European Commission
Enterprise and Industry
Regulating micro-credit in
Europe
«SMEs and Entrepreneurship – Successful Local Strategies »
Porto, 7 December 2007
Cindy Fökehrer
Regulating micro-credit in Europe
Structure of presentation:
• Who are the providers?
• How are they regulated?
• What can be done to improve the
provision of microcredit?
Terminology
• Micro-credit: a loan up to € 25 000
• Provider: any formal organisation that
has as its primary purpose to provide
loans up to € 25 000 for entrepreneurial
activity
Legal entities involved
• Banks
 Commercial banks
 Savings banks
 Co-operative banks
• Public banks
• Financial co-operatives, credit unions
• NGOs (various forms)
• Government-run and/or governmentowned financial service entities
Types of regulation
• Prudential regulation (and supervision)
 “Banking law”
 At European level: Capital Requirements Directive
• “deposit-taking”
• Non-prudential regulation
 Protecting against abusive lending and collection practices
 Protecting against fraud and financial crimes
• Other “non-prudential regulation”
 Tax issues
 In a wider sense:
• social security systems,
• regulatory environment related to entrepreneurial activity:
business registration,
• etc. …
“Special window”
France
 Exemption for special organisations to
lend directly to their borrowers
• For special target groups
 Elimination of usury rate
+ a fund: “Borloo” law on social cohesion
Romania
 Law on microfinance companies No. 240
 Government ordinance 28
“Enabling regulation”
UK
• Community Development Finance Institutions
(CDFIs)
• Code of Conduct
“Regulation as promotion”
• Tax incentives:
 UK: Community Investment Tax Relief (CITR)
 IRL: Seed capital scheme
 NL: Tante Agaath Regeling
European Commission
Enterprise and Industry
Report 31.04.2007
26 experts from 20 Member
States and two European
practitioners:
Austria, Belgium, Bulgaria,
Cyprus, Czech Republic,
Finland, France, Germany,
Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg,
Portugal, Romania, Slovak
Republic, Sweden, Turkey
and United Kingdom.
Recommendations of the report
1. Allow for lending by non-banks
2. Avoid setting interest rate caps too low
3. Ensure minimum legislative standards
for non-banks
4. Create a favourable general
environment for micro-enterprises
The micro-credit initiative
• “A European initiative for the
development of micro-credit in support
of growth and employment”
COM(2007) 708 final adopted on
13.11.2007
The micro-credit initiative
Four strands:
1.Improving the legal and institutional
environment in the Member States
2.Further changing the climate in favour
of entrepreneurship
3.Promoting the spread of best practices,
including training
4.Providing additional capital for microcredit institutions
Useful links
• Policies on access to finance
 europa.eu.int/comm/enterprise/entrepreneurship/financing/
 http://europa.eu.int/comm/enterprise/entrepreneurship/financing/
publications_documents.htm
• Financial instruments
 europa.eu.int/comm/enterprise/entrepreneurship/financing/instrum
ents.
htm
 http://eif.org
• CIP programme:
 http://europa.eu.int/comm/enterprise/enterprise_policy/cip/index_e
n.htm
• JEREMIE programme:
 http://ec.europa.eu/regional_policy/funds/2007/jjj/jeremie_en.htm
Contact
Cindy Fökehrer
Enterprise & Industry Directorate-General
Financing SMEs, entrepreneurs & innovators
European Commission
B-1049 Brussels
Fax +32 2 295 21 54
Email: verena.foekehrer@ec.europa.eu