Banks and Micro-lending Support - Co-operation and Learning - Version 1 - Status: April 2000

Sep 19, 2026

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Report explores micro-lending cooperation between banks and micro-lenders through co-operation and learning, focusing on how small, high-risk micro-enterprises can access suitable finance. It identifies obstacles faced by micro-entrepreneurs as psychological, practical, and caused by inappropriate loan products. It explains how micro-lending works, contrasts it with commercial bank lending, and outlines benefits and main cooperation forms. The research is benchmarked for best practice, with the study led by iff and co-financed by the European Commission.

LanguageEnglish

CategoryLetters

FormatPDF

Pages153

Reading Time54 min

AccessFree to download

Executive summary and conclusions

Introduction

Micro-entrepreneurs and business finance: the obstacles

Bridging the finance gap

What has micro-lending got to offer?

Who are their clients?

How does micro-lending work?

Micro-lending and commercial bank lending: the key differences

Banks and micro-lenders: working together

Outsourcing

Co-operation between banks and micro-lenders

Learning from micro-lenders

Successful loan products

Attracting the right clients

Managing the risk of default

Claire Whiley and Elaine Kempson of Personal Finance Research Centre Banks and Micro-lending Support, Co-operation and Learning in co-operation with Institute for Financial Services (iff ), Ja n Evers Version 1 · Status: April 2000 made in co-operation with and co-financed by: T A B L E O F C O N T E N T S i Executive summary and conclusions ____________________________ 4 1 Introduction ________________________________________________ 12 Micro-entrepreneurs and business finance: the obstacles ______________________ 13 psychological obstacles, practical obstacles, inappropriate loan products Bridging the finance gap __________________________________________________ 16 About the research ______________________________________________________ 16 This report______________________________________________________________ 17 2 What has micro-lending got to offer? __________________________ 18 Who are their clients? ____________________________________________________ 18 loans for people entering marginal self-employment, new or existing entrepreneurs with micro-credit needs, existing micro-entrepreneurs needing working or development capital How does micro-lending work? ____________________________________________ 21 influence of social economic and legislative factors, the importance of the client base Micro-lending and commercial bank lending: the key differences ________________ 27 institutional differences, loan products, marketing and client acquisition risk assessment, risk management Why should banks become involved with micro-lending? ______________________ 31 social benefits, political benefits, commercial benefits Summary ______________________________________________________________ 34 3 Banks and micro-lenders: working together ____________________ 36 Outsourcing ____________________________________________________________ 36 Co-operation between banks and micro-lenders ______________________________ 38 financial assistance, management and staffing, loan decision-making and administration practical support and assistance to clients, client referral Summary ______________________________________________________________ 45 4 Learning from micro-lenders __________________________________ 48 Successful loan products ________________________________________________ 49 stepped loans, fixed repayments, interest rates, appropriate security, group lending and repayment collection, customer support Attracting the right clients ________________________________________________ 54 New forms of risk assessment ____________________________________________ 55 criteria of risk assessment, methods of risk assessment Managing the risk of default ______________________________________________ 59 active loan after-care, payment incentives, firm but fair debt management Default rates and operational sustainability of micro-lenders____________________ 61 Summary ______________________________________________________________ 62 ~~ i ~~Executive~~ ~~summary~~ ~~and~~ ~~conclusions~~ ~~ 4 In recent years there has been growing interest in micro-lending among bankers, governments and those involved in area regeneration initiatives or working with unemployed people. Micro-lending involves issuing small loans to micro-enterprises who are considered to be a very high risk and/or very costly to serve in commercial banking terms. Definitions of micro-lending vary, usually according to the size of the businesses that are eligible for loans and the amount of money they can borrow. For the purposes of this study microlending is defined as loans of between 1,000 and 25,000 EUROs to people running business with less than five employees. Micro-entrepreneurs face a number of significant, and often insurmountable, obstacles in gaining access to appropriate finance. Similar issues were raised by entrepreneurs in all four of the countries involved in the research, although the extent of

FAQs

What is the report’s definition of micro-lending for this study?

Micro-lending is defined as loans between 1,000 and 25,000 EUROs to people running business with less than five employees.

What main obstacles do micro-entrepreneurs face in accessing finance?

The report groups problems into three categories: psychological obstacles, practical obstacles, and inappropriate loan products.

How can micro-lending organizations help bridge the finance gap for micro-enterprises?

By lending to micro-enterprises that cannot get loans from banks, and by developing techniques to lend in a risky market while sharing support packages and loan products with banks.

Sep 19, 2026

Upload by Fahsai