Supporting financial inclusion in Luxembourg
While microfinance first emerged to facilitate small business creation in emerging countries, it has since expanded to so-called “mature” economies to offer aid to disadvantaged populations. In a country like Luxembourg, its purpose is to encourage financial and social inclusion while supporting entrepreneurial projects. Microfinance most often benefits people in precarious situations, the unemployed or young people with no financial resources or work experience.
It was with this in mind that, in 2016, BGL BNP Paribas (unavailable link), the Group’s subsidiary in Luxembourg, created Microlux, the first microfinance institution (MFI) for Luxembourg, in partnership with ADA (Aid for Autonomous Development), ADIE (Association for the Right to Economic Initiative) and the EIF (European Investment Fund). BGL BNP Paribas is the majority shareholder (83%), while a guarantee agreement for the reimbursement of a portion of unpaid microloans was signed with the EIF.
Microlux supports and finances the creation or development of independent activities by individual or social enterprise customers who do not have access to the traditional banking system. Today, 55% of Microlux customers receive government allowances: returning to salaried employment is often difficult and starting a business can represent a path back to autonomy. In 2017, the IMF welcomed a total of 180 people who presented an entrepreneurial idea but did not know how to implement their project.
Luxembourg commits to supporting social entrepreneurship
BGL BNP Paribas (unavailable link) has rolled out a line of financial and non-financial products dedicated to social enterprises, offering financing tools adapted to their needs and their unique economic model. In 2017, the subsidiary financed 10 social entrepreneurs for a total portfolio of 5.7 million euros in loans. It also organizes events enabling social entrepreneurs to connect with other players in their sector and ecosystem, while offering the most promising social startups an incubation program at the Lux Future Lab.
Microlux: ever more projects and ambition
Including a dance school in Luxembourg City, an African grocery shop in Esch-sur-Alzette and a designer cake shop in Dudelange, the projects developed in Luxembourg with the aid of Microlux run the full gamut of entrepreneurship. Thirty-eight percent of microloans finance projects in food service, followed by services (21%), retail (21%) and transport (10%). In 2017, beneficiaries of these microloans (12,500 euros, on average) came from 14 different nationalities.
Hatm Almshaal, a Syrian refugee, notably received a microloan, as well as aid from Touchpoints, a Microlux partner that helps refugee entrepreneurs start landscaping businesses. Mr. Almshaal now employs other refugees, thus enabling them to integrate into Luxembourg society.
Hatm Almshaal is a Syrian refugee who has chosen the path of entrepreneurship.
Delivering tailored support across a vast territory
Microlux offers three types of loans: a microloan for an amount up to 15,000 euros, a “micro+” loan for existing activities (up to 20,000 euros) and a loan dedicated to social entrepreneurship (up to 25,000 euros). Apart from financial aid, Microlux aims to provide specific aid to social entrepreneurs, which is unique, compared to existing MFI offers in other European countries. This free service provides vital support when forming or developing a business. It can take several forms: coaching and personalized oversight, or guidance and training given by teams of volunteers, who assist with developing a business plan, obtaining a business permit or with legal decisions.
In the long term, BGL BNP Paribas aims to enable Microlux to bring microfinance to the entire “Grande Région”, a regional cooperation space (GECT) surrounding the Grand Duchy of Luxembourg and composed of German, French and Belgian territories. This openness to neighboring regions has continued with the announcement of a new office opening at the start of next year in Arlon, in Belgium. BGL BNP Paribas also invests internationally via LMDF (Luxembourg Microfinance and Development Fund), which supports emerging microfinance institutions pursuing a strong social mission in developing countries.
Microfinance at BNP Paribas—an international strategy
BNP Paribas has fully integrated its microfinance projects into its Group CSR approach. They allow disadvantaged individuals to access loans outside the traditional banking system and to finance entrepreneurial projects apt to transform their lives. The Group also lends indirect support to 289,000 microloan beneficiaries in 17 emerging and mature countries, with financing types adapted to the specific economic context in each country. In 2017, refinancing for microfinance institutions by BNP Paribas totaled 277 million euros.
Photos: header © Eryca Mendes and her partner Gertrudes Federico