Navigation path

Additional tools

Special support instruments

JASMINE - European Code of Good Conduct for Microcredit Provision

Download - European Code of Good Conduct for Microcredit Provision Why a Code of Good Conduct for micro-credit providers in the EU?

The European microcredit(1) market is a young and growing sector which has considerable potential. However, this market is still quite heterogeneous due to the disparity of the legal and institutional frameworks in the Member States and the diversity of the microcredit providers.

As a consequence, lending practices in microcredit vary considerably depending on the type of institution providing micro loans, its legal setup, the environment in which it operates and its own ability to apply sound and efficient management procedures.

Under these circumstances, the design of a widely accepted voluntary "European Code of Good Conduct for Microcredit Provision" PDF bg de el en esfi fr hu it nl pl pt ro sk sv was identified by the Commission as an important element to promote best practice in the field of microcredit(2).

The European Code of Good Conduct was designed in the framework of JASMINE(3), a pilot project developed in the aftermath of a Communication on microcredit adopted by the Commission in November 2007 and also feeds on work carried out previously on the regulation of microcredit in Europe(4).

Download - European Code of Good Conduct for Microcredit Provision Download - Leaflet

The objectives of the Code

The objective of the Code is to set out good practice guidelines that will better enable the sector to face the challenges of accessing long-term finance.

The aim is to provide a document benefiting funders, investors, customers, owners, regulators and partner organisations.

Core principles

The Code is built on recognised best practice in the microfinance sector.
It has been developed in close consultation with many stakeholders of the microcredit sector in the EU.
Representatives of the banking and non-banking sector such as academics, funders, investors, customers, owners, regulators and partner organisations were involved in this project.
The development of the Code has been guided by the following principles:

  • An emphasis on incorporating specific and measurable content on the basis of which microcredit provider managers and board can take action to enhance their organisations.

  • An emphasis on developing a Code that is adjusted to the diversity of microcredit providers in the EU in terms of market conditions, institutional forms and legal frameworks.

  • An emphasis on raising standards by balancing the need to introduce best practice with realistic operational expectations of the providers.

A guide organised in a practical way

The Code is divided into five indexed sections comprising several clauses:

  1. Customer and investor relations: This section covers obligations of microcredit providers towards customers and investors, and rights of customers and investors;
  2. Governance: This section covers standards for both management and the board of microcredit providers;
  3. Common reporting standards: This section details which indicators microcredit providers must collect, report and disclose;
  4. Management Information Systems:This section details common standards for management information systems;
  5. Risk management: This section details common approaches and procedures for managing risk.

Using symbols

Each clause is typified by 3 symbols highlighting the following:

  1. Priority clause :
    A priority clause indicates its high importance;

  2. Level of difficulty :
    Three levels of difficulty to implement a specific clause are defined (Low, Medium, High);

  3. Large providers only :
    Indicates a clause applying only to large microcredit providers (i.e. having more than 7000 active borrowers and more than 70 employees).

A Code aimed at a large audience

The Code of Good Conduct is primarily addressed to non-bank microcredit providers which make available to micro-entrepreneurs or self-employed people loans of up to €25,000.

It is intended for microcredit provider managers, directors, customers, investors, funders, owners, regulators and partner organisations.

For customers, it is a tool to ensure that they are treated in a fair and ethical way.

For investors and funders, it ensures that the sector operates with transparent and pan-EU reporting standards.

For regulators, it gives reassurance that the sector operates according to sound business practices and principles and that it is well governed.

For the Commission, it provides a way to harmonise best practices in the European Union and promote common measures in the sector.

Pilot phase (November 2011 – December 2012)

A pilot phase to test the "European Code of Good Conduct for Microcredit Provision" took place from November 2011 till December 2012 with a number of volunteer organisations.

Its aim was to identify potential implementation problems and to clarify clauses where deemed necessary. The experience in applying the Code and feedback collected from these organisations gave raise to an update of the European Code of Good Conduct for Microcredit Provision (Version 2.0)

List of organisations that participated in the pilot phase

ADIE

Adie was created in 1989. Adie's mission is to finance and support the unemployed who wish to create their own business and who cannot get a standard bank loan. Furthermore, Adie relies upon its experience to make improvement suggestions for the existing regulatory framework governing microenterprises and microfinance. Adie finances the self-employed and microenterprises through a variety of financial products. In addition, the staff and volunteers provide business developing counselling to microentrepeneurs.

http://www.adie.org
DMIDeutsches Mikrofinanz Institut e.V. (DMI)

Founded in April 2004, DMI is the national network of microfinance institutions (MFIs) in Germany. The central mission of DMI is to develop and ensure a responsible and high quality provision of microloans. DMI accredits MFIs on the basis of the DMI accreditation scheme. It advises and trains microfinance actors, including MFI management and loan officers. DMI has built up experience, gained in pilot projects and European/international successful microlending projects, and constantly develops new tools for the sector.

http://www.mikrofinanz.net
FEAFejér Enterprise Agency

Fejér Enterprise Agency (FEA®) was founded in 1991.

