EMN-CERMi Seminar:Microfinance in Europe

Daniel Sorrosal(EU Liaison Officer at the European

Microfinance Network)

Marcella Corsi(Core Member of the EMN Research Working Group

and Associate Researcher at CERMi)

Thursday, 23 September 20103.00pm – 5.00pm

Seminar RoomCentre Emile Bernheim, Université libre de Bruxelles

2

Survey of 2008-2009 activities:Successful Collaborative Effort

Built on the strengths of the previous surveys conducted on EMN’s behalf in 2003, 2006 and 2008.

Shortened survey questions to focus on most relevant topics

Incorporation of new questions related to EMN working groups: Social Performance, IT, Regulation

Standardized financial indicators Continued and improved data disaggregation:

gender, ethnicity, immigrant status, youth, disability

Questionnaire available in Bulgarian, English, German, Hungarian, Italian and Spanish.

Work Coordinated by Nantik Lum Foundation (Spain) Work Coordinated by Nantik Lum Foundation (Spain) with the efforts of 11 collaborating organizations with the efforts of 11 collaborating organizations

Réseau Financement Alternatif ASBL (RFA), BelgiumRéseau Financement Alternatif ASBL (RFA), Belgium Centre for Entrepreneurship and Executive Development Centre for Entrepreneurship and Executive Development

(CEED), Bulgaria(CEED), Bulgaria European Microfinance Network (EMN), FranceEuropean Microfinance Network (EMN), France Deutsches Mikrofinanz Institut (DMI), GermanyDeutsches Mikrofinanz Institut (DMI), Germany Hungarian Microfinance Network (HMN), HungaryHungarian Microfinance Network (HMN), Hungary Giordano Dell’ Amore Foundation (FGDA), ItalyGiordano Dell’ Amore Foundation (FGDA), Italy INHolland University of applied sciences, Center for INHolland University of applied sciences, Center for

Microfinance and Small Business Development , the Microfinance and Small Business Development , the NetherlandsNetherlands

EUROM Consultancy, RomaniaEUROM Consultancy, Romania Fundación Nantik Lum, SpainFundación Nantik Lum, Spain Nätverk för Entreprenörer från Etniska Minoriterer (NEEM), Nätverk för Entreprenörer från Etniska Minoriterer (NEEM),

SwedenSweden Independent Microfinance Consultant and Director of the Independent Microfinance Consultant and Director of the

Centre for Responsible Credit, United KingdomCentre for Responsible Credit, United Kingdom

Large Number of Responses

170 institutions representing 21 countries 170 institutions representing 21 countries from the European Unionfrom the European Union

97 new respondents97 new respondents More responses from institutions in Norway, More responses from institutions in Norway,

Sweden, and Ireland, compared to previous Sweden, and Ireland, compared to previous surveysurvey

First time responses from Croatia, Estonia, First time responses from Croatia, Estonia, Latvia, and LithuaniaLatvia, and Lithuania

No responses from Austria and Slovakia due No responses from Austria and Slovakia due to absence of current microcredit to absence of current microcredit programmesprogrammes

Great diversity in Loans Disbursed• Number of loans disbursed by country range from 6 to Number of loans disbursed by country range from 6 to

28,863 for 2009.28,863 for 2009.

• Factors that influence loan numbers by country appear Factors that influence loan numbers by country appear to be:to be:• Age of sectorAge of sector• Number and types of actors and their geographic Number and types of actors and their geographic

reachreach• Whether microlending is the primary activity or one of Whether microlending is the primary activity or one of

many activities carried out by the organizationmany activities carried out by the organization

• E.g. in France: Two lenders in the market since the 1980s, with national E.g. in France: Two lenders in the market since the 1980s, with national coverage, but with different lending methodologies: 1 not-for-profit coverage, but with different lending methodologies: 1 not-for-profit organization with zero-interest quasi-equity loans that allow organization with zero-interest quasi-equity loans that allow beneficiaries to access significant complementary bank credits; 1 NGO beneficiaries to access significant complementary bank credits; 1 NGO providing standard microloans with interestproviding standard microloans with interest

