Market Study: Microfinance in the Netherlands
This study aims to quantify the size and characteristics of the microfinance sector in the Netherlands, and assess the feasibility of starting an independent for-profit MFI. The study is based on 205 interviews with small and microentrepreneurs. Currently, it does not seem feasible to start an independent for-profit MFI in the Netherlands, as the target group is too small, and the interest margin insufficient to cover operating and financial expenses. Study findings highlight the following characteristics of the sector in Netherlands :
- Very little demand for commercial business loans;
- Only four major cities qualify for a branch, which is insufficient to reach institutional break even;
- Banks seem most well-equipped to downscale their operations and serve microentrepreneurs profitably.
The paper recommends that banks improve their credit assessment by reducing their dependence on documentation and automation. Governments and NGOs should limit their role to facilitating the development of a sustainable market for microfinance, and stimulate private actors to serve the target group.