Implementing micro lending in financial institutions

The micro-lending industry in the EU and the USA is young and small and the industry still has to legitimise itself. However, the research team believes that micro lending is there to stay. It offers several advantages compared to some of the alternatives like direct public income support schemes. The principal difference is commitment and responsibility - a loan has to be paid back.

It is still however premature to conclude what types of micro-lending schemes will be seen in the future. The research team does however see some general trends in the industry.

First and foremost, we believe that greater professionalism is sure to arrive: Many donors and clients require professional services delivery and specialisation. Certain micro-lending schemes need to focus on fewer target groups and products. It is better to deliver one good product then trying to serve everybody with bad services.

Secondly there will be a tendency towards standardisation. Standardised accounting procedures and calculation of performance indicators makes comparisons between different providers possible, which enables the clients and the donors to opt for the best performing institution.

Thirdly, the financial institutions must improve matching of instruments and different target clients. Credit is only one of the financial instruments banks can offer.

Finally, the financial institutions need to realise that a large part of the micro entrepreneurs in the EU have an ethnic background that differs from the national background. If a financial institution wants to reach these groups to ensure the inflow of future clients, the organisation should implement measures like the employment of ethnic staff, to attract them.