The mission of the Foundation is to provide high-level, easily accessible financial, advisory and training services in the Transdanubian region to start-ups and existing micro and small enterprises in order to improve their skills and abilities which enable them to make their social standing and living standards better.

In 1992, Fejér Enterprise Agency was among the first to start its non-profit microcrediting activity within the scope of the PHARE Microcredit Programme. This activity is still the most significant of all the activities, since this programme has reached the highest number of clients and provided the most efficient support for the target group of FEA. Also, this activity ensures sustainability for the Foundation.

The microcrediting practice of FEA® was included among the five best practices at the Microfinance Good Practices "European Award" 2009 in the field of Innovations and Sustainability, and in 2011 the Foundation won the Investment and Innovation in Microfinance Europe Award in the category of Innovative Use of Technology.

http://www.rva.hu
PAGPAG Uniconsult Ltd.

Consulting company representing the Polish Union of Loan Funds in the proces of piloting the European Code of Good Conduct for Microcredit Provision. List of members of the Union includes 45 Polish organizations offering microcredit services (loan and microloan funds).

http://www.pag-uniconsult.pl
http://www.pzfp.pl
PermicroPerMicro

PerMicro is a microcredit institution born in 2007 with the aim of giving an opportunity of social and financial inclusion to the "unbankable". Operating initially in the multi-ethnic neighborhoods of Turin, PerMicro has grown to the national level by opening 12 territorial branches through all Italy. PerMicro intends to: reach important social goals, such as financial inclusion and individual or family development paths; offer financial services under fair and clear conditions; reach economic self-sufficiency in the medium-long term, matching social goals with efficient organizational business model.

http://www.permicro.it
QreditsQredits

Qredits started operations on January 1, 2009 and is the only nationwide operating Microfinance Institution in The Netherlands. Qredits' mission is to provide financing and coaching for micro-entrepreneurs in the Netherlands that have a viable business plan, yet are unable to obtain loans and/or coaching through regular channels. Qredits offers microcredit up to €50.000 for start-ups or existing businesses as well as a variety of practical business tools designed to help entrepreneurs succeed.

http://www.qredits.nl
Key FundThe Key Fund

Founded in 1999 Key Fund has been providing a mixture of flexible grant, loan and equity packages. The fund has invested over 37.5 million Euros (to date).
Key Fund itself is a social enterprise and understands the unique difficulties faced by similar organisations when looking to develop and grow. Our mission to break down the barriers to accessing finance, enabling organisations to increase their community, social, economic and environmental impact.

http://www.thekeyfund.co.uk/
Prince's TrustPrince's Trust

The Prince's Trust runs programmes that encourage young people to take responsibility for themselves – helping them build the life they choose rather than the one they've ended up with:
The Enterprise Programme provides money and support to help young people start up in business.
The Team Programme is a 12-week personal development course, offering work experience, qualifications, practical skills, community projects and a residential week.
Get intos are short courses offering intensive training and experience in a specific sector to help young people get a job.
Development Awards are small grants to enable young people to access education, training or work.
Community Cash Awards are grants to help young people set up a project that will benefit their community.
xl clubs give 13-19 year olds who are at risk of truanting, exclusion and underachievement a say in their education. They aim to improve attendance, motivation and social skills.

http://www.princes-trust.org.uk
VITASVITAS IFN SA

VITAS IFN S.A. is a Romanian for-profit company founded by CHF International and currently owned by VITAS Group established to provide micro, SME loans and home improvement loans to entrepreneurs, individuals and home-owners associations throughout west side of the country. Vitas has focused their efforts on MSMEs because they feel strongly that small, local businesses generate the most significant employment, and therefore have a vital role to play in the country's economy and communities they operate in.

http://www.vitasromania.ro

How to sign-up to the Code?

Organisations interested in implementing the code are invited to sign-up to it, as a formal engagement to apply its clauses in their organisation.

As part of this process, a non-bank microcredit provider is requested to:

  1. Sign a document declaring its intention to apply the code on a voluntary basis (Sign-up form) and send it to:
    European Commission - DG Regional Policy
    Unit B3 – Financial Instruments and relations with International Financial Institutions
    Avenue de Beaulieu 5
    B-1160 Brussels
  2. Complete a self-assessment questionnaire allowing estimation of the degree to which it is implementing the clauses of the Code at the beginning of the process;
  3. Implement the Code in their organisation;
  4. Submit to the evaluator (contractor) to verify the compliance with the Code.

