Releases from Liability Forms for Self Employed Business by fat61726

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									                        JURISDICTION SUMMARY: AUSTRIA

                        Source: EMN (+AWS and ÖSB Consulting)

Types of vehicles   -   One-person-companies with a trading licence: individual enterprises
available for           without employees. The trading licence is connected with an
microenterprises        obligatory membership of the Austrian Chamber of Commerce.
and self-
employment          -   New self-employment: The Austrian law defines the legal form of
                        new self-employment in the contract of manufacture only.

                    -   A dependent form of self-employment is given when a contractor is
                        dependent from only one contract awarder and has little autonomy
                        concerning his work, contract, working place and time or payment.
                        Franchising is seen on the border of this type of dependent self-
                        employment.

                    -   Limited liability company (GMbH)

Costs and           All self-employed persons need a trading license (some professions such
Procedures          as lawyers and doctors are exempt).

                    The Austrian law for supporting the foundation of new businesses
                    (Neugründungs-Förderungsgesetz, NEUFÖG) is part of the taxation
                    reforms of 2000 and can free from diverse costs connected to starting and
                    taking over a company as well as supplements to wages and salaries in
                    the first year, independent from a foundation as trade company,
                    freelancer or farmer

Financial support   -   Self-employed persons are in most cases not entitled to receive
programs during         unemployment benefits
the transition
period              -   Exception: Periods of unemployment insurance, which can be
                        achieved by extending the framework period before the claimant
                        became self-employed

                    -   This insurance usually contains health-, accident- and pension
                        insurance. Contributions to unemployment insurance are not
                        considered.

Business            A variety of support mechanisms to promote self-employment and the
Development         viability and growth of business start ups exist. Support programmes are
Services            initiated by the Federal government and its institutions and by the
                    Chamber of Commerce, but not specific for microenterprises

                    Entrepreneurship is especially enhanced through training and coaching
                    programs and public loans. Basically those instruments are open for
                    potential entrepreneurs no matter if they are employed or unemployed



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                        JURISDICTION SUMMARY: AUSTRIA

                        Source: EMN (+AWS and ÖSB Consulting)

                    ÖSB Consulting has a specific business support programme for
                    microentrepreneurs carried out in the frame of the public business start-
                    up programme of the Austrian public employment service (AMS). It
                    provides advice, coaching and networking possibilities

Specific laws &     General corporate rules apply for microenterprises
regulations
applicable to       Banking monopoly
microenterprises,
self-employment     There is no special legislation concerning microcredit.
and microcredit

Sources of          Commercial loans: banks
funding for
microcredit         Public sources:
institutions
                    -   Government (Ministry of Economics and Labour, Ministry of
                        Finance) with EIF counter-guarantee

                    -   Local government

                    -   European funds through ESF

Operational /       So far microcredit projects in Austria have not achieved sustainability
financial           and depend on public subsidies.
autonomy

Usury rule          No interest caps
(interest caps)

Tax incentives      N.A.

Access to           AWS provides a guarantee scheme
guarantee
schemes for banks
and non bank
institutions
providing
microcredit

Database            N.A.
recording
borrowers’
history

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                         JURISDICTION SUMMARY: AUSTRIA

                         Source: EMN (+AWS and ÖSB Consulting)

Ability of non       N.A.
bank microcredit
institutions to
access such
databases

Obligation for non No obligation
bank microcredit
institutions to
provide their
borrowers' credit
history to such
databases

Significant          -   In 2005 three EQUAL-Projects were started in Austria – one in
initiatives taken to     Tirol, one in the eastern part of Austria and one in Styria. Each was
develop                  focussing on different microcredit models. The pilot project in Styria
microcredit              ESCAPE was based on the existing national framework concerning
                         the legal system and banking, and concentrated on women and
                         migrants. microcredits are granted by an official bank (Raiffeisen
                         Landesbanken). Liability / Security was taken over by the AWS
                         (public security bank). The project reached around 450 people
                         interested in the project. The microcredit-concept in ESCAPE was
                         developed and realised by the ÖSB Consulting GmbH, one of the
                         leading consulting firms in Austria and ended in 2007.

                     -   The project “Alternative Selbstständigkeit” (carried out by “ibw”) in
                         Vienna and the project “Initiative Frauen gründen” in Innsbruck”
                         have a similar procedure and similar conditions but focus especially
                         on women who want to start a business.

                     -   The Austrian government has adopted in April 2006 a promotion
                         package for micro and small enterprises. It is being implemented
                         since July 2006 through austria wirtschaftsservice (aws).

                     -   Since 2007 the Austrian public employment service (AMS) provides
                         microcredit in 5 provinces in the frame of the public business start up
                         programme (Unternehmensgründungsprogramm UGP) with support
                         from ÖSB Consulting.




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                         JURISDICTION SUMMARY: AUSTRIA

                         Source: EMN (+AWS and ÖSB Consulting)

Suggested            For microenterprises/self-employment:
measures to
improve existing /   -   Include businesses without employees into statistics
create a new
framework for        -   Improve legislation on self-employment, i.e. include definition of
microenterprises         self-employment in the Austrian law
and microcredit
                     -   Simplify administrative procedures (tax declaration etc.)

                     -   Improve technical and business development services

                     For microcredit:

                     -   Promote partnerships between MFIs and banks

                     -   Authorise non bank institutions to borrow for on-lending

                     -   Build on the lessons of the EQUAL projects carried out in the field of
                         microfinance




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                             JURISDICTION SUMMARY: BELGIUM

               Source: Latham & Watkins Brussels & EMN with Fonds de Participation

Types of vehicles        Any natural person may start a business in Belgium either as a self-
available for            employed person or through a business.
microcredit and
self-employment          Main types of corporate vehicles which can be used by microenterprises
                         and self-employment: Société Anonyme (SA), Société Privée à
                         Responsabilité Limitée (SPRL) and Société coopérative à responsabilité
                         limitée (SCRL).

Costs and                Cost of incorporation of a company includes registration duties,
procedures               publication in the Official Gazette of company‟s articles of
                         incorporation and fixed notary fees. In total, cost amounts to €1,000 for
                         "SPRL" and €1,500 for "SA".

                         Incorporation of a company in Belgium requires formalities such as
                         enactment of articles of incorporation before a Belgian notary,
                         registration with the National Office for Social Security in case staff is
                         employed in Belgium and, if needed, administrative authorization to
                         access a regulated profession and registration with VAT. Initial capital
                         is required to set up a company. For SA, minimum capital required is
                         €61,500 to be fully subscribed. For SPRL and SCRL, law requires a
                         minimum capital of €18,550 of which at least €6,200 must be paid upon
                         constitution (€12,400 in case of incorporation of a SPRL by one
                         shareholder only).

                         Self-employed persons and companies are required to register with a
                         central corporate database: "Crossroads Bank for Enterprises".

                         Created in 2003, there are ten registered business one-stop-shops in
                         Belgium.

Financial support        As a general rule, an unemployed person ceases to benefit from
programs during          allowances as soon as he/she starts running a business either as self-
transition period        employed or through a company. However, prior to the incorporation,
                         potential financial advantages received during training are not
                         considered as wages and may be as such cumulated with unemployment
                         benefits.

Business                 -   Business development training for unemployed people (beneficiaries
Development                  can continue to receive unemployment allowances during some
Services                     trainings)

                         -   Business employment cooperative (e.g. Azimut and Debu(u)t)

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                                JURISDICTION SUMMARY: BELGIUM

               Source: Latham & Watkins Brussels & EMN with Fonds de Participation

                            -    Various programmes offered by MFIs: “Fonds de Participation” has
                                 developed a "Plan for young self-employed" which provides
                                 accompanying measures for persons under 30 and “Crédal” has a
                                 programme focused on women entrepreneurship

                            -    Credal and Hefboom offer a 2 year business support for the
                                 entrepreneurs who are granted with microcredit

Specific laws &             No specific rules
regulations
applicable to
microcredit, self-
employment and
microfinance

Types of                    MFIs:
institutions
providing                   -    Fonds de participation (Federal public company under supervision
microcredit                      of Ministry of Economy, Ministry of Finance and Ministry of
                                 Employment)

                            -    Crédal (cooperative microfinance institution operating in Wallonia
                                 and the Brussels Region)

                            -    Brusoc (a subsidiary of the partly state-owned venture capital
                                 company BRIC operating in former "Objective 2" part of Brussels
                                 Region)

                            -    Hefboom (private MFI operating in Flanders and Brussels Region)

                            Commercial banks do not offer their own microcredit products, they
                            only act through partnerships with microfinance institutions (MFIs).1




1
  The “Fonds de participation” has partnership agreements with several commercial banks in Belgium so that borrowers
may apply for a loan directly to their usual commercial bank. Crédal has a partnership with the Bank of the BelgianPost for
the granting of low rate consumption loans. The loans are granted directly by the Bank of the Belgian Post to which
repayments are paid. The main feature of those consumption loans is that Crédal will intervene in case of failure to repay in
order to find a settlement. In addition, Crédal has partnership with some commercial banks for its funding.

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                              JURISDICTION SUMMARY: BELGIUM

               Source: Latham & Watkins Brussels & EMN with Fonds de Participation

Sources of                 - MFIs receive financing mainly from public sources either at national,
funding for                  regional or European (European Social Fund, European Investment
microcredit                  Fund and European Regional Development Fund) level.
providers
                           - Public MFIs (Fonds de participation and Brusoc) are financed mainly
                             by public authorities: Federal Government and Brussels Region.

                           - Crédal, private MFI, is financed by public and private sources. 2 As
                             cooperative it receives financial support from their members.

                           - Hefboom, private MFI, is financed by private sources. It is a
                             cooperative which receives financial support from its members.

Operational /              Financial autonomy of public MFIs (i.e. Fonds de participation and
financial                  Brusoc) is difficult to assess since they are financed mainly through
autonomy                   public resources. Interest rates set by Brusoc and Fonds de participation
                           do not allow them to reach sustainability.

                           The private MFIs (Crédal& Hefboom) are not financially autonomous:
                           their operational costs for microcredit activities are covered by private
                           donations.

Usury rules                Usury rules only apply to consumer loans.
(interest caps)
                           However, the Fonds de Participation for its “prêt lancement” (business
                           start-up loan) which makes up 85-90 % of the Belgian microcredit
                           market fixes its interest rate following general objective criteria and the
                           market evolution of rates - the gap between the applied rate and the
                           market rate may not exceed 5% and not fall below 3%.

Tax incentives             Private MFIs operating as authorized cooperatives, such as Crédal, may
                           deduct dividends paid to their members up to €160/annum. However,
                           there is no reduction of corporate tax.

                           Tax deduction to natural persons upon donation to MFIs.




2
  For example, part of the entry fees of a mutual fund (SICAV) of the commercial bank “Dexia” supports Crédal. Crédal is
also supported by Trios Bank, an ethical bank that invests in projects promoting sustainable economic development.

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                           JURISDICTION SUMMARY: BELGIUM

               Source: Latham & Watkins Brussels & EMN with Fonds de Participation

Access to                The regional government of Wallonia has set up a guarantee scheme for
guarantee                people who are granted a commercial bank loan < €25,000 from a
schemes for banks        traditional commercial bank.
and non bank
microcredit              Sowalfin, the Walloon Company of Financing and Guarantee for SMEs
institutions             (Société Wallonne de Financement et de Garantie des Petites et
                         Moyennes Entreprises).

Database                 Databases on mortgage and consumer loans administrated by National
recording                Bank of Belgium
borrowers’
history                  No information on investment loans



Access to such           No direct access available for MFIs
databases
                         MFIs can however require that applicants for micro-loans communicate
                         their credit history.

Obligation for non       MFIs have to report the granting of any consumer credit to "Central
bank microcredit         database for loans to private individuals".
institutions to
provide their            Banks have to report granting of loans to microenterprises > €25,000 to
borrowers' credit        "Central database for loans to enterprises".
history to such
databases

Significant          - Creation of MFIs
initiatives taken to
develop              - Lower regulatory requirements to issue securities
microcredit

Suggested                For microenterprises/self-employment:
measures to
improve existing         - Maintain unemployment benefits during transition period from
framework/create           unemployment to self-employment or setting up a microenterprise
a new framework
for microcredit          For microcredit:
and
microenterprises         - Implement specific regulations applicable to MFIs

                         - Set up tax incentives for investment into MFIs.

