Access to credit is one of the main obstacles to growth faced by Spanish MSMEs, especially small companies which rely on bank financing but do not have access to guarantees or assets to be pledged as collateral. Don’t even talk about ongoing political turmoil. The pandemic outbreak before, and the Ukrainian war now, has stocked European industries, Spanish too, under the perfect storm. Not to mention the threat of the climate crisis and all its consequences in regard to economic and social matters.
In this framework, microcredit institutions are playing an important role in the creation and expansion of new businesses and support families. In Spain, MicroBank has created a new concept of microcredit, a real pioneer in Europe.
Microfinance in Europe, a quick view
Microfinance in general and microcredits in particular are undergoing a critical juncture as a result of the complexity of Europe’s socio-economic scenario. According to the report by the European Commission on Microfinance in the European Union: Market analysis and recommendations for delivery options in 2021-2027, Europe represents just 10% of the global microfinance portfolio, with one million active borrowers and disbursements.
However, it has become a growing sector of activity in Europe over the last years. It still carries an important growth potential, considering the impacts of the current low economic growth on disadvantaged and impoverished populations and the need to ensure their social and financial inclusion. In this framework, CaixaBank and its MicroBank has affirmed itself as a pioneer of microcredit solutions in Europe.
A social bank by CaixaBank
MicroBank is the social bank of the Spanish CaixaBank Group. Since 2007, the bank has been offering financial products and services that are tailored to the needs of entrepreneurs, micro-enterprises and families in order to promote personal development, social progress and financial inclusion. One of its core areas of activity is specifically the granting of microcredits to start-up or consolidate businesses, intended for the self-employed, entrepreneurs, and microenterprises.
MicroBank’s microcredits, however, are not exclusively intended for providing support to businesses. In fact, last year, the bulk of the social bank’s activity was connected to providing support to families with fewer resources and difficulties in accessing credit. “In 2022, the bank emphasized financing aimed at covering the specific needs of households with few resources as a result of rising energy prices and inflation in general”, said Cristina González, the general manager of MicroBank, to the media.
Actually, the bank focus on families with a combined income below 19,300 euros (3 times the public income index), on entrepreneurs and micro-enterprises (up to 9 employees and 2 million euros in turnover), and students and companies whose activities have a positive and measurable impact on society (education, innovation, social economy, etc.).
“In MicroBank’s 15-year history, we have adapted our activity to suit the characteristics of the economic and social context at any given time. In that regard, in the wake of the pandemic, the priority has been to support the needs of vulnerable families, without ever losing sight of the backing for entrepreneurs and funding for companies with a social impact,” added Cristina González.
Microloan for business. How does it work
One of MicroBank’s core products is the Business microcredit (loans of up to €25,000), a solution for entrepreneurs and microenterprises that need financing to start, consolidate or expand their business, or to meet working capital needs. However, as stated by the bank, MicroBank interest rates, such as those applied in a conventional loan, vary depending on the characteristics of each operation.
The maximum repayment period for the Business microcredit is six years, with an optional grace period of six months. As for the access requirements, these are: be a self-employed person or microenterprise with less than 10 workers and less than 2 million euros in turnover and to present a financially reliable business project.
A pioneer in Europe
Speaking in numbers, last year, CaixaBank's social bank issued 13,118 microloans worth €171 million to entrepreneurs, self-employed workers and micro-enterprises and its specific credit lines for social impact sectors contributed to the creation of 5,220 projects in Spain, with a total volume of €208 million. In addition, the bank has contributed to the creation of 293,000 direct jobs through support for entrepreneurs and 95,000 new businesses have been launched. In 15 years, MicroBank launched more than 1.2 million projects with a social impact in Spain, a very positive balance that translates into more than 8,000 million euros of financed sources.
Microbank has received European Autorities support too. Recently, the Council of Europe Development Bank approved a €100 million loan to MicroBank with the goal to support job creation and enhance social cohesion in Spain by facilitating access to financial resources for small businesses, microbusinesses and individuals with limited or no access to the traditional banking system.
So, what about the future? The bank forecasts to give up to 3,500 million euros in financing with a social impact in three years, both for families and entrepreneurs, which represents an increase of 36% over the period 2019-2021, stated MicroBank. The management expects to reach more than 400,000 beneficiaries.
