EU Plans European Microcredit Fund For Developing Nations-AFP

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BRUSSELS (AFP)--The European Commission Monday unveiled plans for a new fund to encourage microcredit or small loans popular in the developing countries, in Europe.

E.U. Regional Policy Commissioner Danuta Huebner said the new fund would have about EUR10 million-EUR15 million to be used to "finance the loan activities of non-bank microcredit financial institutions."

The money, which would come from contributions from the European Investment Bank and other sources, would be managed by a new body whose staff would also provide expertise to microcredit lenders.

The initiative aims to make credit more easily available to small companies and unemployed or inactive people looking to set up a business, who are often overlooked by traditional banks.

"Microcredit is a highly effective way to develop new businesses or to help the unemployed back into the mainstream economy through self-employment or micro-enterprise development," Huebner said.

The Commission estimated that there was EUR6.1 billion of pent-up demand in Europe for microcredit, with such loans typically averaging EUR7,700 in the European Union.

Microcredit has been in the spotlight recently since Muhammed Yunus, an economist from Bangladesh, won the Nobel Peace Prize last year for pioneering such lending through his Grameen Bank.