                         - Widen the scope of sources of funding available to MFIs acting

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                          JURISDICTION SUMMARY: BELGIUM

              Source: Latham & Watkins Brussels & EMN with Fonds de Participation
                           through partnership with banks

                        - Foster guarantee schemes for MFIs

                        - Carry out more studies on the impact of microcredit




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                       JURISDICTION SUMMARY: BULGARIA

                                 Source: EMN with Nachala

Types of vehicles    - “Free professions” - lawyers, doctors, dentists, farmers. While in the
available for          past there was no obligation to register a company, now there are
microenterprises       different requirements, for instance the farmers have to register in the
and self-              municipality where they own a land;
employment
                     - “One man company or trader” - this still is the lowest level of
                       registration;

                     - “Sole limited liability company” - there is fixed capital which is the
                       level of responsibility of the company to third party;

                     - “Limited liability company” - formed from more than one owner;
                       there is also fixed capital which is the level of responsibility of the
                       company to third party but it is higher than the above one;

Costs and            There are too many requirements and procedures and the process is very
Procedures           slow.

                     There is no simplified status or procedure for self-employment or
                     microentreprises.

                     There is no system of “one-stop-shop”.

Financial support    There is no financial income support during the transition for
programs during      unemployed or welfare recipients who set up a business and no
the transition       provisions to allow a return to unemployment benefits or welfare in case
period               of failure.

Business             N/A
Development
Services

Specific laws &      There is no special law supporting microcredit
regulations
applicable to        Banking monopoly - The central bank gives very strong support to all
microcredit, self-   trade banks, but does not accept MFIs in the country as normal financial
employment and       players in the field of microfinance
microenterprises
                     MFIs are registered either under the Cooperative Act, the Law for credit
                     institutions or the Commercial Law

                     MFIs do not have right to collect deposits


                                                                                           10
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                    JURISDICTION SUMMARY: BULGARIA

                              Source: EMN with Nachala



Types of          Commercial banks: They grant a small number of small size loans but for
institutions      consumer purposes and not for small business (i.e. Procredit bank)
providing
microcredit       Specialised microcredit banks: Procredit bank - Their average loan size is
                  much higher than the loans given from the MFIs - that means that the
                  bank supports SMEs but not microentrepreneurs

                  Credit cooperatives: Cooperative Union of Popular Funds; Cooperative
                  Union “Association of Popular Savings Societies on the Internet”;
                  National Cooperative Union (NCU) Evrostart; Federation of PMRCAs
                  (Private Mutual Rural Credit Associations)

                  MFIs (joint stock companies): Nachala 2007 EAD; Ustoi; Mikrofond
                  EAD

Sources of        Main sources of funding available to (non-bank) microcredit institutions
funding for       – for the cooperatives – are fees and loans from members and loans from
microcredit       creditors as well as grants from donors.
institutions
                  For the other type of MFIs there are grants from donors, shares from
                  shareholders and loans from different investors, creditors.

                  Commercial loans – trade banks and funds from abroad and trade banks
                  from the country

                  Equity investments – foreign investors (very rare cases)

                  Soft loans - It is difficult to find sources for soft loans; in Bulgaria the
                  MFIs do not have experience with such loans.

                  Subsidies and donations from international aid: USAID and other similar
                  organisations from developed counties

                  There is only one State programme supported with funds from the State
                  budget

Operational /     Some of the non-bank microcredit institutions (the biggest ones such as
financial         Nachala, Mikrofond, Cooperative Union of Popular Funds and Ustoi)
autonomy          achieve operational and financial sustainability.

Usury rules       There is no limitation on the interest rates.
(interest caps)


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                        JURISDICTION SUMMARY: BULGARIA

                                 Source: EMN with Nachala

                     The interest rate level depends on the market.

                     Because of the mentality and lack of experience, the MFIs in the country
                     have to compete with the interest rate of the trade banks. It is not possible
                     to implement the world-wide experience for microloan interest rates. On
                     the other side MFIs are not allowed to mobilise deposits and the funds
                     they work with are with high cost. This is why for MFIs is not easy to be
                     financially sustainable.

                     Different MFIs have different targets and missions. Some of them have
                     social targets and their own evaluation systems, but there is no common
                     one.

Tax incentives       N/A



Access to            There are no national guarantee schemes for banks and non-banks
guarantee            institutions providing microcredit.
schemes for banks
and non bank         Some of the MFIs received guarantees from the mission of USAID in the
institutions         country, but no Bulgarian bank accepted them and gave better loan
providing            conditions to the MFIs.
microcredit

Database             There is a credit bureau only for the trade banks. The central bank does
recording            not allow MFIs to have access and to share their own database in the
borrower history     credit bureau.

Access by non-       Since recently private bureaus have started and maybe it is a question of
bank microcredit     time (year or more) to start to operate efficient. Hopefully they will not
institutions to      ignore the MFIs.
such databases

Obligation for non The major MFIs wish to share their data, but the central bank does not
bank microcredit accept it.
institutions to
provide their
borrowers' credit
history to such
databases

Significant          If the MFIs can have some support from the EU commission, there will
initiatives taken to be a chance for the Bulgarian MFIs to participate in the competition for

                                                                                              12
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                     JURISDICTION SUMMARY: BULGARIA

                               Source: EMN with Nachala
develop            the EU funds. (i.e. Jeremie funds)
microcredit

Suggested          For microenterprises/self-employment:
measures to
improve existing   - Reduce procedures for registration and many requirements to start any
framework/create     small business.
a framework (as
applicable) for    - Reduce taxes (there are no simplifications for new entrepreneurs)
microcredit and
microenterprises   - Facilitate access to credit

                   - Promote business development services as population lacks business
                     experience

                   - Tackle the following issues: availability of proper workers (high level
                     of emigration); difficult market; illegal import of goods which
                     destroys the national producers; disloyal competition; high level of
                     inflation

                   For microcredit:

                   - Create a special law for MFIs with their participation in the process.
                     The MFIs should be regulated and widen their scope of finance in
                     order to have cheap funds and have a chance to grow, to be
                     sustainable ad to serve more poor clients and people from rural areas
                     where the population is underserved by banks.

                   - Reserved EU funds to Bulgarian MFIs only as they cannot compete
                     with banks. The funds from the EU programmes and projects are
                     provided only to the trade banks. The justification is that the funds are
                     only given to regulated institutions (understand: banks). This means
                     that MFIs will be excluded from EU funding as long as they are not
                     regulated. However, the trade banks do not serve the socially excluded
                     small entrepreneurs and self-employed persons. The banks give only
                     mortgage and consumer loans, but not for start-up businesses.

                   - Authorise access to credit bureau for MFIs




                                                                                          13
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                      JURISDICTION SUMMARY: DENMARK

                                       Source: EMN

Types of vehicles   - Sole proprietorship
available for
microenterprises    - Limited liability: ApS Company (anpartsselskaber) or A/S Company
and self-             (aktieselselskaber)
employment


Costs and           According to World Bank Going Business Denmark ranks high when
Procedures          business friendliness is measured by the time and cost needed to start up
                    a business: It requires 4 procedures, takes 6 days, and costs 0.00% GNI
                    per capita to start a business in Denmark.

                    Denmark has very little regulation of hiring and dismissal and is,
                    together with U.K. and Ireland, the country in Europe with the most
                    gentle rules concerning employment protection.

                    The business administration has been facilitated by the creation of a
                    business portal Virk.dk, which provides the entrepreneurs a one point
                    access to the public sector

Financial support Today there seems to be no allowance for new entrepreneurs starting out
programs during   of unemployment.
the transition
period (from
unemployment to
self-employment)?

Business            Not specifically for microenterprises.
Development
Services            In 1997 an offer was introduced that provides a maximum of 12 hours
                    of free consultancy before the initiation of the business. This offer
                    changes from region to region. The consultancy has to be finished
                    before the actual creation of the business.

                    There are five regional business counselling centres, providing
                    support and free counselling - for SMEs. The centres also create
                    business networks, run incubators for new entrepreneurs and organise
                    workshops and courses in business related topics. The centres receive
                    funding from the regional municipalities, the Danish Ministry of
                    Economic and Business Affairs and the European Social Fund.




                                                                                          14
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                      JURISDICTION SUMMARY: DENMARK

                                       Source: EMN

                    Denmarks biggest business counselling centre is EVU: Erhvervscenter
                    for Etablering, Vækst og Udvikling. The EVU established a
                    Knowledge Centre for Ethnic Entrepreneurship (”Videnscenter for
                    Etnisk Erhvervsfremme”) funded by the City of Copenhagen and EU.
                    It aims to collect and distribute information concerning the various
                    possibilities and challenges characteristic to ethnic entrepreneurs
                    through research and outreaching business support.

                    In 2005, the Danish government set up a new loan structure: “Kom-i-
                    gang-lån” loans are distributed through regular banks. The loans are
                    granted through a public guarantee, covering 75% of the possible loss of
                    the banks. Together with the loan, the entrepreneur is given access to
                    business support and counselling. The banks provide these services
                    together with local partners.

Specific laws &     No specific laws regarding sole proprietorship/ microbusiness nor
regulations         microcredit.
applicable to
microenterprises,
self-employment
and microcredit?

Types of            There are no registered microcredit institutions specifically targeting
institutions        excluded people and/or immigrants in Denmark.
providing
microcredit         Commercial banks provide business loans in the frame of the new “Kom-
                    i-gang-lån” loan structure.

                    Savings Banks: JAK

Sources of          Commercial loans
funding for
microcredit         Government funding
institutions

Do non bank         No non bank microfinance providers in Denmerk
microfinance
providers achieve
operational /
financial
autonomy?

Usury rules         N.A.


                                                                                        15
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                       JURISDICTION SUMMARY: DENMARK

                                        Source: EMN
(interest caps)

Tax incentives for   N.A.
microenterprises/
investment in
MFIs?

Access to            Vaekstkaution is a national loan guarantee scheme.
guarantee
schemes for banks
and non bank
institutions
providing
microcredit?

Existence of         Only private credit bureaus exist
database
recording credit
history?

Obligation for non No non-bank microcredit institutions in Denmark
bank microcredit
institutions to
provide their
borrowers' credit
history to such
databases?

Significant          None regarding microcredit
initiatives taken to
develop              The government aims to develop entrepreneurial educational
microcredit          programmes, and is creating accessible and competent advice centres.
                     It is also promoting access to capital by supporting private venture
                     capital structures and new financial instruments, among them
                     microfinance.

                     Measures aiming to reduce the administrative burdens through easier
                     registration and electronic governance, as well as tax-reductions, are
                     being planned and implemented. The government aims to reduce the
                     administrative burdens up to 25% by 2010.

                     From January 1st of 2008, the current EVU is replaced by a Business
                     Contact Centre (Erhvervskontaktcenter) administered by the
                     Copenhagen municipality. This can be seen as an acknowledgement

                                                                                          16
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                     JURISDICTION SUMMARY: DENMARK

                                      Source: EMN
                   that EVU projects have been successful.



Suggested          For microenterprises/self-development:
measures to
improve existing   - Include microenterprises and self-employment into political
framework/create     programmes; do not focus on high-growth business start ups only
a framework for
microcredit and    - Simplify administrative procedures: these are difficult for people with
microenterprises     lower education, and especially for immigrant entrepreneurs

                   - Established public loan guarantees which - in a better way than the
                     present “starting up loans” - take into consideration the financial
                     conditions of specific target groups. The “starting up loans” are
                     criticised because they are too expensive - as the interest is too high,
                     and because these loans require security in terms of capital, residence
                     or the proof (for immigrant women) that the husband has a job.

                   - Set incentives for formal business start up, i.e. through financial
                     support during transition from unemployment to self-employment.

                   - Promote business incubators and business development services,
                     especially for long-term unemployed keeping in mind the needs of
                     specific target groups

                   For microcredit:

                   - Foster collaboration between banks, business-advice centres and the
                     interested firms in order to ensure that cheap, risk-oriented loans are
                     available




                                                                                         17
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                        JURISDICTION SUMMARY: FINLAND

                                Source: EMN with Finnvera

Types of vehicles    All existing company forms are usable.
available for        Most simple company form: "company name" (registration as "private
microenterprises/    entrepreneur"). Other forms: “unlimited partnership company”, “limited
self-employment      partnership company” and “limited company”.

Costs and            Registration with Trade Registry administered by National Board of
procedures           Patents and Registration of Finland (NBPR).

                     Registering a company in terms of a private entrepreneur is relatively
                     easy. Information registered is automatically communicated to tax
                     authorities. Official announcement of the registration will take in
                     general about two weeks. Registration cost varies by company form: €
                     65 - € 330.

