In November 2009, EIF issued a working paper on the European microfinance market. In this study, we found that there are wide spectra of final beneficiaries and intermediaries and concluded that there is no common microfinance business model in Europe. While our findings suggested that the microfinance market is immature and fragmented, they also pointed to its growing importance as a market segment with a potential to counter poverty and unemployment while fostering financial and social inclusion. The main findings of our initial research with regard to the structure of the European microfinance market are still valid. This new report provides updated and additional information about the European microfinance market and current developments in the microfinance area. Moreover, it gives insights into the intervention logic, rationale for EU support, and mandate development considerations of the EIF in this field. More precisely, following a short introduction, we provide in the second section (general market overview) updated information for selected aspects of microfinance in Europe. The third part explains the rationale for public support in the microfinance area and focuses on the chosen approach for the current Progress Microfinance mandate. This intervention logic is based on the market structure and its significant diversity. It seeks to maximise outreach through a flexible investment approach in terms of eligible types of investments and types of financial intermediaries. Hence, in a fourth part, we provide classifications of various intermediary business models and relate suitable financial product designs to their heterogeneous financing needs. Based on the experience gained during the first implementation phase of the Progress Microfinance mandate section five points out possible opportunities for further market developments. Section six finally provides some concluding remarks.
