The European Commission will directly manage the EaSI technical assistance, working closely with the Frankfurt School of Finance and Management and MicroFinanza Rating.
Building a more inclusive and equitable alliance is a top priority for the European Commission, which has recognized the potential of microfinance and social enterprises to promote job creation, inclusive entrepreneurship and social inclusion.
The EaSI Microfinance Technical Assistance Program supports microfinance institutions in building their institutional capacity. These include a range of activities:
Institutional assessment and rating
Tailored training and training on the European Microfinance Code of Good Practice
Help desks, workshops and seminars to promote knowledge sharing
EaSI microfinance technical assistance is divided into two tranches:
Frankfurt School of Finance and Management is leading an alliance with the European Microfinance Network and Microfinance Centers to provide tailored training, code helpdesk training, workshops and seminars.
MicroFinanza Rating will conduct institutional assessments and ratings of microfinance institutions.
MFIs that have signed the European Code of Good Practice for Microfinance Supply, as well as those selected in the previous call for expressions of interest for technical assistance, can continue to benefit from EaSI technical assistance services.
History of Microfinance
Microfinance was born in 1983 when Muhammad Yunus, a Bangladeshi social entrepreneur, founded Microfinance, and in 1983 Yunus established the Grameen Bank in Bangladesh. Grameen Bank’s initial goal was to provide small loans to entrepreneurs.
Yunus’ vision for microfinance was inspired when he saw women making bamboo stools in Bangladesh earning two cents a day. He decided that if these women could rely on loans, they would be able to increase their profit margins and earn more substantial profits. After giving them a $27 loan, following a collective model, the women were able to repay the loan and keep their business running.
Microcredit savings accounts can also be linked to microcredit; creditors can choose to include loan covenants. The loan covenant requires the borrower to set aside a portion of the profits in the financial institution’s savings account as collateral until the loan is repaid. Thus, it provides some protection for creditors, and if the loan is repaid, the borrower receives interest on the savings from the money deposited in the savings account.
In 2006, Yunus was awarded the Nobel Peace Prize for his efforts with the Grameen Bank. The bank currently oversees i2,500 operating locations and employs about 22,000 people. In addition, there are currently 10,000 microfinance institutions.
The pros and cons of microfinance
Many believe that microfinance is very beneficial because it provides financial opportunities for people in poor countries or from low socioeconomic backgrounds. Another benefit of microcredit is that it encourages people to be financially independent and provides them with the financial flexibility to be able to cover any large unforeseen expenses.
In addition, microfinance helps provide financial services to people in remote areas where traditional financial institutions do not have a presence. It also provides education. Finally, microcredit can encourage entrepreneurial activity and business development in poor areas.
Some of the disadvantages of microcredit include the claim that it can take advantage of those in financial difficulty, a situation similar to that of a loan shark. Some microcredit may contain interest rates of up to 30% or more. In addition, according to several studies, recipients of microcredit do not realize that their annual net income has increased.
