Microcredit demand in the EU has increased as a result of the economic and financial crisis. To support the sector, the European Commission launched, in the beginning of 2009, the JASMINE initiative (Joint Action to Support Micro-finance Institutions in Europe). The objective is twofold: to provide technical assistance to microfinance institutions to help them become credible financial intermediaries and obtain capital more easily; and to bring financial aid to the most promising microfinance institutions so that they may grant more loans to project holders. The aid given must enable microfinance institutions to become financially autonomous so that they may adapt to increasing microcredit demands.

Europe’s regions can benefit directly from schemes such as JASMINE. “Activities requiring microcredit are generally found on a more local scale,” explains Cyril Gouiffès, JASMINE project coordinator within the European Investment Fund, who oversees the initiative. However, unlike other programmes for microenterprises, such as JEREMIE (Joint European Resources for Micro to Medium Enterprises), JASMINE does not directly concern regions or member states, but rather finance institutions.

Having been originally designed to help microfinance institutions grow, JASMINE has seen its activities extended so as to include more mature institutions. “The spectrum is now much larger,” explains Gouiffès. This is most visible in Central and Eastern Europe where, until recently, the majority of finance institutions were strong enough to benefit from private financing alone. However, due to the crisis, private investors, such as banks and investment funds, are now unable to finance microfinance institutions, be they in Eastern or Western Europe. As a result, microfinance institutions are looking increasingly towards public investors, such as the European Investment Bank.

FROM INDIVIDUALS TO ENTERPRISES

What public is targeted by the initiative? Typically, older member states have a more social approach to microcredit. Applicants are more often than not welfare beneficiaries, minorities or socially excluded people. In Central and Eastern Europe, however, applicants tend to be microenterprises, with ten employees or less, based on a much more commercial approach. Microcredit beneficiaries are likely, for example, to open up a neighbourhood food shop, rent a space to provide fast-food services, or even go round markets selling clothes. They are entrepreneurs unable to provide adequate guarantees and are therefore excluded from traditional finance services.

Given the decrease in banking activity, it is not surprising that microcredit’s market share has increased since the beginning of the crisis. Microcredit encourages the self-employed, all the more so in the context of the Lisbon Strategy for Growth and Jobs, and is a vital element for economic growth and reducing unemployment. Increased demand for microfinancing requires funding for microfinance institutions, especially since applicants are often project holders without access to traditional bank financing. The average value of microcredits in the EU has increased in recent years from €7,000-€8,000 at the end of 2007 to €8,000-€10,000 today.

Background

What:JASMINE contributes to the development of microcredit in Europe by providing microfinance institutions with technical and financial assistance. It associates the European Investment Bank (EIB), the European Investment Fund (EIF), the European Commission, as well as public and private banks, the European Parliament and various donors.

How much: The EIB has established a co-financing system of a total of 20 million euro, managed by the EIF. A maximum of 50% of the funds come from the EIB and are co-financed with funds from private partners. Co-investors participate according to a clearly identified financing project. From now until the end of the pilot phase, the total sum of allocated resources for the financial support of microfinance institutions is 40 million euro on top of the eight million euro given to the EIF by the European Parliament. The Commission’s Directorate-General for Regional Policy will also provide resources for technical assistance related to activities in the context of JASMINE’s non-financial services.

Current status:The joint action began its pilot phase in January 2009. This will last three years. An operation has already been approved and signed with Coopest, which supports social economy initiatives in Central and Eastern Europe. Other operations have been approved but not yet signed. The target is to sign four of these this year.

Contact: JASMINE team within the IEF: +352 42 66 88 1 – Fax: +352 42 66 88 280