Financial support Existence of start-up grants
programs during
transition period

Business             Finland Employment and Development Centres; Job and Society
development          Agencies; Women Enterprise Agencies; services provided by Finnvera
services
                     Enterprises can also have help and assistance for questions concerning
                     registration on the web site of “Enterprise Finland”.

Specific laws &      For microenterprises:
regulations
applicable to        No specific rules exist, general corporate rules apply
microcredit, self-
employment and       For microcredit:
microenterprises
                     Finnvera´s operations are governed by its own special legislation: In the
                     domestic financing the Act on the State-owned Specialised Financing
                     company (443/1998) dictates the purpose of Finnvera. The Act on
                     Credits and Guarantees provided by Finnvera (445/1998) further targets
                     the operations. Finnvera does not collect deposits.

Types of             - Cooperative banks (OP)-bank group provide their customers with
institutions           small loans against collateral
providing
microcredit          - Local co-operative banks

                     - Savings banks

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                       JURISDICTION SUMMARY: FINLAND

                               Source: EMN with Finnvera

                    - Promotional bank: Finnvera (state-owned)

Sources of          - Commercial loans: international financial markets
funding for
microcredit         - Equity investments: The State of Finland (owner of Finnvera plc)
providers
                    - European sources: European Investment Fund, European Regional
                      Development Fund

Do non-bank         As a result of the income tax exemption (see “tax incentives”), it will be
microcredit         easier for Finnvera to achieve the self-sufficiency target set for it by the
providers achieve   State, its owner.
operational /
financial
autonomy?

Usury rules         No usury rate
(Interest caps)

Tax incentives      Since beginning of 2008 income tax exemption is granted to Finnvera

                    No tax relief for individuals or companies that invest in MFIs

Access to           All commercial banks can have access to Finnvera‟s Small Enterprise
guarantee           Guarantee Scheme. Most commercial banks participate in the Small
schemes for         Enterprise Guarantee function.
banks and non
bank institutions
providing
microcredit

Database            Various commercial credit bureaus which trade such information
recording
borrower history    Finnvera also has its own database which is confidential

Access of non-
bank microcredit
providers to such   Finnvera‟s database is confidential and not marketable
databases

Obligation for      Legally valid credit losses and delinquents are reported to register as
non bank            prescribed by law
microcredit
institutions to

                                                                                             19
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                      JURISDICTION SUMMARY: FINLAND

                              Source: EMN with Finnvera
provide their
borrowers' credit
history to such
databases

Significant            -   The most comprehensive reform was the establishment of a
initiatives taken          Ministry of Employment and Economy in the beginning of
to develop                 2008. The ministry was formed of the current Ministry of Trade
microcredit                and Industry, the Ministry of Labour and a part of Ministry of
                           the Interior. The new Ministry has two ministers. The new
                           ministerial structure will simplify regulatory matters related to
                           regional Development and the Employment and Economic
                           Development Centres.

                       -   An Entrepreneurship Policy Program implemented by
                           Government: The Finnish enterprise service system is
                           organisation-oriented and complex. The supply of services
                           should be clarified in a more customer-oriented direction, based
                           on national service channels. The objective is that customers
                           receive public enterprise services impartially and on equal
                           grounds throughout the country as easily as possible and based
                           on the same operating model. The reform is carried out the new
                           Ministry, Ministry of Employment and Economy.

                       -   Finnvera runs a special credit programme for female
                           entrepreneurs

Suggested        For microenterprises/self-employment:
measures to
improve existing - Reduce barriers to set up new business: bureaucracy related to
framework/create   starting and managing a company, taxation, high social security
a new framework    contributions
(as applicable)
for microcredit  - Promote positive image of self-employment and micro
and                entrepreneurship
microenterprises
                 For microcredit:

                    No suggestions at the present moment




                                                                                         20
PA\619426.6
                        JURISDICTION SUMMARY: FRANCE

                                  Source: EMN with Adie

Types of             - Individual enterprise (Entreprise individuelle)
corporate vehicles
available for        - Personal company with limited liability (Entreprise unipersonnelle à
microenterprises       responsabilité limitée - EURL)
and self-
employment           - Limited liability company (Société à responsabilité limitée- SARL)

Costs and            Cost of registering an individual enterprise is between 50 and 100 €
Procedures           approximately

                     In August 2003 administrative measures have been eased under the “Loi
                     pour l‟Initiative Ecomomique”: business registration and modifications/
                     cessation requests can be made via Business Formality Centres (“Centres
                     de Formalités des Entreprises CFE”) that act as a one-stop business
                     registration window.

Financial support    Financial support programmes for self-employment out of
programs during      unemployment exist for persons receiving unemployment benefit and
the transition       social aid in the preparation period of the business project: and after the
period               setting up of the business.

                     In case of ceasing the new activity, a formerly unemployed person may
                     take up again his/her remaining rights to allocations for up to 3 years. A
                     person having received social minima has the possibility to ask once
                     again for social minimum allowance.

                     Other governmental financial support programmes specifically connected
                     to enterprise set-up by persons in a precarious situation are:

                     - EDEN (Encouragement au Développement d‟Entreprises Nouvelles –
                       Encouragement for the development of new enterprises) : This is a
                       repayable loan without interest and collateral (similar to quasi equity)
                       subordinated to obtaining a complementary loan (from a bank or a
                       microcredit association) of at least half of the amount of the
                       reimbursable advance asked for.

                     - ACCRE (Aide aux Chômeurs Créateurs et Repreneurs d‟Entreprises –
                       Support for unemployed persons setting up or taking over an
                       enterprise): Under certain conditions French law grants exoneration of
                       social charges for enterprise set-up by the unemployed and
                       beneficiaries of social minima. The provision of ACCRE has been
                       simplified and its target group has been extended in 2006.

                                                                                            21
 PA\619426.6
                      JURISDICTION SUMMARY: FRANCE

                                Source: EMN with Adie

Business           Business support is of the highest importance in France due to the
Development        complex legal environment for new enterprises. This is even truer for the
Services           target groups of non-bank microcredit which are often not familiar with
                   administrative procedures or management techniques.

                   New entrepreneurs who are supported by ACCRE may benefit from
                   advice from organisms authorised by the local government.

                   Divers organisms provide advice, training or mentoring services:

                   - Organisations that are financing microenterprises and providing their
                     services in addition to financial products: Adie (microcredit), France
                     Initiative (quasi equity) , France Active (guarantee)

                   - Organisations that are specialised in support but do not provide
                     financial services: Chambers of Commerce, Chambres des metiers,
                     Boutiques de Gestion (RBG)

Specific laws &    - A simplified framework has been set up: the fiscal regime for
regulations          microenterprises. The main objective of this regime is to reduce
applicable to        fiscal obligations for solo-entrepreneurs. It applies to individual
microcredit,         enterprises with an annual business volume limited to 73,000 or
microcredit          27,000 euros depending on the type of activity.
providers and
microenterprises   - Non-bank microcredit institutions are allowed to borrow for on-
                     lending. Since the n°2001-420 law of 15/05/2001, non for profit
                     associations are allowed to borrow in order to lend to unemployed
                     persons and beneficiaries of social minima who would like to set up
                     their business during the first five years of a new enterprise. This
                     simplifies loan management and improves loan disbursement. To date
                     only Adie is authorised under this law.

Types of           - Non bank MFIs=> Adie
institutions
providing          - Banks if one respects the DG Enterprise definition of microcredit
microcredit          (loans below 25 000 euros)

Sources of         Adie finances its credit resources through banks that make available
funding for        credit lines, through social savings, own funds and loan funds from
microcredit        public authorities.
institutions
                   Operational costs are covered by different sources such as EU structural
                   Funds (FSE, FEDER), the State and local governments, private
                   enterprises (Corporate Social Responsibility) and some donations from

                                                                                        22
 PA\619426.6
                       JURISDICTION SUMMARY: FRANCE

                                 Source: EMN with Adie
                    individuals. Adie clients contribute through the solidarity contribution
                    and the interest rate applied to each microcredit.

Operational /       This is not the case at the moment, but Adie expects to cover its credit
financial           cost within 3 years time through revenue on loans; Business development
autonomy            services will remain subsidised as a “public service for economic and
                    social development”.

Usury rules         The usury rata has been abolished. Interest rate cap for loans to solo-
(interest caps)     entrepreneurs has become possible through article 7 of the n°2005-882
                    law of 02/08/2005 in favour of SMEs..

                    This law included a report from the Banque de France evaluating the
                    impact of the abolished usury rate. This document with the title
                    « Rapport au Parlement. Les incidences de la réforme de l‟usure sur les
                    modalités de financement des petites et moyennes entreprises » stresses
                    that the former regulation tended to exclude enterprises representing a
                    higher risk. The evaluation highlights the positive effect of the
                    abolishment of the usury rate. It facilitated access to credit for small
                    enterprises and has not produced the perverse effect feared by many.

Tax incentives      A favourable fiscal regime has been implemented for donations to
                    associations. The n°2003-709 law of 1st August 2003 relative to
                    patronage to associations and foundations authorises a fiscal deduction of
                    66% for donations to individuals realised in a limit of 20% of imposable
                    revenue and of 60% for enterprises for donations up to 0.5% of business
                    volume.

Access to           Risk coverage is assured by the FGIE guarantee fund (Fonds de Garantie
guarantee           de l‟Insertion par l‟Economique) fed by the Social Cohesion Fund
schemes for banks   (Fonds de Cohésion Sociale; “Loi n°2005-32 of 18/01/2005 de
and non bank        programmation pour la cohésion sociale”); the European Investment
microcredit         Fund, partner banks, own funds and the borrowers.
institutions
                    The Social Cohesion Fund proves 73 M€ over a period of 5 years and
                    considerably increases the means of guarantee for microcredit. It has two
                    target groups: microenterprises set up by persons in precarious situations
                    as well as non for profit organisms.

Databases           There is a banks‟ database: the FCC (fichier central des chèques
recording           impayés) and the FICP (fichier des incidents des crédits aux particuliers)
borrowers’          of the Banque de France.
history


                                                                                          23
 PA\619426.6
                        JURISDICTION SUMMARY: FRANCE

                                 Source: EMN with Adie

Access to such      They are not accessible to non-bank microcredit institutions at the
databases           moment but this might change soon due to an action by Adie in this field.

                    In order to better manage risk microcredit organizations authorized in the
                    frame of article L511-6 of the Monetary and Financial Code should have
                    access to the databases. The purpose is not to increase the selection of
                    entrepreneurs due to theses databases, but to take prevention measures
                    regarding the credit amount and the support to ensure reimbursement and
                    increase the chances that the business will have success.

Obligation for non Non-bank microcredit institutions do not have the obligation to provide
bank microcredit information on their borrowers‟ credit defaults to this database. It will
institutions to    change if they have access to the database.
provide their
borrowers' credit
history to such
databases

Significant          - The different laws already given as examples previously
initiatives taken to
develop              - Partnerships between banks and non bank MFIs (Adie) or between
microcredit            banks and guarantee or quasi-equity providers (France Active/Fir)

                    - Those are significant steps towards the development of microcredit




                                                                                           24
 PA\619426.6
                         JURISDICTION SUMMARY: FRANCE

                                Source: EMN with Adie

Suggested          For microenterprises/self-employment:
measures to
improve existing    1.    Remove the obstacles related to the carrying of different types
framework/create          of business
a framework (as
applicable) for    Access to self-employment remains limited due to a number of
microcredit and    barriers related to persons, businesses and types of enterprises.
microenterprises   These barriers incite persons to work in the informal sector which
                   provokes disloyal concurrence to registered entrepreneurs, loss of
                   resources to the State and most of all Lack of dignity for those
                   concerned.

                   Article 4 of the French Constitution stresses the principle of
                   entrepreneurial liberty that can only be restricted through a non-
                   discriminatory legal decree justified by the motive of public security or
                   protection of the environment.

                    2.    Improve the system of social contributions

                   The system of social contributions remains too heavy. The system of
                   capped contributions (“bouclier social”) set up in March 2007 limits
                   social contributions and allows microenterprises to calculate their
                   contributions in a simplified manner. These are important improvements,
                   but they only apply to enterprises registered under the micro-regime
                   which still Is not adapted for all types of businesses.

                   The measures implemented in 2007 regarding social contributions should
                   be extended to businesses that are not registered under the fiscal regime
                   of microenterprises, but that have a business volume corresponding to
                   this regime.

                   A more ambitious reform should be implemented regarding progressive
                   imposition of social charges depending on revenue, unifying the regime
                   and abolishing minimal contributions.

                    3.    Provide more and less expensive business premises

                   Premises are too expensive for very small enterprises in the city centre,
                   and they are paradoxically very rare in the suburbs.

