Microfinance and Business Start-ups: Review of the Current Practice in Europe

Challenges and opportunities for larger engagement of MFIs in the start-up segment

This paper explores the theoretical background and the emergent evidence related to the role of access to finance for business start-ups and self-employment in Europe, with a specific focus on the role of microfinance institutions. So far, microfinance has been supporting start-ups at certain maturity level on a limited scale, with only a handful of institutions fully dedicated to new ventures. The paper reviews the role of finance from the economic theory perspective drawing on the key lines of research related to entrepreneurship and financing constraints. The general research findings are contrasted with the current state of entrepreneurial finance at the European Union (EU) level corroborated by a limited field research of entrepreneurship ecosystem in the select countries in Europe.

The paper finally summarizes opportunities and challenges faced by the microfinance sector to more deeply engage the entrepreneurship and start-up financing market. It further offers options for larger engagement of the microfinance institutions in the start-up segment as well as several policy recommendations on the EU and individual member state levels to support a greater role of microfinance institutions in financing business start-ups by the excluded groups.

About this Publication

By Pytkowska, J. & Korynski, P.