Microfinance works in rich countries too, EU says

Over the past two years the EU's Progress Microfinancing Facility guaranteed about 5,000 microloans totalling 27 million euros to citizens, the EC said on Tuesday.

The scheme, launched in 2010, provides guarantees and equity to microfinance lenders in EU member states, and has been used to give backing to people wanting to set up small businesses, to trade, or even to go into farming.

They in turn dole out loans of less than 25,000 euros to people underserved by traditional banks because they are deemed too risky, such as young entrepreneurs who lack collateral.

A total of 203 million euros has been set aside for the programme by the European Investment Bank and the EC, which they hope will result in 46,000 2-3 year loans by 2013.

The EC said the scheme was already a success, with more than 20 microcredit lenders participating, in 13 EU countries.

"By providing access to microfinance to create jobs, particularly for disadvantaged people, the facility has proved to be an important social investment tool that should continue," EU Commissioner Laszlo Andor said.

NOT JUST FOR DEVELOPING COUNTRIES

Muhammad Yunus's receipt of the Nobel peace prize in 2006 for his work with Bangladeshi microlender Grameen Bank brought international attention to microfinance as a way to provide low-cost credit and fight poverty.

About 2.5 billion adults around the world have no access to a bank account, leaving them without a credit history and outside the loan market, according to a survey by French think tank Convergences 2015.

And although there have been jitters in a few countries, the popularity of microfinancing in the developing world remains high.

There were over 105 million borrowers with 54 billion euros in loans at the end of 2010, data from the MIX market, which monitors microfinance providers.

But microfinance has lagged as a financing tool in the developed world.

"It is more difficult for these people to reach microfinance because it is less known by the public and by people who could need microfinance but do not know that these type of services exist in their country," said Convergences 2015's Faustine Delasalle.

In France, microlending created 57,000 jobs in 2011, Convergences said.