                   A bigger part of the budget of the National Agency for Urban
                   Regeneration could be provided to the construction and planning of
                   adapted premises at low price, for microentrepreneurs.


                                                                                        25
PA\619426.6
                 JURISDICTION SUMMARY: FRANCE

                           Source: EMN with Adie

              Renting of already existing premises should be facilitated through
              information and confidence-building amongst funding providers.

              Legislative measures are necessary to allow mixed usage of social
              housing for activities without nuisance

              For microcredit:

              The Bill on the modernization of economy to be passed in the next
              months includes :

              - enlarging of the article L 511-6 of the monetary and financial code
                allowing non bank institutions to borrow and on-lend

              - access of the non bank institutions to the Central Bank databases

              -the remaining obstacle to the development of microcredit is the lack of
              funding for coaching and business development services.




                                                                                    26
PA\619426.6
                        JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG

Types of vehicles   Micro-enterprises may either be established by individuals or by
available for       business partners becoming self-employed:
microenterprises    -   sole proprietorship (Einzelkaufmann /-firma);
and self-
employment          -   limited liability company (Gesellschaft mit beschränkter Haftung –
                        "GmbH");
                    -   business partnership (Personengesellschaften): general partnership;
                        limited partnership;

Costs and           Depending on sector of business, various prior formalities are required:
procedures          registration with tax authorities; Trade Surveillance Office
                    (Gewerbeaufsichtsamt);       Social      Insurances    (Krankenkassen,
                    Rentenversicherung, Berufsgenossenschaft); Construction Office
                    (Bauamt); Registration in commercial register (Handelsregister) via
                    notarial act (applicable to all businesses except very small businesses
                    and partnerships organised as a GbR (Gesellschaft bürgerlichen
                    Rechts))

Financial support The Federal Government offers support loans managed by KfW
programs during Mittelstandsbank and have to be applied for via applicant's own bank
transition period ("house bank"):

                    -   Micro-loan (StartGeld, up to 50,000 €)

                    -   Capital for     new     start-ups   (ERP-Unternehmerkapital      für
                        Gründungen)

                    -   Business loan (Unternehmerkredit)

                    Subsidies can also be obtained through Employment Agency (Agentur
                    für Arbeit) by recipients of unemployment benefit (Arbeitslosengeld
                    I/II) wishing to set up a business:

                    -   Start-up subsidy (Gründungszuschuss)

                    -   Initial financial support for people setting up a business
                        (Einstiegsgeld)




                                                                                         27
PA\619426.6
                             JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG

Business             -       Sponsorship for advisory services (Beratungsförderung)
development
services             -       Sponsorship for advisory services for start-ups: Gründercoaching
                             Deutschland

                     -       Centers for founders of a business (Gründerzentren)

                     -       Assistance provided by German MFIs

                     -       Networks: several local, regional and national networks for founders
                             of SMEs offer broad information, qualification, personal advice and
                             coaching for people who plan to set up a business, contacts to capital
                             investors and customers, exchange of experience etc.

Specific laws &          -    Legislation restricts lending activities to banks only
regulations
applicable to            -    General corporate and trade law rules (such as German Limited
microcredit, self-            Liability Company Act (GmbH-Gesetz) and German Trade Code
employment and                (Handelsgesetzbuch) and general tax laws (in particular the
microenterprises              German Trade Tax Act (Gewerbesteuergesetz), Corporate Income
                              Tax Act (Körperschaftsteuergesetz) and Income Tax Act
                              (Einkommensteuergesetz), and Valued Added Tax Act
                              (Umsatzsteuergesetz) apply in the same way to self-employment
                              and microenterprises

Types of                 -    A key role to promote microcredit in Germany is played by
institutions                  promotional banks (KfW Mittelstandsbank being the most active
providing                     actor) at federal and regional (“Länder”) level. KfW
microcredit                   Mittelstandsbank is a state-owned promotional bank. It does not, in
                              general, directly grant microloans, but it gives funds to house banks
                              which arrange credits and on-lend funds to borrowers. Thus, first
                              contact for applicants for microloans is always their house bank.
                              Similar promotional banks exist in each of the 16 “Länder”.

                         -    KfW Mittelstandsbank, Federal Ministry of Economy and
                              Technology, Federal Ministry of Labor and Social Affairs and GLS
                              Gemeinschaftsbank e.G. created Microfinance Fund Germany
                              (Mikrofinanzfonds Deutschland) to provide capital for micro-
                              lending and acquire and manage capital used for lending.
                              Technically, loans are still granted by applicant's house bank which
                              has been elected for cooperation and has to execute a cooperation
                              agreement with the Fund. Amount of loans must not exceed
                              €10,000; loans have a term of approximately 2 years. Microfinance
                              Fund Germany exempts lending banks from all credit risks and

                                                                                                28
PA\619426.6
                       JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG
                        covers losses in cases of an event of default. As remuneration for
                        coverage of credit risk, i.e. guarantee given by Fund, the house
                        bank has to pay a commission which currently amounts to 5% p.a.
                        This commission is paid out of interest paid by borrowers. Current
                        interest rate is 10% (5% for “Mikrofinanzfonds Deutschland”, 5%
                        for co-operating bank).

                   -    German non bank microcredit providers accredited by the German
                        Microfinance Institute (Deutsches Mikrofinanz Institut e.V - DMI)
                        are not comparable to international MFIs which are mostly licensed
                        credit institutions and grant credits themselves. German MFIs do
                        not grant loans since they do not hold necessary license for such
                        banking business: loans are granted by "house banks" instead.
                        DMI-MFIs act as intermediaries between borrower‟s (start-up‟s /
                        microenterprises) and banks:

                          consultancy & technical support for borrowers

                          preparation of loan application (via DMI-Software) and
                           collection of all necessary documents

                          forwarding loan application & recommendation of loan delivery
                           to co-operating bank (GLS Bank; Sparkasse Offenbach (saving
                           bank); Volksbank Villingen-Schwenningen (cooperative bank)

                          provision of risk capital (20% of yearly loan portfolio agreed
                           with “Mikrofinanzfonds Deutschland”)

                          loan monitoring & further (non-financial) support

                          crisis management & liquidation of securities

                          participation at DMI-Benchmarking as an instrument for
                           transparency to funders / sponsors and exchange of results
                           between microfinance practitioners is compulsory for DMI-
                           MFI‟s.

                   -    Several other semi-public and private schemes providing
                        microcredit exist often in form of co-operations between regional
                        business support institutions, regional authorities and regional
                        banks (“Sparkassen” and “Volks- und Raiffeisenbanken”).




                                                                                       29
PA\619426.6
                      JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG

Sources of           Public sector funds on regional, national and European level
funding for
microcredit
institutions

Do non-bank         Microfinance Fund Germany can theoretically reach financial
microcredit         sustainability and operational autonomy. Since liability of regional
providers achieve   MFIs to cover credit losses is capped to 20%, capital of Microfinance
operational /       Fund Germany would only be diminished if default rate in loan
financial           portfolio exceeded 20%. If default rate of credits is between 10% and
autonomy?           20%, capital of Microfinance Fund Germany would remain stable, but
                    regional MFIs would produce losses. If default rate of credits was below
                    10%, capital in Microfinance Fund Germany would stay stable and
                    regional investors would receive a return on their investment.

                    However, in practice so far non of the DMI members issuing loans
                    covers operational lending costs (please see the following example):

                          average loan amount: 7.000 Euro

                          maximum gratification 10% (no loan default): 700 Euro

                          actual gratification / deduction of average loan default 6,5%: 245
                           Euro

                          average credit period: 24 months

                          result: 122,50 Euro / loan / per year for technical assistance loan
                           application and ongoing support

                    MFI‟s put in a claim to receive processing fees similar to banks
                    (Example: Housebank will receive a processing fee of 1.000 Euro for
                    public loan programme “KfW StartGeld”).

Usury rules         The rule of "significant disproportion" of interest rate which is designed
(interest caps)     to protect weak borrowers from lenders who exploit their economic
                    weakness which is applicable to consumer loans does not appear, for the
                    time being, to hinder the development of microcredit




                                                                                           30
PA\619426.6
                        JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG

Tax incentives      -   For trade tax purposes a tax allowance in amount of €24,500 applies
                        to individuals and partnerships

                    -   Small and medium-sized enterprises can be subject to special
                        appreciation rules: taxable profit may be decreased in certain years
                        to a large extent

                    -   Entrepreneurs with turnovers in preceding business year below
                        €17,500 and with expected turnovers of below €50,000 within the
                        current year can opt not to be subject to VAT

Access to           -   German banks operating as "house banks" have access to guarantee
guarantee               schemes provided by guarantee banks in each of the 16 “Länder” if
schemes for             they provide microcredits in the framework of established
banks and non           programmes to promote microcredits, e.g.:
bank institutions   -   KfW Mittelstandsbank-programmes          "KfW-Startgeld"     provide
providing               default guarantees of 80% of loans
microcredit
                    -   Microfinance Fund Germany exempts the co-operating bank of local
                        MFI 100% from all liability (e.g. GLS Bank, Sparkasse Offenbach,
                        Volksbank Nürtingen-Schwenningen – other local banks will
                        follow)

                    -   Regional promotional programs: similar guarantees are available and
                        generally assume around 70-80% of credit liability. For instance,
                        Bavarian development bank LfA Förderbank Bayern combines its
                        start-up program "Startkredit" with option "HaftungPlus" which
                        releases relevant house bank from 70% of its liability

Existence of        Several credit bureaus that record credit history (Schufa-database,
database            Creditreform) are managed by private entities and aim either at profits
recording credit    or at sharing information between members of such entities on
history             cooperative basis. However, individual's consent is required prior to
                    communication of any information.
Access for non-
bank microcredit    Access to information, in general, is only permitted to costumers of
providers to such   those databases who, in return, oblige themselves to file all information
databases           they gather in their course of business with database.

                    However, most of these databases grant access to information recorded
                    therein to third parties for a certain fee if relevant individual has
                    consented to a release of such information to third parties.

                    Each individual may access information recorded on itself and convey

                                                                                          31
PA\619426.6
                      JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG
                    them to non-bank MFI.

Obligation for      No, but can be organised by contract.
microcredit
institutions to
provide their
borrowers' credit
history to such
databases

Significant          1) The German Microfinance Institute DMI plays a key role in the
initiatives taken       Microfinance Fund. It is a private law, non-profit association
to develop              whose members are mainly start-up advisory centres, financial
microcredit             institutions, public agencies and other associations tasked with
                        promoting economical development. The aim of German
                        Microfinance Institute is to collect knowledge and gain experience
                        in the field of microfinance so as to establish a microfinance sector
                        in Germany.

                        The German Microfinance Institute trains and accredits so-called
                        Microfinance Institutions (Mikrofinanzierer) which provide both
                        support and financing-related services. MFIs (usually, start-up
                        advisory centres, economic development organizations, local
                        authority entities or consulting companies after having received
                        necessary training and accreditation by German Microfinance
                        Institute) identify valuable business ideas, advise potential
                        borrowers in their plans, analyse credit applications and
                        recommend to banks to grant loans.

                        MFIs are also involved in servicing of loans; MFIs bear risks of
                        loans recommended by them and have to indemnify Microfinance
                        Fund Germany if it has to cover losses. However, if borrowers do
                        not default, MFIs receive a bonus of 10% of capital repayments of
                        loan. This means that if default rate of loans promoted by MFIs is
                        below 10%, MFIs realize profits. This mechanism works as an
                        incentive for MFIs to thoroughly check ideas and projects which
                        they intend to recommend.

                     2) In the last years KfW has organised several meetings and
                        workshops bringing together all relevant players in the field of
                        microfinance in Germany to discuss development and problems.




                                                                                          32
PA\619426.6
                       JURISDICTION SUMMARY: GERMANY

   Source: Latham & Watkins Frankfurt/Hamburg & EMN with DMI and EVERS&JUNG

Suggested          For microcredit:
measures to
improve existing   -   Improve Scale and Efficiency of MFIs: the number of loans issued
framework/             through all DMI members is limited – it was below 200 in 2006 and
create a new           possibly around 200 in 2007. Through MFIs‟ eyes risk/return-ratio is
framework (as          inappropriate (lack of programmes for capacity building / to finance
applicable) for        start-up of MFIs; low gratification / lack of processing fees, but 20%
microenterprises       risk assuming). So finding federal / regional / local funding sources
and microcredit        for the development of MFI‟s has high priority for DMI and MFIs
                       and is very power consuming.

