Setting up a microfinance financial instrument

5 November 2018

The scope of this factsheet is to serve as guidance for European Social Fund (ESF) managing authorities that decide to set up a microcredit financial instrument.

In order to support vulnerable persons and micro-enterprises, a microcredit is a suitable financial instrument to combine European Union funds with public and private resources to provide access to finance, in particular, loans for business purposes, to vulnerable groups usually excluded from mainstream finance. A microcredit should target vulnerable persons and micro-enterprises who have limited access to finance, while small-sized loans normally carry higher interest rates. A dedicated financial instrument backed by ESF would bridge the financing gap and provide more funds at preferential conditions, together with non-financial services.