£500m EU microfinance plan for new business loans needs government backing - Liz Lynne

11.50.01am GMT Thu 18th Mar 2010

Liz Lynne has strongly backed campaigns to encourage lending to small business and make banking more people friendly

A new EU plan to fund business loans for unemployed people and very small firms will need active support from UK government agencies to succeed, says LibDem Euro MP Liz Lynne.

The European Microfinance Facility scheme is due to be launched in June this year and aims to give new entrepreneurs or small firms with less than 10 employees easier access to loans of up to 25,000 Euros (£21,000).

The scheme is part of the European Commission's Economic Recovery programme and will be linked to the European Social Fund. The facility will be aimed particularly at people who have lost their jobs and want to set up their own business but who often struggle to get credit from banks in the current climate.

An initial 100 million Euro budget will be used to lever in additional funds of up to 500 million Euros more from institutions such as the European Investment bank, giving a total funding of approximately half a billion pounds.

Liz Lynne, MEP for the West Midlands Region, is Vice President of the Economic and Social Affairs Committee of the European Parliament and a strong supporter of this new initiative.

Speaking at the Parliament in Brussels today, Liz Lynne said: "This plan is targeted at people who have been particularly hard hit by the recession and I strongly welcome it.

"Most banks are now far more cautious in lending, particularly to people who are unemployed or have difficulties with their credit rating, but want to set up their own business and earn a living.

"The scheme could be hugely successful but I am aware that some similar recent initiatives have stalled because publicity and the application process have not been thought through properly.

"It is vital that the UK government backs it, using the controlling stake it has in banks like Northern Rock and RBS to ensure that potential applicants get the information and support they need.

"The Commission say they want applicants to contact the providers of micro loans in member states, such as banks and building societies. We have to make sure the application process is clear and well publicised once it is launched in June."

ENDS

Note: Micro-credit in the EU means loans under €25,000. The scheme will be tailored to micro-enterprises, employing fewer than 10 people and unemployed or inactive people who want to go into self-employment but do not have access to traditional banking services.

Further details of the scheme can be found on the European Commission's website at this link: http://ec.europa.eu/social/main.jsp?catId=836&langId=en