                   -   Promote cooperation with banks

                   -   Link the funding for refinancing and operational costs. With regard
                       to public funding, there is often a separation of funding between
                       operational and refinancing costs. Only focusing on one and
                       neglecting the other leads to a distorted allocation of money within
                       the organisation.

                   -   Enable funding options for private investors. For private donors it is
                       often hard to fund microfinance providers, which do not possess a
                       charitable (dt.: gemeinnützig) status. Donors therefore can not
                       necessary claim these costs. In the view of increasing corporate
                       social responsibility, tax laws should be improved and private
                       funding to microfinance institutions should be deductible.




                                                                                          33
PA\619426.6
                        JURISDICTION SUMMARY: HUNGARY

        Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS

Types of vehicles   -   Sole proprietorship
available for
microenterprises    -   Limited partnership
and self-
employment          -   General partnership

                    -   Limited liability company

Costs and           In 2007 several laws have been passed in the frame of the „Tuned to
Procedures          Business” programme of the Ministry of Economy that aims at easing
                    administrative burdens for setting up a business and to improve the
                    operational conditions of enterprises within the frames of the
                    convergence programme: possibility of online registration; reduced
                    registration fee; procedure time: 8-15 working days

Financial support   Supporting developments that create jobs: In the call for application the
programs during     employment organisation stressed that enterprises operating in socially
the transition      and economically disadvantaged areas should have supplementary
period              support for the sake of new jobs.

                    Support of keeping jobs: The non-returnable grant given to the employer
                    may range from 25 to 75 % of the added amount of wages and
                    contributions of the relevant employee. In 2006 this support enabled
                    nearly 7,400 employees, who would have otherwise got redundant, to
                    keep their jobs.

                    Payment of contributions instead of employers who employ formerly
                    unemployed people: This support is to urge the employment of job-
                    seekers by paying the employer‟s expenses relating employment
                    (medical and social insurance contributions, employer‟s contribution and
                    health care contribution) in part or total.

                    Supporting the process of becoming an entrepreneur: the support enables
                    unemployed people who become entrepreneurs to finance their social
                    security contributions. In 2006 approximately 2,700 people received
                    grants supporting the process of their becoming entrepreneurs, which is
                    658 less (i.e. 19.4% less) than in the previous year.

                    Support of self-employment specifically for job-seekers: this support can
                    be given to job-seekers to whom the employment centre could not offer a
                    suitable job and who undertake to employ themselves - by starting or
                    joining a business -, furthermore they have the initial funds to start the

                                                                                          34
 PA\619426.6
                         JURISDICTION SUMMARY: HUNGARY

        Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS
                     business - at least 20% of the investment - as well as the necessary
                     financial security for repayment.

Business             -   State-owned organisations aiming to develop SMEs (e.g. the
Development              Hungarian Development Bank, Creditguarantee, Regional
Services                 development Holding etc., EXIMbank Corvinus), and support
                         brokerage organisations (MAG Close Corp. etc.), which are
                         established and continuously financed by the state

                     -   Non-profit development agencies (NGOs), which are not founded
                         directly by the state but partly execute state functions as well.

                     -   Chambers (of commerce and industry, agriculture and special fields
                         etc.)

                     -   Entrepreneurial business federations, trade associations: VOSZ,
                         GYOSZ, IPOSZ, KISOSZ, Innovation Association, Association of
                         Business Incubators etc.

                     -   Enterprises providing business-type services (financial institutes,
                         enterprises of property development, consultancy and training etc.)

                     -   The national network of enterprise promotion foundations (LEA
                         network)

Specific laws &      Hungary allows both bank and non-bank MFIs to provide credit to
regulations          microenterprises. However, non-bank lending is limited. MFIs are legally
applicable to        licensed to disburse credit but not to collect savings. There is no specific
microcredit, self-   law for microcredit; it is regulated in the following laws:
employment and
microfinance            Act XXXIX/2003 on the modification of Act CXII/1996 about
                         lending institutes and financial enterprises: It defines operational
                         rules and conditions for profit-oriented actors of the financial market.
                         On the basis of Article (1) h. in §2 of the act lending from the
                         National Microcredit Fund of MVA and the microlending activities
                         of the enterprise promotion foundations in the county and the capital
                         city ® are exempt from the action of this law.

                        Government Decree No. 2163/2004. (July 5th) to settle the operation
                         of the Microcredit Program, Microcredit System realised by utilizing
                         the rights and Funds relating the revolving regional and national
                         credit funds financed by PHARE, and their connecting credit
                         guarantee funds: It authorizes the Minister of Economy and Transport
                         to practise the owner's rights relating the state-owned Microcredit

                                                                                             35
 PA\619426.6
                        JURISDICTION SUMMARY: HUNGARY

        Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS
                        Funds on behalf of the Hungarian Republic. Financial settlement of
                        the funds with the EU has not been accomplished before the
                        preparation of this study.

                       Act LXXVI/2007 about the modification of Act XX/2001 on the
                        Hungarian Development Bank: §1 of the law enables MFB to take
                        part in the finance of loans needed for the microlending activities of
                        the Hungarian Enterprise Promotion Foundation and the enterprise
                        promotion foundations in the counties and the capital city on the
                        basis of a government decree.

                    Other regulations:

                    The National Microcredit Programme is operated on the basis of the
                    "Microcredit Manual" as approved by the Ministry of Economy and
                    Transport.

Types of            Bank microcredit:
institutions
providing               -   37 commercial banks: only microenterprises at the very top of
microcredit                 band for turnover are drawing don bank credit; banks tend to
                            offer their entrepreneurial loan products more and more often to
                            the micro- and small enterprises creating competition for public
                            funds.

                        -   KAVOSZ Chambers of Commerce: Subsidised Széchenyi Card
                            loans disbursed through commercial banks (OTP, Erste Bank,
                            Volksbank, Inter-Eruope Bank, MKB Bank) and savings
                            institutions

                        -   169 cooperative credit unions

                    Non bank microcredit:

                        -   Hungarian Foundation for Enterprise Promotion (MVA) – non-
                            profit organization under the supervision of the Ministry of
                            Economy and Transport: since 2001 national co-ordinator of the
                            National Microcredit Programme and caretaker of the National
                            Microcredit Fund; has changed its name to Hungarian Enterprise
                            Promotion Network Consortium non profit PLC in 2007.

                        -   Foundations: 20 Local Enterprise Agencies (LEAs): exclusive
                            local administrators of the National Microcredit Programme on
                            behalf of PHARE


                                                                                          36
 PA\619426.6
                      JURISDICTION SUMMARY: HUNGARY

        Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS

                        -   MFIs: Mikrohitel (lends smaller amounts) in cooperation with
                            Autonomia NGO; target group: Roma

Sources of             -    Ministry of Economy and Transport (MET): Microcredit Fund;
funding for                 authority over the National Microcredit Programme
microcredit
institutions            -   Hungary Development Bank (MFB): Microcredit Plus Program in
                            co-operation with the Hungarian Enterprise Promotion Network
                            Consortium since 2005

                        -   Hungarian Centre for Economic Development and Subsidy
                            Intermediation Ltd. (MAG Zrt.): created by the Government
                            through merging former subsidy intermediary organizations.
                            MAG Zrt. became a major subsidy intermediary agency
                            responsible for the Economic Development Operational Program
                            financed under the EU Structural Funds.

                        -   Hungarian Enterprise Finance Ltd.: The company was established
                            in 2007 in order to become the holding fund of the JEREMIE
                            programme, using ERDF resources.

                       -    Commercial loans: Microcredit Ltd is a profit-oriented financial
                            enterprise supported by non-profit organisations but it does not
                            collect deposits.

                       -    Soft loans: A microcredit programme called GOP-4 microcredit
                            (named after the Economic Development Operative Program) was
                            issued in late 2007. This resource, coming from EU funds
                            (ERDF), is provided to MFIs and banks by the Hungarian
                            Enterprise Financing Ltd. at a price of 0.5%

                       -    PHARE and government grants within the framework of the
                            National Microcredit Programme

Operational /       Non-bank microfinance institutions (MFIs), either state-sponsored
financial           (MVA) or Mikrohitel which operates on half the funds required to break
sustainability      even, lack sustainability.

                    It seems that LEAs are self-sustainability even with relatively low
                    interest rates, partly due to the fact that LEAs - as non-profit
                    organisations - have tax allowances, operate in a national network and
                    run other business development programmes that cover a part of the costs
                    (counselling, training, business incubators etc.).


                                                                                        37
 PA\619426.6
                      JURISDICTION SUMMARY: HUNGARY

        Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS

Usury rules         There is no interest cap in Hungary.
(interest caps)
                    Between 1992 and 2007 the interest rates in the National Microcredit
                    Programme were equal to the respective base interest rate of the central
                    bank.

                    Non-LEA microfinance institutes realised a higher interest but their
                    volume both in clientele and dispersed loans is low.

                    The interest rate of the GOP-4 microcredit programme issued late 2007
                    has an upper limit: that is the EU reference interest rate + maximum 2 %-
                    point.

                    There is the view that there are very few potential enterprises whose
                    financial background and business activities would enable them to realise
                    a significant development from a credit burdened with a high interest and
                    that high interest would result in business failure.

Tax incentives      LEAs receive tax and duty allowances on their activities of public utility
                    (as any other foundation does on its activities of public utility).

Access to           The State Guarantee Agency (Hitalgarancia) has played a meaningful
guarantee           role in microcredit development. Through partnerships with institutions
schemes for banks   that provide microcredit, the Guarantee Agency (Hitalgarancia) has
and non bank        helped to mitigate risk and lower credit costs, thereby increasing scale.
microcredit
institutions

Database            The Bank Supervisory Authority database records borrower defaults for
recording           credit institutes.
borrower history
                    Non-bank microcredit institutions do not yet have access to such
Access by non-      information. The LEAs can rely on the data of their own network and the
bank microcredit    information from members of the Microcredit Censorship Board.
institutions to
such databases

Obligation for non No obligation
bank microcredit
institutions to
provide their
borrowers' credit
history to such
databases

                                                                                          38
 PA\619426.6
                       JURISDICTION SUMMARY: HUNGARY

        Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS



Significant          JEREMIE and the new EU initiative on microcredit
initiatives taken to
develop
microcredit




                                                                                 39
 PA\619426.6
                     JURISDICTION SUMMARY: HUNGARY

       Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS

Suggested          For microenterprises/self-employment:
measures to
improve existing       1. Reduce administrational and taxation burdens - It is currently
framework/create          under preparation to significantly reduce the taxes and
a framework (as           contributions payable by enterprises with less than 10 employees
applicable) for           from 2009 as a positive result of the convergence programme. A
microcredit and           major part of enterprises benefit from a so called Simplified
microenterprises          Enterprise Tax (Hungarian acronym EVA), which radically
                          reduced tax burdens and their administration.

                       2. Provide access to finance for new entrepreneurs - A wide range of
                          the population has little accumulated capital. The financial
                          institutes do not welcome and finance small enterprises willingly
                          due to low profitability and high risk of small loans. lending
                          organisations have a much too “careful” business policy due bore
                          remarkable losses en masse in the early '90s

                       3. Create a favourable economic environment for microenterprises
                          which promotes growth, encourages entrepreneurs to join the
                          formal economy, and allows access to finance.

                       4. Improve efficient operation of the enterprise development
                          institution

                       5. Promote entrepreneurial culture - It significantly hindered the
                          development and efficient operation (or simply the survival) of
                          the enterprises in the sector that the population did not have
                          notable entrepreneurial traditions, experience or knowledge.

                   For microcredit:

                       1. Allow microlending by non-banks in order to lower average loan
                          size to reach more microenterprises, single person entrepreneurs
                          and the working poor.

                       2. Reduce dependence by the national programme on subsidised
                          donor funds for microcredit schemes. This distorts the
                          microlending mechanism and inhibits financial innovation.
                          Subsidised donor programmes should complement, not compete,
                          with private capital to provide small loans otherwise not
                          available.

                       3. Promote cooperation between banks, government agencies, MFIs
                          and NGOs to optimise the potential of all service providers.

                                                                                       40
PA\619426.6
                     JURISDICTION SUMMARY: HUNGARY

       Source: EMN with HMN; Microfinance Market Study by MFC for CEE and NIS

                       4. Introduce innovations in IT and information collection. This will
                          enable commercial banks to downscale their lending activities by
                          simplifying procedures and MFIs to deliver credit on a large
                          scale.

                       5. Where public funds are being disbursed, there needs to be an
                          active monitoring and evaluation system to ensure accountability
                          and impact measurement.

