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Financial institutions and supply of financial services in the European microcredit market: a survey of selected countries’ experiences

Sergio Lagoa
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Sergio Lagoa: Instituto Universitário de Lisboa – ISCTE and Dinamia’CET-IUL

Working papers from Financialisation, Economy, Society & Sustainable Development (FESSUD) Project

Abstract: In this paper we review the country experiences of eight national European microfinance markets in order to study the impact of different types of financial institutions in the supply of financial services. Our study shows that national differences are large and the most important institutions are distinct in each country. The general economic environment affects the development of microfinance, and there is some substitutability between the formal banking sector and the microcredit sector. Nevertheless, the collaboration of Microfinance Institutions (MFIs) with banks (commercial banks and savings banks) and the participation of banks in the microcredit sector is a factor that enhances the growth of the market. The public sector, the non-for-profit MFIs, savings banks, cooperative banks, and CUs are one of the main drivers of growth in the microcredit sector. However, there is a large dependence of institutions on public funds, and they may not be able to sustain their activities if these funds cease. An increase of institutions’ specialisation and dimension are important steps to improve their financial sustainability. Local presence through a network of branches seems to be important for MFIs success. Local knowledge can also be achieved by collaborating with social support institutions that help to reduce operational costs and screen and support clients.

Keywords: microfinance; financial institutions (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2014-11-01
New Economics Papers: this item is included in nep-cfn and nep-mfd
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