Helping vulnerable people groups around the worldMicrofinance consists in issuing loans to people with extremely limited resources, so they can develop their business activity, generate revenue, and escape poverty. Active in this area across many emerging countries worldwide, the BNP Paribas Group also supports microfinance institutions in Europe. The Group notably pursues this commitment in France, Belgium, Italy, Luxembourg, and the United Kingdom.
And this commitment is having an impact! According to the Microfinance Barometer (published by Convergences), in 2016, MFIs totaled 132 million customers and a portfolio of 102 billion dollars worldwide. In addition, the number of borrowers rose by 9.8% over the previous year.
Thousands of jobs created in Europe
BNP Paribas’s priority in Europe is to stimulate job creation and workforce reintegration for people with no access to traditional bank loans, by empowering them to start their own business. This strong commitment was reaffirmed in recent years, just as the economic crisis has had serious employment consequences for the most vulnerable populations. To ensure that it can maintain its commitments, BNP Paribas has formed strategic partnerships with leading players.
25 years of support in France
For example, in France, the Group has supported Adie (Association for the Right to Economic Initiative) for nearly 25 years through a variety of means: loans, group employee savings accounts, as well as donations and skill-based volunteering. As a pioneer in microloans in Europe, Adie has financed more than 160,000 jobs since 1989—that’s a rate of 225 jobs per week! Their work is all the more effective as 84% of beneficiaries remain in the workforce for the long term, thanks to support before, during and after they start their activity.
To accomplish even more, BNP Paribas assisted Adie in crafting France’s first Social Impact Contract, a financial innovation that allows a social player (like an association) to receive funding from a private company. BNP Paribas and Adie pursue the shared objective of expanding entrepreneurship in isolated rural areas, with the target of sustainably reintegrating at least 320 people into the workforce and enabling the French government to generate two million euros in savings.
Powerful synergies between BNL and PerMicro
In Italy, the Group supports the MFI PerMicro via BNL, its retail banking subsidiary. PerMicro has enabled the creation of more than 1,000 microenterprises per year. The operation has also proven effective against unemployment, since half of microenterprises create at least one job in addition to the entrepreneur in charge. Another reason to rejoice is that 81% of microenterprises that receive funding have remained in operation three years after their creation. According to a study by Università Politecnico di Milano, 51% of customers accompanied by PerMicro have obtained funding from traditional banks within three years of their first microloan. These numbers show all the impact of microfinance on financial inclusion, as well as the importance of supporting microentrepreneurs as they develop their plans. All these arguments prove how microfinance can be an effective tool to promote financial inclusion.
BNP Paribas’s Italian subsidiary has also chosen to take its support and collaboration with PerMicro even further. Five BNL branches now house satellite locations of the association (which has 14 in all). The bank develops programs to guide microentrepreneur customers, as well as new immigrants who do not have access to financing. This innovative business model is achieving results, since PerMicro is on pace to become one of Western Europe’s first MFIs to cover all its own costs.
Participating in creating new MFIsAnother focal point of the Group’s job creation strategy is to encourage the creation of new and sustainable MFIs. In fact, in Europe, these institutions, often set up as associations, can depend on the subsidies they receive for their operation. That structural and financial vulnerability limits their capacity for long-term action. To compensate for this weakness, BNP Paribas has acquired a capital stake in some of these institutions.
In 2010, BNP Paribas Fortis played a major role in creating MicroStart, by providing more than 58% of its capital. The MFI is now the leader in Belgium with 2,700 customers. The impact study recently conducted with Vlerick Business School revealed that 75% of people who received support between 2013 and 2015 were still employed in 2017, while their revenue had increased by an average of 7.6%. Furthermore, 44% of customers rose above the poverty line since they received aid from MicroStart, while just 18% were above the poverty line before obtaining the loan.
In 2016, the Group, through its subsidiary BGL BNP Paribas, took part in launching Microlux, the first MFI in Luxembourg dedicated to financing microenterprises and social enterprises that do not have access to bank loans. BGL, which owns an 83% stake in the institution, also provides entrepreneurs with support through a skill-based volunteering program. Microlux has notably funded Syriously!, a Syrian restaurant created by a refugee to foster cultural exchange between his home and host countries, while favoring social and workforce integration for other refugees.
Europe and emerging countries: two different models with the same social goal
European MFIs can seldom operate without receiving subsidies or public or private investments. That is explained by local regulations that mandate especially low caps on interest rates. These institutions also record a larger share of outstanding balances, since their borrowing methodology must focus on individuals (instead of groups). However, some institutions can benefit from insurance policies that cover a large portion of these risks (EASI program from the EIB, for example). These limitations do not hinder BNP Paribas from financing MFIs and playing a role as a social and civic player in its domestic markets.
On the other hand, MFIs operating in emerging countries rarely benefit from subsidies. They ensure the continuity of their business by charging higher interest rates, which still remain below maximum borrowing rates. In general, they have a lower level of outstanding balances. For example, many MFIs in Asia provide microfinance to groups, which provides security for each loan through a financial guarantee paid by all group members.