Code Implementation process

Organisations that already signed-up to the Code

Fair financeFair Finance

Fair Finance

http://www.fairfinance.org.uk/
United Kingdom
FEAFejér Enterprise Agency

Fejér Enterprise Agency (FEA®).

http://www.rva.hu
Hungary
PermicroPerMicro

PerMicro.

http://www.permicro.it
Italy
QreditsQredits

Qredits.

http://www.qredits.nl
Netherlands
CAR Sanitar Brasov
CAR Sanitar RM Valcea
CAR TRACTORUL BRASON
SC VITAS  INSTITUTIE FINANCIARA NEBANCARA SA

www.vitasromania.ro

Romania
CAR-IFN-CFR  RM VALCEA

www.cfrvalcea.ro

Romania
ROCREDIT IFN SA

www.rocredit-ifn.ro

Romania
ACAF

www.comunitaautofinanziate.wordpress.com

Italy
CAR SANATATEA TARGU MURES
Romania

A methodology as guidance and to assess the Code’s implementation

The proposed methodology, developed by the Community Finance Solutions (University of Salford), is intended to provide guidance to organisations as regards the implementation of the Code and to allow assessmenting of whether an organisation complies correctly with the Code. The methodology provides an overview of the monitoring process to be performed by the evaluator (future contractor) from sign-up to post-evaluation and support to the microcredit providers. It also provides a self-assessment tool, also at the intention offor the microcredit providers implementing the Code.

Methodology to monitor the implementation of the ‘European Code of Good Conduct for Microcredit Provision’ by microcredit providers
Microcredit provider guidelines PDF en
Evaluator methodology PDF en
Self Assessment Tool PDF en - xls en

The Commissions intends to launch, in the course of 2014, a call for tender to select a contractor that will perform the evaluations mentioned in the Methodology. Of course, in the meantime, interested (non-bank) microcredit organisations are invited to sign-up up to the Code on a free basis and start its implementation.

Endorsing the Code

Organisations that are already complying with the banking legislation and the Capital Requirement Directive and are supervised accordingly, such as banks, savings banks or cooperative banks, are only requested to declare formally their agreement with the principles of the Code, through the signature of an endorsement form to be sent to:

European Commission - DG Regional Policy
Unit B3 – Financial Instruments and relations with International Financial Institutions
Avenue de Beaulieu 5
B-1160 Brussels

By endorsing the Code they recognise the importance of the Code as a tool to raise standards for the benefit of providers and customers and recommend its sign-up by non-bank microcredit providers.

Organisations that endorsed the code

CoopEst
CoopEst
http://www.coopest.eu/
Belgium
PAG
PAG Uniconsult Ltd.
http://www.pag-uniconsult.pl/en/index.php
Poland
 
National Association of Credit Unions
www.uncar.ro
Romania
 
MICROFINANCE CENTRE (FUNDACIA MICROFINANCE CENTRE / MFC Sp.zo.o.)
www.mfc.org.pl
Poland
 
EUROP CONSULTANCY AND STUDIES SRL
www.eurom-consultancy.ro
Romania

Useful links

European Code of Good Conduct for Microcredit Provision PDF bg de el en esfi fr hu it nl pl pt ro sk sv

JASMINE:
http://ec.europa.eu/regional_policy/thefunds/instruments/jasmine_en.cfm
http://www.eif.org/what_we_do/microfinance/JASMINE/index.htm?lang=-en

JASMINE Helpdesk: http://ec.europa.eu/regional_policy/thefunds/instruments/jasmine_helpdesk_en.cfm

"A European initiative for the development of micro-credit in support of Growth and Employment"– COM (2007) 0708:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2007:0708:FIN:en:PDF

Regulation on microcredit:
http://ec.europa.eu/enterprise/newsroom/cf/itemshortdetail.cfm?item_id=714

European Small Business Portal (Access to finance):
http://www.access2finance.eu/
http://ec.europa.eu/small-business/funding-partners-public/finance/index_en.htm

Progress Microfinance:
http://ec.europa.eu/social/main.jsp?langId=en&catId=836

(1) Microcredit is defined by the EC as loans up to EUR 25,000, tailored to micro enterprises (those with up to nine employees) and people who would like to become self-employed but are facing difficulties in accessing the traditional banking services. Throughout the EU, micro enterprises represent 91% of all European businesses. Moreover, 99% of all start-ups in Europe are micro or small enterprises and one third of those were launched by unemployed people.

(2) "A European initiative for the development of microcredit in support of Growth and Employment"– COM (2007) 0708

(3) Joint Action to Support Microfinance Institutions in Europe launched by the Commission and the EIB-Group in September 2008 to help microcredit providers to develop quality and become sustainable.  JASMINE provides to selected microcredit providers various services such as the diagnosis of the training needs, an institutional assessment or even a financial rating, tailor-made training and Business Development Services (JASMINE Helpdesk, specialised workshops and conferences)

(4) Expert Group Report – The regulation of microcredit in Europe -  DG Enterprise and industry – April 2007

 

 

EU Regional Policy: Stay informed