European Microfinance: Financial Inclusion and Entrepreneurship

Microfinance is a critical instrument for financial inclusion and economic development in both developing and developed economies (Demirgüç-Kunt & Singer, 2017; Cull & Morduch, 2018). Initially conceptualized as a tool for poverty alleviation in the Global South, microfinance has also significantly evolved within the European context (Armendáriz & Morduch, 2010; Bourlès & Cozarenco, 2018). While in emerging markets it primarily serves to bridge gaps in access to basic financial services, in Europe, microfinance has become a significant mechanism to provide access to credit for micro, small, and medium-sized enterprises (SMEs), which are often excluded from traditional banking services due to perceived high risks or lack of collateral (Morduch, 2000; Morduch & Armendariz, 2005). ​The relevance of microfinance goes beyond contributing to countries' macroeconomic growth and GDP. The role of microfinance in Europe has shifted from its original focus on poverty alleviation to a more strategic role in supporting entrepreneurship and the development of SMEs.