                       6. Strengthen the networking of LEAs and facilitate access to GOP
                          4 funds. Limit resources to one particular microfinance institute
                          in a region proving specific standards and results.




                                                                                       41
PA\619426.6
                          JURISDICTION SUMMARY: IRELAND
               Source: EMN with First Step and intrepid Management Consultants
Types of vehicles     -           sole trader
available for
microenterprises      -           partnership
and self-
employment            -           limited liability company (including partnerships)

Costs and              Registration, inter alia, for tax purposes
procedures
                       If one wishes to register as a company, the cost c. €150.

                       To start business in one‟s own name, no cost.

                       In both cases must register with Revenue, with no cost applicable.

Financial support     -   The Irish government provides "back to work schemes" and assists
programs during           new microenteprises and self-employment with financing of their
transition period         company. Individuals can return to welfare should business fail.

                      -   First step (MFI) provides access to funding

Business               State funded agencies:
development
services              -   35 City Enterprise Boards

                      -   County Enterprise Boards and

                      -   Area Partnership companies

Specific laws &        No, other than revenue, planning, labour, health and safety, etc. where
regulations            applicable.
applicable to
microcredit, self-
employment and
microenterprises




Types of              -   Commercial banks: Bank of Ireland, AIB Bank, Ulster Bank (RBS)
institutions
providing             -   One MFI operating nationally in Ireland: First Step Microfinance
microcredit
                      -   Approximately 500 independent local credit unions, however such

                                                                                             42
 PA\619426.6
                           JURISDICTION SUMMARY: IRELAND
               Source: EMN with First Step and intrepid Management Consultants
                         entities are only authorized to lend to consumers (not for business
                         purposes)

Sources of             Loans from a joint body set up by banking community (The Social
funding for non-       Finance Fund), and from Enterprise Ireland (State body which assists
bank microcredit       start up and development of businesses).
providers

Do non-bank            First Step operates autonomously: rates set on loans do not allow
microcredit            sustainability and other revenue streams are developed to insure
institutes achieve     sustainability.
operational /
financial
autonomy?

Usury rules            No interest caps: interest rates are set by financial institutions in
(interest caps)        consultation with the Financial Regulator.

                       First Step sets its rate below this benchmark.

Tax incentives         -   Thresholds for VAT returns and year end reporting based on
                           business size exist in relation to setting up of a business.

                       -   First Step has a specific "charitable status" and is only subject to
                           VAT. First Step is not subject to Corporation taxes.

                       -   Individuals and corporations which donate funds to First Step can
                           benefit to extent of 20% relief on amounts donated up to €100,000
                           per year.

Access to              First Step has access to guarantees provided by banking community
guarantee              fund (please see Section "Sources of funding") and by European
schemes for banks      Investment Fund.
and non-bank
microcredit
institutions

Database               Irish Credit Bureau
recording
borrowers’
history

Access by non-
bank microcredit       MFIs can access such information if they are members of Irish Credit
institutions to        Bureau.


                                                                                             43
 PA\619426.6
                      JURISDICTION SUMMARY: IRELAND
            Source: EMN with First Step and intrepid Management Consultants
such databases



Obligation for non Only if MFI is member of Irish Credit Bureau
bank microcredit
institutions to
provide their
borrowers' credit
history to such
databases

Significant          Initiatives of Financial Regulator to regulate microcredit, self-
initiatives taken to employment and microenterprises
develop
microcredit          Creation of Enterprise Ireland

Suggested           For microenterprises/self-employment:
measures to
improve existing    Implement stringent business regulatory and compliance issues.
framework/create
a new framework     For microcredit:
for microcredit
and                 N.A.
microenterprises




                                                                                     44
 PA\619426.6
                          JURISDICTION SUMMARY: ITALY

                    Source: Latham & Watkins Milan; EMN and micro.bo

Types of vehicles    Two categories of vehicles are available:
available for
microenterprises     -   “società di persone” (similar to partnership), which encompasses:
and self-                “società semplice”, “società in nome collettivo” and “società in
employment               accomandita semplice” and

                     -   “società di capitali” (similar to business corporation), which
                         includes: “società per azioni", "società in accomandita per azioni"
                         and "società a responsabilità limitata”

                     Corporate forms most likely to be used for microenterprises are the
                     “società di persone”

                    Italian law does not provide for a general legal framework concerning
                     self-employment and microenterprises. However, there are some legal
                     instruments that specifically relate to and regulate the assistance and
                     promotion of self-employment and microenterprises.

                     In this respect Legislative Decree No. 185 of 21 April 2000 (the
                     "Decree") introduced incentives to facilitate creation and development
                     of enterprises and self-employment in certain geographical areas and
                     with regard to specific groups of people.

                     Pursuant to the Decree, the microenterprises must:

                     -   be a newly set up "società di persone" (exclusion of joint stock
                         corporations and limited liability companies)

                     -   not pursue mutualism

                     -   have its registered office is within economic disadvantaged areas
                         identified by European Union

                     -   be composed of unemployed adults resident in disadvantaged
                         economic areas and

                     -   pursue a project in area of production of goods and service sectors

                     If all criteria set up by Decree are met, the microenterprises can be an
                     eligible beneficiary of non-repayable grants, subsidized loans for
                     investments and grants for operating expenses



                                                                                               45
PA\619426.6
                           JURISDICTION SUMMARY: ITALY

                  Source: Latham & Watkins Milan; EMN and micro.bo

Costs and           Approximate cost of a public notary to set up a “società di persone”:
procedures          €2,000 (whereas public notary costs to set up a “società di capitali” are
                    in average double)

                    Minimum capital requirements exist for the two following forms of
                    “società di capitali”:

                       -    €120,000 for “Società per azioni”

                       -    €10,000 for “società a responsabilità limitata”

                    No minimum capital requirement for "società in accomandita per
                    azioni" or for any corporate form of “società di persone”

Financial support Those persons who carry out a self-employed activity - which had been
programs during started prior to the termination of the employment relationship - can be
transition period eligible to unemployment benefits.

                    Otherwise, unemployment benefits may be granted only if the self-
                    employed activity is not carried out on a continuous basis

Business            Business development centers are the result of the collaboration among
development         regional and local public institutions, usually jointly with the private
services            sector (i.e., Business Associations, Chambers of Commerce, local banks
                    and individual enterprises etc.)

                    Furthermore, private companies, universities, Agenzia nazionale per
                    l’attrazione d’investimenti e lo sviluppo d’impresa S.p.A. and some
                    Italian local public entities provide "business incubators" to assist new
                    businesses in their start-up phase (services provided against
                    remuneration or free of charge depending on provider)

                    With regard to the Decree (please see Section "Types of institutions
                    providing MC"), Agenzia nazionale per l’attrazione d’investimenti e lo
                    sviluppo d’impresa S.p.A. - a financial intermediary wholly owned by
                    and under control and surveillance of Ministry of Economy - is in
                    charge of the applications' review process, the granting of credit
                    facilities and the subsequent monitoring phase. If all criteria set up by
                    Decree are met, microentreprises can benefit from technical assistance
                    in investment realization




                                                                                          46
PA\619426.6
                           JURISDICTION SUMMARY: ITALY

                     Source: Latham & Watkins Milan; EMN and micro.bo

Other measures        Employees (with a seniority of at least 1 year) dismissed in the context
                      of a mass redundancy who intend to start a self-employed activity (or to
                      develop on a full-time basis a self-employed activity already started
                      during their previous employment) can obtain an advance payment of
                      their unemployment indemnity by presenting a special request to
                      National Social Security Institute together with the documents proving
                      the start-up of an independent activity

Specific laws &       Tax incentives to support microenterprises and self-employment (please
regulations           see Section "Tax Incentives")
applicable to
microcredit, self-    No general legal framework concerning self-employment and
employment and        microenterprises (however, please see the Decree in Section "Types of
microenterprises      vehicles available for microenterprises and self-employment ")

                      No specific national legislation or regulations on microcredit



Types of              -   Cooperative banks: Banca Popolare Etica, Banca Popolare Pugliese,
institutions              Banca Popolare di Ancona, Banche di credito cooperativo, Banca di
providing                 Credito Cooperativo di Roma, Credito Cooperativo Ravennate e
microcredit               Imolese; Banca di Bologna

                      -   Financial intermediaries (pursuant to Article 106 of the Italian
                          Banking Act): Mag2 Finance s.c.ar.l. (Mutue di Auto Gestione-
                          MAG), Mag6 Società Cooperativa

                      -   NGOs in partnership with banks: micro.bo, Caritas Italiana,
                          Microcredito di Solidarietà S.p.A., Agenzia nazionale per
                          l‟attrazione d‟investimenti e lo sviluppo d‟impresa S.p.A.

                      -   Foundations: please note that most do not - and are not allowed to -
                          provide microcredit. However, they provide the funds that guarantee
                          the institutions providing microcredit. Fondazione di Venezia; Terre
                          in Valigia; Fondazione San Carlo; Fondazione Field; Fondazione
                          Antiusura Iteresse Uomo; Fondazione La Casa; Compagnia di San
                          Paolo

                      -   Commercial banks: Banca del Piemonte, Banca Monte dei Paschi di
                          Siena, Intesa San Paolo, etc.

                      -   Specialised microcredit bank: Banca Prossima (established by Intesa
                          San Paolo)

                                                                                           47
PA\619426.6
                             JURISDICTION SUMMARY: ITALY

                    Source: Latham & Watkins Milan; EMN and micro.bo

Sources of           -      Governmental, regional sources of funding
funding for
microcredit          -      Private sources (foundations)
providers
                     -      European sources

Do non-bank          The cooperatives Società Mutua per l’Autogestione that provide
microcredit          microcredit (i.e., the financial intermediaries Mag2 Finance s.c.ar.l. and
providers achieve    Mag6 Società Cooperativa) appear to have achieved operational and
operational /        financial autonomy
financial
autonomy?

Usury rules              Yes: pursuant to Law No. 108 of 7 March 1996, the Bank of Italy
(interest caps)          publishes every three months the interest rate caps for macro-categories
                         of financial operations. An interest rate higher than the interest rate cap
                         is in breach anti-usury

                         Legal interest caps cannot exceed the double of the average market
                         interest rate identified on a quarterly basis by the Italian Exchange
                         Office (Ufficio Italiano Cambio)

Tax incentives       -      "Tax regime for new business activity and self-employment" In the
                            fiscal year during which business activity begins and for the two
                            following years, net profit carried out by a natural person is subject
                            to a flat 10% rate of a "substitutive tax" if the revenues do not
                            exceed €30,987 per year. Furthermore, the ordinary accountancy
                            rules and obligations do not generally apply when this tax regime is
                            applied. As mentioned, this regime is "temporary" (i.e., applicable
                            only in the first three-year period at most)

                     -      "Tax regime for lowest taxpayers" applicable to self-employed
                            natural persons provided that:

                                 annual revenues do not exceed €30,000 per year

                                 no employees and

                                 instrumental material assets purchased in previous three years
                                  do not exceed €15,000

                     -      The net profit, calculated on “cash” basis (in place of the “accrual”
                            one) is, inter alia, liable to a flat 20% substitutive tax rate. VAT is
                            not charged on the invoices issued (and, thus, the VAT exposed in

                                                                                                 48
PA\619426.6
                          JURISDICTION SUMMARY: ITALY

                    Source: Latham & Watkins Milan; EMN and micro.bo
                         the invoices received is not deductible).

Access to            -   Yes: a guarantee fund for small and medium enterprises - expressly
guarantee                applicable to micro-enterprises - is managed by Mediocredito
schemes for              Centrale S.p.A. (the "Central Guarantee Fund"). Banks and
banks and non            Financial Intermediaries (Article 107 of the Italian Banking Act) can
bank institutions        request to be guaranteed by the Central Guarantee Fund when the
providing                final beneficiaries are enterprises that satisfy specific requirements
microcredit              or fall within certain categories.

                     -   Nation-wide mutual guarantee scheme for the craft sector, industrial
                         and commercial micro-enterprises: CONFIDI

                     -   BIC Lazio is an agency that manages a guarantee fund of €3.5
                         million established by Regione Lazio to support lending from
                         €5,000 to €20,000.

                     -   Compania de San Paolo has created a guarantee fund to secure the
                         banks that lend in the projects of the foundation.

