve sales. The training also helped improve staff motivation and reduce turnover. A Belgian microcredit provider (recently established) has developed a broader and more tailored range of products which is eventually expected to help attract new customers A bank reports increased micro lending as a result of training provided to loan officers. The training covered sales and analysis skills. A UK-based microcredit provider stated the improvement of the operational processes in light of the assessment process has, in the longer term, allowed them to serve a greater volume of clients. The microcredit provider stated that without these changes that were made it is difficult to foresee how these clients could have been served How did the JASMINE setup contribute to social inclusion of the MFI s customers? There is no evidence to suggest that JASMINE Technical Assistance has contributed to social inclusion of beneficiary customers. Overall, metrics on social impact of microcredit providers are under-developed and as highlighted by the beneficiary assessment/ rating reports, social impact monitoring is an area requiring improvement. 76

89 4 Conclusions and Recommendations This section summarises the conclusions that emerge from the analysis and findings previously presented in response to each evaluation question. It then provides a series of recommendations regarding future orientations of JASMINE technical assistance facility on the basis of the lessons and experiences drawn from the pilot phase. 4.1 Conclusions The overarching conclusion of this evaluation is that JASMINE technical Assistance pilot phase was a success. This is evident by: The 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. 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 customer /investor relations. It is however, difficult to attribute tangible outcomes to the business development services, as can be expected. There is 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 and performance of the European microcredit sector. The intervention is highly 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 have found it to be relevant and useful once they had been through it. JASMINE has thus, played an important role in promoting the idea of independent assessments and ratings within the sector. All beneficiaries interviewed confirmed that they would not have been able to undertake the training (or at best, they would have undertaken the training at a much reduced scale) in the absence of JASMINE. The Helpdesk is a unique single source information on the European microcredit sector, that is available to individuals and organisations across Europe. Without JASMINE, it is unlikely that such a tool would exist. There is demand for more beneficiaries and stakeholders have expressed for a broader range of technical assistances in future. 4.2 Recommendations This section provides a series of recommendations regarding the future orientations of JASMINE. The recommendations that follow, seek to build upon the success of the pilot phase and at the same time, take account of the experiences and learning gained during this period. 77

90 4.2.1 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 The main recommendations of this evaluation are: 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. 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 48. Strengthen demand for institutional assessments/ ratings through awareness-raising among microcredit investors and grant providers. 48 Available online at: 78

91 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 The following recommendations are aimed at improving the management and implementation arrangements for JASMINE: 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. 79

92 European Commission Evaluation of Jasmine Technical Assistance Pilot Phase - Final Report pp. 21 x 29.7 cm ISBN doi: /18708 Free publications: HOW TO OBTAIN EU PUBLICATIONS via EU Bookshop ( at the European Union s representations or delegations. You can obtain their contact details on the Internet ( or by sending a fax to Priced publications: via EU Bookshop ( of the European Union): dex_en.htm). ropean Union and reports of cases before the Court of Justice Union ( -

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