Microfinance Focus, November 8, 2011: Beginning early 2012, microlending in Spain may enjoy greater flexibility if legislation is passed which has been heavily advocated by the microfinance sector, as well as immigrant associations and other entities involved in financial access initiatives.

At a forum on Spanish microfinance legislation in Valladolid, Spain recently, Jaime Duran Navarro, coordinator of the Spanish microfinance law has reportedly said that the legislation, modelled after French microfinance law will allows NGOs, savings and loan associations and other entities to provide entrepreneurs with microcredit for start-up businesses.

The new proposal aims to encourage the formation of microfinance institutions that, according to Jaime Durán, would have “proximity to the most vulnerable persons,” and thus would more effectively combat social and financial exclusion, compared to the financial institutions that are currently permitted to provide microcredits.  The potential loan recipients will be Spanish citizens and resident immigrants who are unemployed or have an income of less than twice the minimum wage.  Microcredits in Spain are defined as loans under 20,000 Euros.

According to Durán, this is an effort of the entire sector, which is "very healthy for democracy because it is the first time a sector works itself to propose legislation" with a common concern that microfinance can reach the most in need in Spain."

The forum on Spanish microfinance legislation convened in Valladolid, Spain on October 24 as a precursor to the Global Microcredit Summit to be held in the same city in November.  The forum is made up of over 100 member institutions with an interest in microfinance legislation of this kind.  These member organizations believe they can have a greater social impact through microfinance.

The provision of microfinance through non-profit entities is commonplace in developing countries and some Western European countries.  Forum members say that the goal is not to prevent for-profit financial institutions from giving microcredits, but rather to open up the microfinance sector to non-profit entities to encourage a more heterogeneous and diversified sector.

The proposal comes at a key moment for Spain, as many small businesses have folded in response to the economic crisis.  This, compounded with a sky-high unemployment rate, means great potential for microentrepreneurs.