“In Luxembourg there’s a big microfinance industry, but it was always for the countries in the south,” Microlux manager Samuel Paulus said in an interview.
While microfinance lenders already existed in most European countries, Microlux is the first institution for projects in Luxembourg.
The new institution began when ADA and Adie, organisations with microfinance expertise, joined forces with BGL BNP Paribas and the European Investment Fund. While the bank provides the financial backing, the EIF helps guarantee the loans.
The institution began laying the groundwork in March 2016, and by October it was distributing its first loans. At the time of writing, it had provided loans to six individuals, with loans averaging €15,000 (the maximum loan amount allowed by European definition of microcredit is €25,000).
Working with non-traditional entrepreneurs
Microlux works with individuals in the grand duchy who cannot get bank loans and aren’t “traditional” entrepreneurs, according to Paulus, meaning they often lack business plans and don’t have starting capital or sufficient guarantees to back them.
“They have a lot of motivation, but it’s often people who are unemployed or on RMG [guaranteed minimum income],” Paulus said. In many cases, they have what he calls the “right entrepreneurial spirit” but can’t find traditional work due to special circumstances, such as family constraints.
One woman, for example, had five children but found it difficult to strike the ideal work-life balance and sought a loan to start her own line of work. Other recipients ran their own businesses in Syria and Iraq before asking for Microlux loans to start working in their own trades in Luxembourg.
“We work with coaches to help structure the project, and afterwards continue to mentor them, so these entrepreneurs get a feel for the climate surrounding their business,” Paulus said.
The file is presented to a credit committee which determines whether to issue the loan. Once approved, the loan works like classical credit with a repayment scheme, with mentors available to advise throughout the process.
Up to 100 loans
According to Paulus, most of Microlux’s clientele is in the south and north of the grand duchy.
Although Microlux has worked with some of the refugee population which cannot always easily integrate into the job market, they also reach those who are simply not well off economically.
“What we noticed is that there is really a need for this tool in Luxembourg,” said Paulus. “Luxembourg is often seen as a rich country, but there are also poor people here.”
Microlux anticipates providing up to 100 loans over the course of the next four or five years. But the Microlux mission is bigger, as Paulus noted: “It’s [not only] about job creation, but also reintegration into society.”