Banks and microfinance in Europe

Europe is characterised by a dense network of banks with over 8 300 financial institutions. Despite this reality, microfinance provided by non banking institutions has emerged in the last twenty years as a genuine alternative for thousands of micro entrepreneurs, who have been refused access to credit by the mainstream banks.

The special links created between the non banking institutions and the banks have been a key factor in the growth of this sector. The banks entered this new market with a range of different models and approaches. While most banks prefer to provide support to MFIs, some are also starting to offer microfinance directly. As the sector becomes more visible and more mature, relationships between the actors are evolving.

New initiatives (particularly from the EU) will provide further funding for the sector but it is not clear if this will be channelled through the banks, the non financial institutions or both. Some national governments are putting pressure on the banks to downscale their activities in this area.