Database             Various databases exist:
recording
borrowers’           A) the "Centrale dei Rischi" database managed by the Bank of Italy and
history                 the "Centrale Rischi di Importo Contenuto" database managed by
                        SIA-SSB (each a "Database")

                         Subject to specific provisions being met, the following entities must
                         communicate to the to the competent Database its risk position
                         towards a client:

                         -   banks

                         -   companies belonging to a banking group

                         -   banking, financial and instrumental companies at least 20% of
                             whose capital is held by companies belonging to a banking
                             group or by an individual bank and

                         -   financial intermediaries (Article 107 of the Italian Banking Act)

                         (each an Information Provider)

                     B) the "Sistemi di Informazione Creditizia" managed by private entities
                        (the "Private Databases")


                                                                                            49
PA\619426.6
                          JURISDICTION SUMMARY: ITALY

                    Source: Latham & Watkins Milan; EMN and micro.bo

                         The following entities provide information to the Private Databases:

                         -   banks

                         -   financial brokers

                         -   other private entities that, in the exercise of commercial and/or
                             professional activities, grant an extension for the payment
                             related to the supply of goods and/or services

                         (each a Participant)

Access for non-      MFIs may access such databases provided that it can be qualified as
bank microcredit     "Information Provider" or "Participant" under Italian law
providers to such
databases

Obligation for       With regard to each Database in A) and the Private Databases in B)
non bank             above, only if the non-bank microcredit institution is respectively an
microcredit          Information Provider or a Participant.
institutions to
provide their
borrowers' credit
history to such
databases

Significant          -   Legislative Decree No. 185 of 21 April 2000 (please see Section
initiatives taken        "Types of vehicles available for microenterprises and self-
to develop               employment")
microcredit
                     -   On 31 July 2007, the Ministry of Interior and, inter alia, Bank of
                         Italy, Italian Banking Association, National Association of Italian
                         Municipalities and Confederation of Italian Industry entered into a
                         framework agreement in which they undertake to, inter alia,
                         increase microcredit use




                                                                                            50
PA\619426.6
                         JURISDICTION SUMMARY: ITALY

                   Source: Latham & Watkins Milan; EMN and micro.bo

Suggested           For microenterprises/self-employment:
measures to
improve existing    -   Reduce costs and          simplify    procedures    for    setting   up
framework/create        microenterprises
a new framework
(as applicable)     -   Promote business incubators and professional support
for microcredit
and                 -   Absence of simplified status to set up microenterprises
microenterprises

                    For microcredit:

                    -   Soften regulatory requirements for non-banking institutions engaged
                        in microcredit as their principal/exclusive activity. The current status
                        of Italian law foresees that only Financial Intermediaries – which are
                        subject to, inter alia, strict patrimonial requirements and to
                        prudential supervision – are allowed to grant microcredit

                    -   Establish a uniform and commonly agreed definition of microcredit

                    -   Implement regulation for microcredit

                    -   Implement tax incentives for individuals/corporations that invest in
                        MFIs and promote and support guarantee funds accessible to those
                        institutions that meet defined standards of governance, proficiency,
                        transparency and accountability

                    -   Set up a network of institutions involved in the Italian microcredit
                        sector in order to support the activity of Microfinance Committee
                        and to develop further activities




                                                                                             51
PA\619426.6
                    JURISDICTION SUMMARY: THE NETHERLANDS

       Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation

Types of vehicles     -   Registration of a private company in various legal forms
available for
microenterprises      -   Registration as self-employed without personnel (ZZP - Zelfstandige
and self-                 zonder personeel)
employment
                      -   Registration as a private, self employed (vrij beroep)

Costs and             Registration has to be made with the Chamber of Commerce, with the
Procedures            Fiscal Authorities (VAT number, status of self-employed or
                      entrepreneur).

                      Fees for registration (annual) are based on the number of employees.

                      Absence of simplified status for microentreprises. They fall in the same
                      category as small enterprises employed (ZZP) or self-employed.

                      There are no one-stop centres. However in some municipalities there are
                      so called “enterprise centres” where some business development services
                      are jointly offered.

                      Political decision makers try to tackle this issue in a more structural way
                      by promoting and/or stimulating collaboration between specialised
                      services providers.

Financial support     There are two special phenomena:
programs during
the transition        -   Unemployed persons who depend on minimum social welfare
period                    (Bijstand) and who are eligible for assistance to start one‟s own
                          business under a special programme (BBZ) may receive income
                          support in the starting phase for a maximum period of 18 months.
                          The decision is taken by the Municipality on a case-by-case basis.
                          This is not specific for micro-enterprises. Under the responsibility of
                          the Ministry for Social Affairs and Employment a pilot programme is
                          underway to open this facility for any person on social welfare.

                      -   In theory the ZZPer (Zelfstandige zonder personeel) - Self-employed
                          without personnel - retains built-up social welfare entitlements if
                          his/her venture fails within 3 years; the other entrepreneurs have no
                          rights on social welfare.

                      Once a person registers with the Chamber of Commerce he/she looses
                      his/her social welfare status and generated income is deducted from the


                                                                                             52
 PA\619426.6
                 JURISDICTION SUMMARY: THE NETHERLANDS

      Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation
                    social benefits.

Business            A number of options exists (all with relative limited effects in numbers
Development         reached):
Services
                    -   Persons in the BBZ programme (see above) have the possibility to
                        receive counselling and advisory services in the preparatory stage.
                        These services are rendered by private business development service
                        providers; most of them operate on a modest scale at local level.
                        There is only one network organisation (IMK) that operates nation-
                        wide; payment for these services is attractive for individual advisers/
                        consultants not for companies

                    -   In the pilot programme of the Ministry for Social Affairs and
                        Employment this facility is for any person on social welfare.

                    -   There are various projects funded mainly under EU/ Equal/ D2 or
                        similar programmes (and or by local authorities) that make it possible
                        to offer – temporarily! – business development services, in many
                        cases targeted at special groups of socially excluded persons.
                        Payments are often similar to those under aforementioned projects.

                    -   There exist various networks of volunteers (retired business persons)
                        that offer ad-hoc business development advisory services; some of
                        them such as Ondernemersklankbord have a more permanent
                        character; those volunteer groups are quite accessible for socially
                        excluded.

                    -   There are limited experiments by private organisations (such as
                        Hands On) that recently launched business development services
                        linked to credit / finance programmes; those services again are
                        rendered by volunteers (some of whom even contribute in cash to
                        such programmes).

                    -   Upcoming are the special interest groups that organise business
                        development service rendering amongst the members by the members
                        (sometimes with ad hoc funding by local authorities); see for instance
                        Zwarte Zaken Vrouwen Network (ZZVN); it is doubtful whether they
                        reach the socially excluded




                                                                                           53
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                   JURISDICTION SUMMARY: THE NETHERLANDS

       Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation

Specific laws &      There is no specific legislation on microcredit, but for credit and savings
regulations          mobilisation. As soon as a private organisation wants to take savings or
applicable to        deposits it has to adhere to all laws and regulations in this field and needs
microcredit,         an operating license either from the Dutch National Bank (DNB) or the
microenterprises     Authority of Financial Markets (AFM).
and self-
employment           The national Advisory Council in Microfinance in the Netherlands will
                     present an advise on Legislation and regulations for Microfinance
                     (institutions and users) by October 2008. The Centre of Microfinancing
                     of the University of Applied sciences INHOLLAND will undertake a
                     special research on this topic. The results of this research will be used by
                     the Council. This research will be based on the best practices on
                     Microfinance from the Southern- and European countries.

                     A generally accepted definition for microcredit does not exist in the
                     Netherlands; however the limit for microcredit is sometimes set at
                     35.000€.

Types of             -   Government: BBZ programme (see above)
institutions
providing            -   Commercial banks: the most popular form of credit is the overdraft
microcredit              facility:
                            -   Fortis Bank has started a microfinance project and channelled
                                a small amount of its own funds (€100.000) in that project
                                (CSR);
                            -   Some of the Gemeentelijke Krediet Banken (Municipal Credit
                                Banks) started in 2007 to develop special facilities for micro
                                borrowers (amounts not yet known);
                            -   Rabobank cooperative bank operates de facto as a general
                                bank.
                     -   Few private organisations exist that are specialised in and dedicated
                         to providing microloans. Only recently such initiatives are deploying:
                         i.e. SEON, Hands On, Start Smart.

                         Upcoming but not yet visible are small savings/ credit groups set up
                         by migrant groups; no regulation yet for this.

Sources of           -   Commercial loans: banks
funding for non
bank microcredit     -   Equity investments: banks and equity funds
institutions
                     -   Soft loans: mainly with funds from the Ministry of Social Affairs and
                         Employment, sometimes on limited scale with own funds

                                                                                              54
 PA\619426.6
                  JURISDICTION SUMMARY: THE NETHERLANDS

       Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation

                     -   Subsidies and donations from:

                             -   National person - ad hoc

                             -   Private institution - various donor organisations such as VSB
                                 Fonds, Start Foundation, DOEN Foundation

                     -   European sources: Equal/ESF/ etc

                     There are no public sources.

Operational /        This will require a change in mind-setting.
financial
autonomy

Usury rules          There is no interest cap on commercial loans/ investment loans, but
(interest caps)      central bank discount rates, open and transparent market and competition
                     clearly determine the rates.

                     Since January 2006 there is a law on financial services for consumer
                     loans. Per January 2007 maximum rate to be charged on top of the
                     discount rate is 18%.

                     There has been a serious debate about the level of the interest rates that
                     could be charged on consumer credit especially by mail order firms. It is
                     felt socially unacceptable to leave this rate free.



Tax incentives       There is no specific tax exoneration for microcredit but several for small
                     enterprises: i.e.:

                     -   exemption from paying VAT if the amount to be paid is limited (less
                         than Euro 1345);

                     -   extra tax reduction in the first year of operation of the business;

                     -   tax incentive for individuals lending to relatives of friends up to €
                         40.000 (Tante Agaath facility);

                     There are three tax facilities for individuals investing in risk capital either
                     directly or through certain registered organisations.

Access to            -   There are no special guarantee schemes in support of microfinance
guarantee

                                                                                                55
 PA\619426.6
                   JURISDICTION SUMMARY: THE NETHERLANDS

       Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation
schemes for banks        (institutions/ lending programmes).
and non bank
institutions      -      Banks have access to a national Guarantee facility in support of
providing                lending to SME: BBMKB, an unfunded scheme, with ex-post
microcredit              evaluations, offering 50% coverage on a supplementary basis, mainly
                         above €25.000. Most beneficiaries are SMEs already in existence for
                         several years and guaranteed loans amounts are often beyond
                         €100.000. Although it has often been argued that the scheme could
                         also be used for micro borrowers its present procedures are not yet
                         adequate to do so. The Council for Microfinance therefore proposed
                         the Government to amend procedure and/or introduce an adjusted
                         guarantee scheme for micro credit.

                     -   A pilot is underway in Rotterdam, Leeuwarden and Lelystad under
                         guidance of the Ministry for Social Affairs and Employment whereby
                         the BBMKB facility is opened up to banks who lend to persons
                         depending on social welfare who start a new business with external
                         funds (loans from those banks) – guarantees for loans up to €31.000
                         with average of €22.000.

                     -   Private guarantee funds such as the SEON fund for minorities and
                         women (guarantees up to € 16.000).

                     -   The deposit guarantee scheme of De Nederlandsche Bank (DNB) to
                         protect private individuals and small businesses having deposits (up
                         to €20.000) with a bank that is under the supervision of DNB.

Database             The Bureau Krediet Registration BKR in Tiel is a credit reference bureau
recording            accessible to all banks.
borrowers’
history

Access for non       Only members (banks but also a number of other institutions) have
bank microcredit     access to the information of BKR; individuals have to request the
institutions to      personal data of BKR through their own bank.
such databases

Obligation for non No obligation
bank microcredit
institutions to
provide their
borrowers' credit
history to such
databases

                                                                                         56
 PA\619426.6
                  JURISDICTION SUMMARY: THE NETHERLANDS

       Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation

Significant          National level:
initiatives taken to
develop              In 2007 the National Advisory Council on Microfinance in the
microcredit          Netherlands presented its first policy recommendation to the Netherlands
                     Government. This advice was taken over by the Government and is now
                     being implemented.

                     In this advice, the Council presents an approach for the Dutch situation
                     based on relevant experience gained inside as well as outside the
                     Netherlands. The approach proposed consists of three interrelated
                     components:

                     1. Promotion and distribution of the services by local microfinance
                     initiatives: these are existing or new organisations from which (potential)
                     entrepreneurs may obtain information, advice as well as specific types of
                     business support. On a local level, they also make people more aware of
                     available microfinance opportunities. For example, they can make use of
                     scouts from local communities to actively approach target groups.

