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News tagged as "regulation"
January 21, 2013

Microfinance in Spain needs regulation

Tags: microfinance, Spain, regulation | by Jaime Durán Navarro, Foro de MicroFinanzas. Translation by Mª Teresa González López

The current economic and financial situation in Spain has made microfinance activity necessary. Microfinance is addressed to support those who want to start, or make a small business grow, in order to improve their living standards, and cannot obtain any financing in the formal financial system because they lack collaterals or guarantees. The drama in our country is that lots of people who are willing to work are financially excluded. Microcredit can be that little help they need to move forward

Moreover, many of these people who receive social benefits would be pleased to exchange them for the chance to start their own business. However, we cannot make the mistake of believing that they only need a small loan from a bank. What they really need is the support and advice of a Microfinance Institution (MFI), not the help of a traditional financial one. This MFI could help, and even train them, to succeed in the development of their project. The biggest difference between a Microfinance Institution and a traditional financial institution  is that the first one has the objective of providing all the support necessary to improve these peoples’ lives. The social goal is what differentiates the microfinance sector from the financial sector, as Peace Nobel Prize Muhammad Yunus proposed when he firstly conceived microcredits. 

Spain allocates over 433 million euros1 to support microfinance in developing countries through AECID (Spanish Agency for International Cooperation and Development). However, the Spanish microfinance sector suffered a big loss with the collapse of the Spanish Savings Banks. In 2009, the peak of microfinance within Spain’s boundaries, 5,172 microcredits were given, reaching almost 46.6 million euros. In contrast, during the same period in France the amount exceeded 152 million euros, a disbursement of 28,863 microcredits2.

As it was outlined in the First National Microfinance Meeting, organized by the Foro de MicroFinanzas in September 2010, microcredits disbursed in Spain since 2001 have been conceded mainly by the Obra Social arm of Savings Banks (the Corporate Social Responsibility division). Social institutions such as NGOs and foundations had normally provided social support and guidance to Savings Banks in return for grants. In Spain, social institutions cannot legally provide micro loans as a main activity despite having the face-to-face relationship with the potential beneficiaries. This is the main reason why institutions rely on commercial banks or on public administrations to develop their microfinance projects. To sum up: in Spain we cannot find any proper Microfinance Institutions (MFI) legally authorized to concede microcredit loans for social purposes.

The members present in the First National Microfinance Meeting created a working group with the goal of promoting Spanish Microfinance Legislation. This legislation would then set a frame where MFI in our country could start with the aim of providing microfinance services to promote self‑employment and entrepreneurship culture among those financial and socially excluded. Since September 2012, this working group, composed by more than 30 different organizations, meets periodically with the purpose of  working side by side in the development of this new legislation. The working group is also in contact with more than a hundred entities representing the whole sector, as well as being connected to every single social and political movement (from Savings Banks, NGOs, foundations, universities, consultants, women associations, law firms, immigrant associations, Social European Forum representatives or city councils, to people from commercial banks or ministries). In addition, this group collaborates with some European Institutions, and with the European Microfinance Network. The main objective of the group is to guarantee that all the European funds available that are not reaching our institutions because specific MFI do not exist, could be assigned to Spanish organizations in the future.

This working group is finding inspiration in legislations developed in the last few years in some other European countries. In some cases, they are deciding to imitate the good practices while in others they are learning examples of what to avoid. The main model we are following is the French regulation, not only because it managed to make a big part of the shadow economy come to light, but also because it is a great example of the commitment of all the institutions involved, locally, nationally and even at a European level. The reason for this implication is quite simple: giving people tools to start working instead of having them receiving social subsidies benefits not only individuals but also society as a whole.

In April 2012, the Second National Microfinance Meeting was held. In this second meeting we assessed and continued the work that had begun in the First National Microfinance Meeting. We learned from the experiences of international experts and we also evaluated the goals reached, as well as adopting the Microfinance Bill for Spain  unanimously.  Now we would like to submit the bill to the political institutions to make microfinance in Spain a reality, so that we can start building a genuine microfinance industry that we believe essential for the future well-being of Spain.


1 AECID Microcredit Fund at December 2011. Active portfolio. www.aecid.es

2 European Microfinance Network enquiry, conducted by Fundación Nantik Lum, Spain.

Initiative financed by: Initiative financed by AECID
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