• E.g. in Hungary: small foundations operate locally; a bank working on E.g. in Hungary: small foundations operate locally; a bank working on the international level disbursed 9,500 loans; the international level disbursed 9,500 loans;

• E.g. in Germany: 60% of organizations started lending after 2005, they E.g. in Germany: 60% of organizations started lending after 2005, they operate locally; a government body operating internationally disbursed operate locally; a government body operating internationally disbursed 7,000 loans 7,000 loans

In 2009, a total of 84,523 microcredits for In 2009, a total of 84,523 microcredits for

828 million euros were granted*. In Western 828 million euros were granted*. In Western European countries, 51,027 loans were made for European countries, 51,027 loans were made for 477 million euros, while in Eastern Europe 18,293 477 million euros, while in Eastern Europe 18,293

loans were made for 307 million euros. loans were made for 307 million euros.

72% gave the figures for their active clients. End of 72% gave the figures for their active clients. End of 2009: 135,815 active clients. 2009: 135,815 active clients.

74% of organisations have lent €49.9 billion for 74% of organisations have lent €49.9 billion for 237,495 loans since their creation.237,495 loans since their creation.

*The data didn’t include one major actor in Poland and the network of Procredit banks in Eastern Europe.*The data didn’t include one major actor in Poland and the network of Procredit banks in Eastern Europe.

Number of loans disbursed in Number of loans disbursed in 20092009

Number of active clientsNumber of active clients

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

Growth and Decline at the same timeGrowth and Decline at the same time

• Between 2008 and 2009 the number of loans Between 2008 and 2009 the number of loans disbursed decreased by 7%. disbursed decreased by 7%.

• Highest Sector Growth Rates from 2008 to Highest Sector Growth Rates from 2008 to 2009 in:2009 in:

– Hungary (49%)Hungary (49%)– Italy (40%)Italy (40%)– The Netherlands, Latvia, due to the incorporation of The Netherlands, Latvia, due to the incorporation of new institutions that began activities in 2009.new institutions that began activities in 2009.

- - In terms of the highest growth in terms of In terms of the highest growth in terms of number of loans disbursed: Hungary (3412 more number of loans disbursed: Hungary (3412 more loans than in 2008), France (2154), Italy (545) loans than in 2008), France (2154), Italy (545) and Finland (485).and Finland (485).

Evolution in loans disbursed by country

0

8750

17500

26250

35000

Fran

ce

Pol

and

Rom

ania

Ger

man

y

Spa

in

Hun

gary

Bul

garia

Finl

and

Italy

Cro

atia

Sw

eden

Bel

gium U

K

Por

tuga

l

Irela

nd

Latv

ia

Nor

way

Net

herla

nds

Sw

itzer

land

Number of loans disbursed 2008 Number of loans disbursed 2009

NGOs and are the main Actors

Young sector with many small actors

Only 40% of lenders participating in the Only 40% of lenders participating in the survey were active before 2000survey were active before 2000

Nine new actors started lending in 2008 and Nine new actors started lending in 2008 and another nine started lending in 2009another nine started lending in 2009

Most lenders in the EU/EEA disburse less Most lenders in the EU/EEA disburse less than 50 loans a year (57%).than 50 loans a year (57%).

On the other hand, 13% of the organisations On the other hand, 13% of the organisations disbursed more than 400 loans in 2009disbursed more than 400 loans in 2009

A young and growing MF A young and growing MF sectorsector

Not only microcredit for enterprise development

42% provide other types of financial services

Loan Products and Pricing: Diversity in Loan Sizes and Interest rates

A variety of loan sizes offered to clients.A variety of loan sizes offered to clients.

The maximum loan size offered to clients ranges from The maximum loan size offered to clients ranges from €37,000 to €220 (even if the EU defined a microcredit €37,000 to €220 (even if the EU defined a microcredit as being below €25,000).as being below €25,000).

(Non-weighted) Interest rates charged range from 2% (Non-weighted) Interest rates charged range from 2% at the lowest to 22% at the highest. The average is at the lowest to 22% at the highest. The average is 9%.9%.

