Commission targets creation of a European microcredit industry
Europe must take steps to promote a more favourable environment for the provision of microloans to small enterprises, a high level conference organised by the Commission has been told. Microcredit is defined as loans below 25,000 euro, and experts believe that it plays a key role in fostering entrepreneurship. Such small scale financing is considered particularly useful in promoting self employment and the creation of small businesses in the service sector, where access to credit can be difficult. 'Microcredit has proven to be an efficient tool for promoting entrepreneurship and is therefore a key catalyst for individuals who are willing to create and develop their own businesses,' confirmed Commissioner for Enterprise and Information Society Olli Rehn. Commissioner Jan Figel', who shares Mr Rehn's portfolio, added: 'We should now focus on how to make microcredit more accessible for companies all across Europe so that this can be used as a real instrument for growth.' Already over 90 per cent of businesses are small enterprises, and there is a growing trend towards the creation of one person, self employed companies, particularly by those who find themselves out of work. When such small businesses require external financing, they often ask for amounts of less than 25,000 euro. However, the relatively high administrative costs of providing such small sums, combined with a perception that such ventures are normally high risk and low return, means that there is currently a deficiency of microcredit provision from the financial sector. In order to facilitate the emergence of a European microcredit industry, therefore, participants at the conference, including Commission President Romano Prodi, were asked to consider ways to increase the dynamism of the sector. Necessary conditions identified by the conference included: the dissemination of good practice among European networks and increased cooperation among financial and non-financial actors; an improved legal and regulatory framework for microcredit provision, adapting administrative, tax and social requirements to the needs of small businesses; the creation of synergies between financial enterprise policy instruments and European regional and social development funds. Such conditions, the conference argued, would allow the evolution of a true European microcredit industry and provide access to vital funding for millions of small businesses in the EU.