Micro-Lending - A Case for Regulation in Europe

Social Microlending is a scheme of small instalment credit with fixed interest rates and fixed repayments to people which have little or no securities and adequate credit history and therefore insufficient access to bank business loans. It may require guarantees from a group of clients ("peer group”) or pre-payments for a future loan ("savings into loan” schemes) or loans may be increased step by step ("stepped loans”).
Its purpose is the education of potential borrowers in financial issues ("financial literacy”) and the creation of self-employment and microenterprises. ("self-help”) or community development. Its core activity is the additional assistance to the the borrowers.
The present study covers the variety of practices, intentions and the regulatory frameworks of lending for social purposes in six EU-memberstates und the EU-banking directives. It recommends further development with active participation of the banking business under exemption laws to banking supervision which anyhow hold up the standards of modern lending and consumer protection.