The EU framework for microfinance

Under the InvestEU and ESF+ regulations, microfinance is defined as follows:

Under this definition, microcredit is conceived as a combination of credit and accompanying non-financial services provided to financially excluded individuals and enterprises. The EU previously defined microcredit as loans up to EUR 25,000 granted to existing and potential microentrepreneurs at risk of social and financial exclusion. Under the current InvestEU guidelines, this threshold has been doubled to EUR 50,000.

A key feature of the current definition is the central role given to non-financial support, now treated as an inherent part of microcredit disbursement. This reflects current sector practice, where the large majority of MFIs have adopted an integrated approach combining microcredit with trainings, coaching or mentoring activities.

One element of continuity with the earlier definition is that microcredit remains explicitly tied to income-generating activities. Personal microcredit — i.e. credit not linked to a professional or revenue-generating purpose — is therefore not yet part of the EU agenda, in contrast to the approach taken by some Member States (e.g. France, Italy, Greece), where personal microcredit has been established alongside business microcredit.

Importantly, the EU definition and the EUR 50,000 threshold define the scope of EU financial support, but they are not legally binding at national level. They matter primarily for MFIs seeking to access InvestEU and ESF+ resources. Beyond this, there is no EU-level legal harmonisation of microcredit: its definition and regulatory treatment are left entirely to national legislators.

Microfinance has long been recognised by EU policy makers as an instrument for entrepreneurship and competitiveness, and equally as a lever for the social inclusion of individuals facing financial exclusion. Since the mid-2000s, it has been a core pillar of the EU’s inclusive entrepreneurship strategy, aimed at improving access to finance for people and microenterprises that face barriers to conventional credit. By facilitating access to finance, EU microfinance policy contributes to entrepreneurship, job creation and social inclusion.

EU support has combined guarantee schemes and funding instruments for microfinance providers with technical assistance.

A broader EU policy move to use public funds to support the development and long-term sustainability of the sector was initiated with the European Commission’s Communication of November 2007 on a “European initiative for the development of micro-credit in support of growth and employment”. Its objective was to promote the development of microcredit in the EU through improving the legal and institutional environment in the Member States, fostering a climate favourable to entrepreneurship, and providing additional capital for microcredit institutions.

In this context, the Commission and the European Investment Bank agreed on the “Joint Action to Support Microfinance Institutions in Europe” (JASMINE), a technical assistance initiative launched in September 2008 to help microcredit providers improve the quality of their operations, scale their operations and become self-sustainable. This was followed in 2010 by Progress Microfinance — the first-ever EU-wide dedicated financing programme for the sector — which added financing capacity and provided the structural framework needed to absorb the various smaller microfinance pilot predecessors.

Dedicated EU support for the microfinance sector has evolved across successive funding periods:

Table structure as per EMN content plan; instrument details to be validated and completed by EMN.

On top of these financial instruments, the sector has also been supported through structural funds — grants and funding under the European Social Fund (ESF) and, from 2021, its successor ESF+ providing a complementary layer of EU support to MFIs.

Overall, EU public intervention has traditionally been made conditional upon ensuring “additionality”, i.e. not crowding out private activities, but rather serving as a catalyst for the entry of private capital in order to create a self-sustainable market in the long run.

Institutionally, EU involvement in microfinance has shifted over time. In its early phase, microfinance was closely tied to Cohesion Policy and the Commission’s Directorate-General for Regional Policy (DG REGIO), notably through JASMINE. As the policy emphasis moved toward employment and social inclusion, responsibility shifted to the Directorate-General for Employment, Social Affairs and Inclusion (DG EMPL), which now holds the primary EU-level mandate for microfinance policy and support.

Regulatory approaches to microcredit vary considerably across EU Member States, reflecting differing historical, economic, and institutional contexts. As a result, national frameworks do not always fully capture microfinance’s specific characteristics — its social and financial inclusion objectives, focus on underserved clients, smaller loan sizes, diverse delivery models, and distinct risk profiles.

Against this backdrop, the European Commission developed the European Code of Good Conduct for Microcredit Provision (the Code) in 2011, under the JASMINE initiative, following the Commission’s 2007 Communication “A European initiative for the development of micro-credit in support of growth and employment”.

The Code was designed as a voluntary, self-regulatory framework rather than a binding legal instrument. Its objective is to strengthen the European microfinance sector by promoting high-quality, ethical, client-oriented services, while supporting the sustainability, transparency, and accountability of MFIs and facilitating access to long-term finance.

Over time, the Code has become an important European reference framework for good practice, complementing — rather than replacing — national regulatory frameworks. By setting common standards for operational, governance, and reporting practices, it promotes greater consistency and transparency across a highly diverse EU microfinance market. Code certification has also become a key gateway to EU financial support, with compliance a prerequisite for MFIs accessing EU funding instruments including EaSI and InvestEU.

The Code has evolved through several stages since its inception in 2011. The timeline below sets out its development to date, alongside the changes currently underway.

• 2011Code established
• 2013–2017Pilot phase
• 2016First evaluation of the Code
• 2021First revised version of the Code enters into force
• 2024Further adjustments on certification cycles and evaluation methodologies; focus on under-represented regions and smaller MFIs
• 2025–2026Targeted consultation with the sector to prepare the new revision of the Code
• 2027Second revised version of the Code expected to enter into force by the end of the year

EU banking legislation and national banking laws together govern credit institutions in Europe. The core prudential framework consists of two complementary instruments: the Capital Requirements Regulation (CRR, Regulation (EU) No 575/2013), which sets uniform micro-prudential requirements — minimum capital, liquidity, and leverage standards — applied directly and identically across all Member States without national transposition; and the Capital Requirements Directive (CRD, Directive 2013/36/EU), which governs authorisation and supervision and provides the framework for macro-prudential tools such as capital buffers. Because the CRD is a Directive, it must be transposed into national law, and Member States’ designated authorities calibrate macro-prudential measures. This division of competences is central to understanding why microcredit regulation differs so widely across the EU.

Under the CRR, a “credit institution” is defined as “an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account”. The determining factor for whether an institution falls within the scope of EU banking legislation is therefore the taking of deposits — not the granting of credit itself. As a result, non-bank lenders, including non-bank MFIs, face no specific EU-level restriction on providing credit, provided they do not take deposits from the public. Non-bank MFIs are a subset of the broader category of non-bank lenders, which also includes NBFIs financing SMEs and crowdfunding or fintech platforms. What distinguishes them is their focus on small loan sizes and financially excluded clients.

Notably, EU banking regulation contains no definition of microcredit, unlike other financial products such as mortgage credit, payment services, deposit guarantee schemes, cross-border payments, and e-money. The specific features of a microcredit product are therefore defined only at national level.

Based on this legal architecture, national frameworks fall into three main scenarios governing the legal basis on which non-bank MFIs may operate:

Country-specific regulatory details and a comparative overview are provided in the Country Level section.

Beyond banking law, the wider EU entrepreneurship and SME policy agenda — InvestEU, ESF+, ERDF, the Single Market Programme, Horizon Europe — shapes the environment in which microfinance operates. Read the Policy section →