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Mr. László ANDOR

EU Commissioner responsible for Employment, Social Affairs and Inclusion

EU Microfinance Facility – lessons learnt so far

European Microfinance Network Annual Conference 2011

Amsterdam, 9 June 2011

Your Royal Highness,

Ladies and gentlemen,

This conference comes at a good time. Its subject is highly relevant to the challenges facing the Union and it holds out great hope for solutions.

The recovery we are seeing is fragile and needs nurturing. We need to sustain the economy’s growth, but not growth at any cost.

What we want is growth that is:

  • smart — because it is driven by knowledge and innovation;

  • sustainable — to ensure it is viable in the longer term, and

  • socially inclusive — so it fosters high employment and social cohesion.

Those objectives are the foundation of the Europe 2020 Strategy and they inspire the Commission’s country-specific recommendations adopted this week.

The recommendations highlight the areas where the Member States need to make a bigger effort to meet the Europe 2020 targets — and especially the employment and poverty reduction targets: to raise the EU employment rate to 75% and lift at least 20 million people out of poverty by 2020.

Because conventional labour-market measures will not be enough to meet those goals, more emphasis on job creation is needed.

And because:

  • a significant percentage — between 20 and 50% — of those starting up businesses are unemployed or inactive individuals, and

  • starting a business offers some of those furthest from the labour market a real possibility of getting back to work,

achieving that 75% employment rate by 2020 means tapping the potential for entrepreneurship and self-employment more effectively.

As Commissioner for social inclusion as well as employment and social affairs, I am heartened to learn that microloan clients include many immigrants and young people.

European Microfinance Network figures show that while immigrants make up 6.2% of the population, they account for 13% of microloan clients. And 10% of microcredit clients were young people in 2009.

Ladies and gentlemen,

Difficulty in gaining access to finance is the one of biggest obstacles to starting up one’s own business.

In a 2009 Eurobarometer survey, 81% of the respondents from across the EU agreed that a lack of financial support made it difficult to start up a business. But access to finance alone is not enough, as people like you, who are closely involved in microfinance, know.

Other key factors such as outreach and business support services are also crucial to success in setting up viable micro-enterprises.

The main challenge for the European Union involves taking that complexity into account and providing support where it is most needed.

As you know, the European Progress Microfinance Facility is the first dedicated EU-level instrument for microfinance, and this year will be its first full year of operation.

To date, five microfinance-providers in the Netherlands, Belgium, Poland, Bulgaria and Romania have started to provide loans with guarantees or loans provided by the Microfinance Facility.

By the end of the year we hope that 14 microfinance-providers will be offering microloans with the support of the Facility. And over the coming eight years we expect to generate a total microloan volume of €500 million across the Union.

It is still too early to assess the Facility’s usefulness, but the initial response received suggests that the range of products offered by the European Investment Fund generally corresponds to the various needs of microfinance-providers in the EU.

The Facility’s demand-driven approach, the leverage it can generate in combination with EU resources, and the fact that there is no need for specific national or regional arrangements means it has real added value. The Facility also supplements similar initiatives developed by Member States, with the use, in some cases, of the EU Structural Funds.

Ladies and Gentlemen,

The Commission is currently working on the multiannual financial framework for the forthcoming period. By the end of the month it will be putting forward proposals for the broad priorities for EU spending for the period from 2014 on.

The question — and the title of this Conference — is who will be paying the ferryman?

For the Commission this raises the question of whether there is added value in the EU paying at a time of budget cuts. And if the EU does pick up the bill, will the ferryman do the work efficiently?

This means looking at the results achieved within the EU and at experience elsewhere. I welcome the links this conference draws between the challenges facing EU microfinance-providers and the lessons of experience from countries outside Europe.

Based on experience with the Progress Microfinance Facility,

I do see a case for stepping up EU support for microfinance. In addition, further investment is needed in two major areas from both a political and a financial viewpoint.

The first relates to the development of the microfinance market in the European Union. The capacity-building initiative Jasmine financed by the Commission provides the beneficiaries with free of charge technical assistance in the form of training, assessment and sometimes rating.

But we will need to do more if we want the EU microfinance market to achieve maturity.

This is why I intend to propose that the Microfinance Facility provide financial support for capacity-building in microfinance institutions over the next financial period. This could take the form of equity investment in microfinance institutions and, possibly, in other social enterprises. I would be happy to hear the views of the EMN members on these ideas.

Once more, financing will not be enough on its own. The Commission will work with the Member States to ensure that the regulatory environment is conducive to the sector’s development.

We also need to pay attention to the lessons to be learnt from abroad, keep a close eye on the quality of the services provided. The code of conduct currently being drafted in conjunction with the sector itself is a step in the right direction.

The second major area where further investment is needed is the subject of this conference.

Microfinance needs to be part of an overall policy for entrepreneurship support that is specially geared to groups who are in a less favourable position in society.

At EU level, this means joining up all support measures available to provide seamless connections between welfare systems, general entrepreneurship support and microfinance.

The European Social Fund is a key player here. In the current programming period, an estimated €2.75 billion has been allocated to support for entrepreneurship.

For the period after 2013, the European Social Fund will continue actively to help meet the goals set in the Europe 2020 Strategy. I expect a substantial percentage of Social Fund financing to be invested in people who want to start up their own businesses.

I rely on the Member States' political determination to use the European Social Fund to implement a coherent policy agenda that considers entrepreneurship and microfinance as ways of creating jobs and combating against exclusion.

The Commission will support them in their efforts by making the necessary data available and offering targeted consultancy and support services to business development services in the Member States.

This needs to be worked out in close cooperation with the microfinance sector and business development service-providers.

Such networks as the European Microfinance Network are our key partners here.

I wish you a very fruitful conference.

Thank you.

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