Average (non-weighted) interest rates vary by country Average (non-weighted) interest rates vary by country - the highest rates are charged in the United Kingdom - the highest rates are charged in the United Kingdom (22% average), Poland (17% average) and the lowest (22% average), Poland (17% average) and the lowest in Portugal and Finland (3% and 2% respectively).in Portugal and Finland (3% and 2% respectively).

22.2%

17%16.9%

14.3%

11%

9% 8.6%8.3%

7.8%7%

6.7%6% 6%

4.8% 4.7%4.5% 4% 4%

3.7%3%

2%

Euribor 5%

Broad Range in Average Loan Size

The average loan amount is €10,012.The average loan amount is €10,012.

It has decreased compared to 2007 (average loan size It has decreased compared to 2007 (average loan size €11,002).€11,002).

Despite this, we find that in some EU countries, loan Despite this, we find that in some EU countries, loan disbursements are moving toward larger loans and the disbursements are moving toward larger loans and the higher end of the market.higher end of the market.

- - E.g. Netherlands – average loan size €14,745E.g. Netherlands – average loan size €14,745

- E.g. United Kingdom – average loan size €9,623- E.g. United Kingdom – average loan size €9,623

- E.g. Hungary – average loan size €14,545- E.g. Hungary – average loan size €14,545

Average loan size per country

Average Loan Size by type of MF actorAverage Loan Size by type of MF actor

FinancialInstitution

cooperativeBankFoundation

15,852

11,379

11,070 10,948

9,144

8,340

8,054

6,456

Government Body CDFI Bank NGO or Savings Non-bank Credit Union/ Other

Depth of outreach

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

0 20 40 60 80 100 120 140 160

Norway

France

Italy

Latvia

Switzerland

Spain

UK

Germany

Ireland

Sweden

Poland

Netherlands

Portugal

Belgium

Finland

Croatia

Romania

Bulgaria

Hungary

Limited Data on Portfolio Performance

Although more institutions responded in this current Although more institutions responded in this current survey than in previous surveys, the number of responses survey than in previous surveys, the number of responses continues to be low. Due to:continues to be low. Due to: Under-developed MIS systemsUnder-developed MIS systems Confidentiality policies (Banks)Confidentiality policies (Banks)

For the data available in 2009*:For the data available in 2009*: - - Average repayment rate of 83%,Average repayment rate of 83%, 6 points lower than 6 points lower than the previous survey (around 90%)the previous survey (around 90%) - - Percent Portfolio at risk (>30) is 16.8%Percent Portfolio at risk (>30) is 16.8% (14% previous (14% previous survey)survey) - - Value of write offs was 5.2%,Value of write offs was 5.2%, of average portfolio of average portfolio outstanding, similar to the previous surveyoutstanding, similar to the previous survey - - Average Operational Self-Sufficiency: 98.7%Average Operational Self-Sufficiency: 98.7%

* On basis of response rate (CRR: 16.5%, PAR>30: 37%, Write-offs: 35%, OSS: 28%)

External Funding plays still an Important Role

Operational Costs:Operational Costs:

In contrast to the previous survey, 60% of survey In contrast to the previous survey, 60% of survey respondents cover their operational costs through respondents cover their operational costs through earned income (fees, interest and income earned on earned income (fees, interest and income earned on assets). assets).

Loan Capital:Loan Capital:

Loan capital comes from a combination of public and Loan capital comes from a combination of public and private sources, private sources, with public sources most important:with public sources most important: Public sector 50%Public sector 50% Own funds, Private sector, Client deposits, Own funds, Private sector, Client deposits, commercial debtcommercial debt

Crisis impact

Future Vision

Reaching financial sustainability Reaching financial sustainability remains the primary concern for the remains the primary concern for the responding organizations.responding organizations.

Access to long-term fundingAccess to long-term funding Regulatory flexibilityRegulatory flexibility Growth of operations and targeting new Growth of operations and targeting new

client groupsclient groups

Most Important Future Goals