Role of Microfinance Institutions in Western Europe: A Paradigm Shift

by Prathima Rajan, April 27, 2010
Industry Trends
EMEA

Abstract

The financial crisis has created a social and economic crisis that has increased the level of unemployment and exclusion across the European Union. While microfinance in Europe has been a limited phenomenon until now, it could become a key tool against financial exclusion in the future.

Microfinance institutions (MFIs) in Western Europe represent a young sector offering financial support to those who could not otherwise obtain assistance from commercial banks. Despite the fact that Western Europe was late in adopting the concept of microfinance, it has seen growth due to growing interest in the SME segment and increasing unemployment and exclusion.

In a new report, Role of Microfinance Institutions in Western Europe: A Paradigm Shift, Celent examines the role of MFIs in Western Europe, explaining the model adopted with microcredit institutions in the region. The report presents a SWOT analysis of major markets, including France, Italy, Spain, Germany, and the UK.

As a result of the microfinance market’s composition, new players have emerged, developing P2P solutions to finance projects that might not otherwise have been selected by traditional market players. Approximately €550 Million is being lent online worldwide. Considering the current demand and advantages over bank lending like low interest rates and easy accessibility, Celent expects the online P2P lending market to hit €74 million by the end of 2012 in Western Europe.

“P2P online lending addresses a similar market demand (e.g., SMEs, individuals) with smaller loan sizes and could become a complementary solution to the existing European microfinance structure,” says Prathima Rajan, Celent analyst and author of the report. “P2P lending players operate with a social motive, lending to needy individuals or borrowers who are otherwise not qualified for personal loans from banks.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

5

MFIs in Western Europe...Preview

6

Prominent Microfinance Business Models

9

Operational Differences Between Markets

13

Savings Banks Particularly Helpful to MFIs

16

Key Findings from Major Western European Markets

19

 

France

19

 

Germany

21

 

Italy

23

 

Spain

25

Online Peer-to-Peer Lending in Europe

29

 

BabyLoan

31

 

Boober

33

Conclusion

35

 

Key Findings

35

Leveraging Celent’s Expertise

37

 

Support for Financial Institutions

37

 

Support for Vendors

37

Related Celent Research

38

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