The European microfinance market is a young and growing sector which has considerable potential. However, this market is still quite heterogeneous, due to the disparity of the legal and institutional frameworks in the Member States and the diversity of the microcredit providers. In the EU, microloans are provided by financial institutions, such as commercial banks, savings banks, cooperative banks and public banks, as well as by a number of non-bank entities, such as microfinance institutions, foundations, credit unions, charities, NGOs and others. As a result, microcredit lending practice vary considerably depending on the type of institution providing microloans, its legal setup, the environment in which it operates and its own ability to apply sound and efficient management procedures. Under these circumstances, the design of a widely accepted voluntary European Code of Good Conduct for microcredit provision was identified by the Commission as an important part of its initiative1 to promote best practices in the field of microcredit. By setting out good practice guidelines and identifying expectations and common standards, the Commission is seeking to support the sector in facing the challenges of accessing longterm finance, maintaining and raising the quality of services and moving towards sustainability. The principles regarding governance and management presented in this document are generally not new, but they reflect best practices across the sector. The purpose of this document is to detail a set of approved standards recognised in the European Union as essential in terms of the operation and reporting of microcredit providers. The work to develop this European Code of Good Conduct has been carried out2 in close consultation with many actors and stakeholders from the microfinance sector, such as funders, investors, customers, owners, regulators and partner organisations. It drew on the expertise and valuable experience gained by many microfinance actors in the EU, in particular the trade associations the European Microfinance Network (EMN), Microfinance Centre (MFC) and Community Development Finance Association (CDFA).
