In your last article you mentioned the European Microfinance facility – could you explain what this is and how it will be made available to Maltese citizens?

One of the most detrimental consequences of the global economic crisis is the lack of credit being supplied by banks. This is preventing individuals, SMEs, as well as large companies from conducting their economic activities. The proposal that has been brought forward by European Commission provides for the establishment of a micro-finance facility that seeks to aid in alleviating the current hesitation in funding by banks and other financial institutions.

When Jean Claude Trichet, President of the ECB visited the European Parliament he claimed that despite the fact that figures indicating the amount of credit being supplied by banks was still low, the signs were that this was only due to the fact that the actual demand had diminished rather than that requests are being turned down. This having been said, there are still certain countries in which lending institutions continue to be overly cautious and this is having a negative impact on the ability of European economies to recover and giving rise to further unemployment. In his address to MEPs, Trichet emphasised that the message the ECB was giving to banks was that they should be ‘doing their job’ and lending to those who require the bank’s services. Whatever the real situation, there is no doubt that this facility will be of benefit to those who were most adversely affected by the crisis in addition to microenterprises who require funds to keep their organisations afloat.

In essence micro-funding consists of making relatively small amounts of money available to certain individuals and organisations. The amounts that will be handed out through this fund shall be of not more than e25,000. The targeted recipients of the fund are individuals who have been rendered unemployed as a result of the economic crisis as well as microenterprises who are finding themselves in difficulty.

At a European level, pressure is being made so as to make the facility available as soon as possible. What would be the point of having a facility intended to offset some of the consequences of the crisis if by the time that access to these funds is granted the crisis would have been long gone? The hurdle that is currently present concerns the origin of the funds. The Commission had initially proposed that the e100 million that is to make up the fund should be taken from the Progress Programme. This is the EU’s employment and social solidarity programme and is present in order to help the EU achieve its aims as established in the Social Agenda.

The European Parliament however has not agreed with the reallocation of funds as the Progress Programme is also present to benefit the more vulnerable segments of society and so has proposed the setting-up of a new and separate budget line. A compromise should be in the pipeline however, and with some luck this facility will be made available to EU citizens in the near future.

Hypothetically once all these inter-institutional debates come to a close, the European Investment Bank will enter into contractual agreements with microfinance institutions. In Malta this institution would most likely be one of the major banks. Maltese individuals and microenterprises that satisfy certain predetermined criteria would then be able to apply for funding as they would any other loan. The difference is that whereas many loans might not be approved under normal circumstances, being awarded this kind of loan would be less onerous for the applicant as the fund has the backing of the EIB. The impression that we have been given is that interest rates would also be more favourable and this would also facilitate the launching of an entrepreneurial venture.

I would still like to see the EU intervening at a stage prior to the use of funds such as this new micro-finance facility and the already established European Global Adjustment Fund. Preventing unemployment would be preferred to addressing the aftermath however this additional fund is also a welcome addition to the recovery measures.

David Casa is a Nationalist MP

www.davidcasa.eu

david.casa@europarl.

europa.eu