A microfinance scheme funded by the European Union is to be launched in next week's Budget, The Times Business has learnt.
Microfinance is the provision of financial services to low-income clients, small businesses and the self-employed that traditionally lack access to banking and related services.
Last July, the European Commission launched a €100 million microfinance facility to provide microcredit to small businesses and to people who have lost their jobs and want to start their own small businesses. The Commission had said the new "Progress Microfinance Facility" should be operational by next year.
The exact value of the EU funds to be made available for local small businesses will be announced by Finance Minister Tonio Fenech in his Budget speech on Monday.
When launching the €100 million microfinance facility last summer the European Commission had said that the current economic downturn started as a financial crisis prompted by severe liquidity problems: Banks stopped lending to each other and also stopped lending to people to do business and create jobs. The new microfinance facility, the Commission said, aims to make it easier for people who, in the current context of reduced credit supply, might have difficulties in accessing funds for business start-ups.
"Workers who have lost their jobs or are at risk of losing them and want to establish their own businesses will have better access to funds and benefit from additional support measures such as mentoring, training and coaching. Disadvantaged people, including the young, who want to start or further develop their own small businesses, will also benefit from guarantees and assistance in preparing a business plan," the Commission said.
The Commission had said the initial budget of €100 million is expected to leverage €500 million of credit in cooperation with international financial institutions such as the EIB Group.
"This could result in around 45,000 loans over a period of up to eight years. In addition, the possibility to apply to the loans interest rate rebates from the European Social Fund will make it easier for people to access the funds," it said.
Microcredit in the EU means loans under €25,000. It is tailored to micro-enterprises, employing fewer than 10 people (91 per cent of all European businesses), and unemployed or inactive people who want to go into self-employment but do not have access to traditional banking services. Nintey-nine per cent of start-ups in Europe are micro or small enterprises and one third of these are launched by people who are unemployed.