Hanse-Passage Project “SUSTAIN”: „Microcredit – A Tool to support SME” Thomas König Agrarsoziale Gesellschaft e. V. Göttingen Germany

Outline: 1.Origin of microcredits 2.Experiences from various Hanse-Passage regions 3.Characteristics of the examples selected 4.Applicability of the microcredit approach 5.Conclusions

1. Origin of microcredits founded in Bangladesh in the 70s, now spread globally dedicated to people with no or limited access to the financial market Basic assumption: poor people are able to use loans economically and use borrowed money in a responsible manner The loan security system emphasis on social system  Microcredits support poor people to borrow money and use it efficiently; not by donating grants!

2 a. Experiences Founded in 1989 Largest provider in the EU Nationally organized Target groups: unemployed and recipients of welfare benefits Limited loans Founded in 2004 National umbrella organisation supporting microlenders Interface between microlenders, banks, borrowers

2 b. Experiences Founded in 1976 Charity organisation, offering loans and grants working nationally Target group ‘those who need it most’, young people, long-term unemployed Pay-back rate for loans is relatively low but becomes more important Central and Eastern Europe Totally different market approach Began soon after the fall of the Berlin Wall MFI focus more on existing enterprises than on start-ups MFI offers loan to bridge a financial gap of the running business Both, NGO and banks are involved

2. Overview EU-15 –75 microfinance providers EU-15. Almost half of the programs were founded in 2000 or later (68 %) –Biggest microloan schemes: France (ADIE) and Finland (Finnvera); both provide nearly 80% of all microloans in 2003 –Total number of loans made in ,436 loans (n=75 MFIs). –69 % of microlenders made 100 loans or fewer in 2005 Source: Evers & Jung

3. Characteristics The MFI’s performance strongly depends on the national legal frame All MFIs support their financial offers with non-financial services Most MFIs work target group oriented The loan security system differs from the ‘normal’ bank’s security requirements

4. Applicability Numerous examples of good practices do exist! Necessity of involving banks, gov., experienced organisations, other local stakeholders Assessment of the existing situation (e.g. regulations, target groups, demands and offers) is essential Keep in mind the social aspects and the loan security system’s design in this respect

5. Conclusions Microcredits are a market niche and reach a relatively small group of clients. Microlending is more than only a financial instrument, but is mainly a social oriented approach. (Local) governments play an important role. The decreasing availability of public funds urges new forms to use the public money effectively. Learning from the South is a new quality of international know-how transfer.