Microcredits in Europe and Italy

Microcredito

• Banco Popolare became a Group on 1 July 2007 with the merger of Banco Popolare di Verona e Novara and the Banca Popolare Italiana

• One of the largest five Italian Bank Groups • Group of local banks

• 2,000 branches, 200,000 shareholders and more than 20,000 employees • It operates throughout Italy • Three key values: proximity, ethics, and quality services

Banco Popolare

Serving family and business customers, creating stable and lasting value for partners, shareholders and local territories.— Carlo Fratta Pasini, President of the board of directors

2

Definition by the European Commission

3

microloan

business personal

< 25 000 EUR support development

of self-employment and microenterprises

< 25 000 EUR cover personal costs(rent, emergencies,

education)

Source: Annual Report 2012 Microbank

Attractiveness of microcredit

4

corporate social responsibility

reputation, brand image

profitability long-term relationship

Estimate European and Italian market sizes !

Analyze the most diffused patterns and identify the best practices

Objectives of the work

5

Quantitative research: reports and websites Qualitative research: interviews to microcredit institutions !

Selection of five different models

‣ Italy’s leading microfinanceinstitutions ‣ Spain’s leading microfinance

institution ‣Global player in microfinance

6

Methodology

Reports consideredEuropean Microfinance

Network, 20127° Rapporto sul

microcredito in Italia, 2012

Ente Nazionale per il Microcredito, 2013

Report of Microcredit in Bergamo by Caritas, 2012

Microcredit market

8Sources: Bending et al. 2012, Pp. 9; Ente Nazionale per il Microcredito; 2013, Pp 11

0

175

350

525

700

Amount (million of euro)

63

368

680

Western EuropeEastern EuropeItaly

0

30000

60000

90000

120000

Number

7167

119519

84561

Patterns in microcredits

Business model #1

Bank Non-profit institution Customers

10

Business model #1

Bank Non-profit institution Customers

11

funding

Business model #1

Bank Non-profit institution Customers

12

funding supply microcredit

Business model #1

Bank Non-profit institution Customers

13

funding supply microcredit

supportguarantee

Non-profit institution

Business model #1 - Conditions

non-profit institution

14

• Selection • Evaluation • Advisory • Services

guarantee moderate interest rates

%

Business model #2

Bank Customers

15

supply microcredit

professionals

issue microcredit

credit risk management

refunding

Business model #2 - Conditions

high administrative costs

16

moral guarantee high interest rates

%

Comparison

administrative costs

17

interest rate%

Model #1 Model #2

network

default rate

moderate

low

partners

high

high

high

own

very low

• Business model

‣ Short-term: partnerships

‣ Long-term: in-house program

• Guarantee

• Interest rates

• Cost deduction

Recommendations

18