EU unveils microfinance fund to tackle unemployment

"The economic crisis will lead to 3.5 million job losses in the EU this year. The financial crisis has dried up credit to those wishing to start or develop their own businesses," said Employment and Social Affairs Commissioner Vladimír Špidla.

"In the current recession, we want to offer a new start to the unemployed through easier access to credit to set up or develop new businesses. And we want to help small businesses to develop further despite the crisis. This will help create new jobs. The EU can provide real added value by maximising leverage in cooperation with the EIB Group, giving more people a chance to realise their dreams as entrepreneurs."

Eurochambers, the association of European chambers of commerce, welcomed the new facility as "a valuable tool to stiumulate entrepreneurship and create jobs". Thanks to the fund, people wanting to start their own micro-entreprise will be able to obtain loans of up to €25,000, Eurochambers underlined, and receive assistance with mentoring, training and coaching. "Give a man a fish, you have fed him for today. Teach a man to fish, and you have fed him for a lifetime. This is the ethos that will lead Europe out of recession," said Arnaldo Abruzzini, Secretary General of Eurochambres. "This scheme is not just about finding one new job for one unemployed person. Helping someone set up a new business can have a significant multiplier effect by generating additional jobs," he added.

The new microfinance facility was welcomed by Giles Chichester MEP (UK Conservative), who said small businesses and entrepreneurs "will pull our economies out of this recession". 

"This fund is a small seed corn for people who want to help themselves and provide employment for others. British small businesses currently employ around 60% of the private sector workforce. Many people have tried to turn their ideas into a business or expand, but without support from the banks many have floundered. This fund will easily pay for itself and will create a strong foundation for economic growth in the future." 

"We must do our best to pass this facility swiftly through the parliament. Many small businesses need the support as soon as possible."

Liliane Volozinskis, Employment and Social Affairs Director at UEAPME, the European craft and SME employers’ organisation, welcomed the plan but said banks must pass on the loans to companies. 

"The suggested joint EIB-EC €500 million micro-credit fund clearly has the potential to facilitate access to finance on one hand and to promote the creation of new businesses on the other hand. However, its success will largely depend on the willingness of intermediary institutions to pass on the EU funds to the potential recipients. Our experience so far shows mixed results in this respect, which does not bode well for the success of this scheme."