Microcredits - Roots, Prospects and Status Quo in Western Europe (PDF)

Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1,7, Leipzig Graduate School of Management, language: English, abstract: As a sustainable tool for poverty alleviation, microcredit has become the buzzword for foreign aid in developing countries. Based on a group lending model, Mohammad Yunus developed the first microloan concept already in the eighties. Since then it has
evolved into a state-of-the art microcredit program. Just recently he was awarded with the Nobel Peace Prize. His success in Bangladesh has highlighted how very small loans can support poor people from the bottom of the socio-economic pyramid and how they can encourage disadvantaged groups to move towards self-employment. However, critics argue that microcredits are no panacea for poverty alleviation e.g. it does not provide opportunities for the poorest of the poor to move into formal employment. Nevertheless, millions of people from developing countries have benefited from microfinance services and Yunus' microcredit approach has been adopted around the world.

The second part of the thesis focuses on microfinance availability for entrepreneurs and very small enterprises in Western Europe. In order to close the financing gap experienced by these groups, many microcredit programs have been established in these countries recently. The overall microfinance sector in Western Europe is just emerging. Combined with consulting services and mentoring support, various programs provide
microcredits with the objective of encouraging entrepreneurship and fighting social and financial exclusion. Based on a comprehensive survey, the status quo of microcredit institutions in Western Europe was analyzed. Whereas some lending organizations have grown to major players in this area, others have not yet experienced much growth. Especially smaller programs are experimenting with different business models, product portfolios and marketing approaches but face several growth barriers. This thesis provides practical recommendations e.g. on how to enhance the entrepreneurial spirit and how to improve the operations of microfinance programs. All proposals are applicable to any Western European countries and shall provide the first steps to improve their microcredit sector.