                     2. Coaching by a network of trained volunteers and professionals:
                     Coaches may be members of national networks but will also often have a
                     permanent home base with a local initiative, due to the culture of the
                     specific target group and the individual perspective adopted by specific
                     local initiatives.

                     3. Simplified access to financial assistance is realised via a guarantee
                     fund, a screening system and agreements with parties providing the
                     funds. The four large banks have promised to also participate collectively
                     in this financial assistance model, at least for 2008.

                     The Council is of the opinion that these three components should be
                     brought together in a kind of franchise model. In this model, elements for
                     which benefits of scale are important are structured in a centralised
                     fashion; this includes marketing, administrative processing of funding
                     requests, and contact with national government bodies. The local
                     initiatives should be given ample opportunity to develop their own
                     profile for their own target groups.

                     The Council proposes the implementation of a franchise system in order
                     to benefit optimally from the expertise and networks of established
                     organisations such as Ondernemershuizen (Dutch Entrepreneurial
                     Centres) and Chambers of Commerce as well as other microfinance
                     initiative. In this scenario, the local organisations enter into an agreement
                     with a (small) national project organisation. As a result, they can display

                                                                                              57
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                  JURISDICTION SUMMARY: THE NETHERLANDS

       Source: EMN with TriodosFacet; Microfinance Market Study by SEON foundation
                     the franchise label and make use of the support services offered, thereby
                     guaranteeing a nationally set minimum level of services for the target
                     group. It should be noted that the franchise concept proposed here does
                     not mean that the participating organizations contribute to financially
                     supporting the national organization.

                     European level:

                     Parties in The Netherlands are awaiting what the EU Microfinance
                     Initiative will bring; the official reaction will be submitted in the course
                     of the months March/ April 2008.

Suggested         For microenterprises/self-employment:
measures to
improve existing  - Build up the capacity of Business Development Services such as
framework /create    mentoring and coaching
a framework (as
applicable) for   - Extend the outreach of public programmes; do not only focus on
microcredit and      persons receiving social welfare benefits
microenterprises
                  - Better inform potential entrepreneurs about the possibilities of
                     microfinance for self-employment and entrepreneurship

                     For microcredit:

                     -   Increase the scope and outreach of private MFIs: only 200
                         microcredits are yearly issued by specific projects undertaken by non
                         financial institutions and banks. This is a rather poor result as about
                         20 non financial institutions supply microcredit and at least 10 non-
                         commercial business development organisations are active

                     -   Incite more banks to enter the sector

                     -   Inform practitioners about the fact that lending by private non-
                         banking organisations is allowed by the central bank

                     -   Assess the actual demand for micro-credit before starting a
                         microfinance initiative

                     -   Decide whether it is still wise to invest in building up traditional
                         Microfinance Institutions or focus on designing and introducing
                         innovative credit delivery mechanisms such as the recently launched
                         BizNer Bank or the Booper, both operating on the internet with
                         extremely low costs and short processing times.


                                                                                             58
 PA\619426.6
                           JURISDICTION SUMMARY: POLAND

              Sources: EMN based on Microfinance Market Study in Poland by MFC

Types of vehicles      Limited liability companies
available for
microenterprises       Joint-stock companies
and self-
employment

Costs and              According to experts, efforts have been made to shorten registration
Procedures             procedures. In 2006, the average duration was between 30 and 60 days,
                       which was considered as acceptable. Apparently, costs for setting up are
                       still very high.

Financial support -        Polish Agency for Enterprise Development - governmental agency
programs during            under authority of Ministry of Economy which allocates grants to
transition period          regional funds

                       -   Regional Financing Institutions which act as partners of Polish
                           Agency for Enterprise Development

                       -   Non-bank MFIs: Fundusz Mikro, Rural Development Foundation,
                           FDPA, Inicjatywa Mikro (see “Types of institutions providing
                           microcredit”)

                       Local development initiatives to support the creation and survival of
                       micro-enterprises and self-employment are widespread in the country
                       through the establishment of “Micro-credit Loans Funds” put in place
                       by public authorities (regional). There were 76 loan funds in 2003, but
                       with large regional difference and no strong interconnections.

                       There is apparently no coherent national strategy for the improvement
                       of the financial support for micro-enterprises and no national
                       programme focusing on fostering self-employment for socially excluded
                       people.

Business               The National SME Services Network consists of 180 cooperating
development            outlets in 190 localisations in Poland. This network consists primarily of
services               regional and local development agencies, business support centres,
                       chambers of industry and commerce, and local non-profit foundations
                       and associations, which render various services directly to small
                       business sector.

                       The Consultation Centres (PK) function as first-contact institutions
                       for small and medium-sized enterprises. In 2007 around 190 were in


                                                                                              59
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                           JURISDICTION SUMMARY: POLAND

              Sources: EMN based on Microfinance Market Study in Poland by MFC
                       service.

                       Development services to help socially excluded people remains weak if
                       not non-existent (strategic orientation toward business generating cash
                       flow).
                       There is no special legal regulation for micro-finance providers.
Specific laws &
regulations            The existing regulation, although it does not support directly
applicable to          microfinance, establishes an environment in which it is relatively easy
microcredit, self-     to create microcredit institutions, and in which they can conduct their
employment and         activities. The legal base for conducting business activities is regulated
microenterprises       by the Freedom of Business Activity Act, which specifies the principles
                       for undertaking and conducting business activities in Poland. As a
                       general rule specified in Art. 6 of the Freedom of Business Activity Act,
                       anyone is free and permitted to undertake and pursue business activity
                       under equal rights, subject to conditions set forth by law.

                       The requirements to set-up a micro-loan fund are as follows (which
                       apply for micro-credit funds supported by public resources). According
                       to its statue the fund has to operate not-profit or allocate the profit for its
                       statutory goal. The micro-loan fund is a legal entity, which, by
                       resolution of a relevant body, sets up a separate block of finance to grant
                       loans to micro and small sized enterprises. The amount of any loan
                       given cannot exceed 120 000 zloty (app. EUR 30 000). Loans shall not
                       be provided to enterprises in difficulty within the meaning of the
                       Community Guidelines on State aid for rescuing and restructuring firms
                       in difficulty (O.J. C 288, 9.10.1999). Finally, a risk assessment must be
                       carried out.

                       Credit Unions – SKOK – operate under special legislation for credit
                       unions. The legislation is very favourable and contributed to the very
                       fast development and growth of SKOKs in Poland.

Types of               -   Commercial banks: PKO BP, Cooperative Banks, Pekao SA and
institutions               BPH (largest providers)
providing
microcredit            -   Credit   Unions:    SKOK     (Krajowa   Spółdzielcza   Kasa
                           Oszczednosciowo - Kredytowa / National Association of
                           Cooperative Savigs and Credit Unions) – mainly focussing on
                           consumption credit

                       -   Non bank MFIs (registered as limited liability company): Fundusz
                           Mikro, Inicjatywa Mikro Sp.z o.o., FWW (Fundacja Wspierania Wsi
                           -Rural Development Foundation), Fundacja na Rzecz Rozwoju

                                                                                                   60
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                           JURISDICTION SUMMARY: POLAND

              Sources: EMN based on Microfinance Market Study in Poland by MFC
                           Polskiego Rolnictwa (Foundation for the Development of Polish
                           Agriculture - FDPA)

                       -   Polish Association of Loan Funds (Polskie Stowarzyszenie
                           Funduszy Pożyczkowych) represents interests of such Funds from
                           all over Poland on national level and supports their activities to
                           develop microenterprises. However, their outreach is very limited.

Sources of             -   Government sources, inter alia, regional government
funding for
microcredit            -   Private funds
providers
                       -   International (World Council of Credit Unions, USAID) and
                           European sources (ESF, EIF, ERDF)

Do non-bank            Only Fundusz Mikro has achieved financial and operational
microcredit            sustainability.
providers achieve
operational /
financial
autonomy?

Usury rules            Yes, "Anti Usury Act" applies to non-bank MFIs
(interest caps)

Tax incentives         None

Access to              Guarantee Funds for SMEs financed from Sectoral Operational
guarantee              Programme “Improvement of Enterprise Competitiveness” realised by
schemes for            Polish Agency for Enterprise Development. Over 50 guarantee funds
banks and non          operate on territory of Poland (e.g. 4,743 guarantees provided in 2006).
bank institutions      87% of these loans were provided by banks and 10% from Loan Funds.
providing              Over 70% of guarantees were provided to SMEs.
microcredit

Data protection        No information available
rules

Access by non
bank microcredit
providers to such
databases
                       In 2002 a national government programme to build an integrated system
Significant
                       of regional and local financial institutions for SMEs, was launched
initiatives taken

                                                                                            61
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                           JURISDICTION SUMMARY: POLAND

              Sources: EMN based on Microfinance Market Study in Poland by MFC
to develop             (Capital for Entrepreneurs).
microcredit

Suggested              For microenterprises/self-employment:
measures to
improve existing /     -   Improve knowledge of potential entrepreneurs about microcredit and
create a new               microenterprise finance providers
framework (as
applicable) for        -   Promote access to finance for microenterprises
microenterprises
and microcredit        For microcredit:

                       -   Authorise non bank MFIs to use a short and effective procedure in
                           acquiring the legal title to collect debts

                       -   Allow tax exemption for non bank MFIs

                       -   Abolish interest rate cap

                       -   Improve accounting regulations concerning principles of loan loss
                           reserves; allow MFIs to treat their loan loss reserves as a cost

                       -   Reduce taxes that have to be paid by Polish MFIs on the interest
                           they remit to foreign lenders (now: 20%).

                       -    Ensure better geographic coverage of microcredit providers, in
                           particular in those areas where demand is highest

                       -   Promote cooperation between banks, non-bank MFIs, government
                           agencies and support institutions to ensure maximum leverage;
                           stimulate innovation in product development and delivery channels
                           to provide microcredit to un-served segments




                                                                                           62
PA\619426.6
                        JURISDICTION SUMMARY: PORTUGAL

                                  Source: EMN with ANDC

Costs and           During the past two years some measures have been implemented in
Procedures          order to make the process of starting up a small company easier, faster
                    and less bureaucratic.

                    “Empresa na Hora” (“on the spot firm”) desks have been set up: they
                    allow the whole process of creating a company to be carried out in one
                    office (one-stop office) and on the same day. This has, in fact,
                    considerably reduced bureaucracy and speeded up the process.

                    However this is a procedure that has not been widely implemented in
                    microcredit practices.

Financial support   -    One of the main problems for socially excluded persons who would
programs during          like to create a micro-business or self-employment is the fact that
the transition           there is no gradual reduction of aid, in other words, once the micro-
period                   enterprise is created the proponent looses all social income support
                         he/she was receiving up until that moment.

                    -    Moreover, if the micro-enterprise fails, the micro-entrepreneur will
                         not be eligible for unemployment benefit as are other employed
                         workers.

Business            -    With the exception of the support services made available by the
Development              charity institutions who work with socially excluded people, there are
Services                 no specific services for those people, namely in terms of business
                         development.

                    -    IEFP (Employment and Vocational Training Institute) has been trying
                         to implement, through their “Programa Rede” (Network Program),
                         tuition and consultancy actions for small businesses, to take place
                         after start-up. - It is important to point out that this is has no relation
                         to microcredit.

Specific laws &     -    In Portugal, only banks and financial institutions are allowed to take
regulations              deposits and/or grant loans and offer other financial products.
applicable to            Institutions such as ANDC, dealing in microcredit, are “forced” to
microenterprises,        negotiate agreements with banks determining the conditions under
self-employment          which they are prepared to grant microcredit.
and microcredit
                    -    Credit unions, with the exception of Caixa de Crédito Agrícola, are
                         non-existent in Portugal. Caixa de Crédito Agrícola is nowadays,
                         locally, a commercial bank like any other, although it still maintains a
                         certain proximity with the rural and farming populations. The various

                                                                                                63
 PA\619426.6
                    JURISDICTION SUMMARY: PORTUGAL

                              Source: EMN with ANDC
                     Caixas de Crédito Agrícola are members of Caixa Central de Crédito
                     Agrícola.

                -    There is no legislation on microcredit or microfinance activities.

Types of        -    Commercial banks: Millennium bcp (BCP), Banco Espírito Santo
institutions         (BES), Caixa Geral de Depósitos (CGD) and Montepio Geral. BCP,
providing            BES and CGD have agreements with ANDC to provide loans to
microcredit          projects they propose. Montepio has an agreement with Santa Casa da
                     Misericórdia de Lisboa, only for the city of Lisbon. Millennium bcp,
                     in addition to the agreement they have with ANDC, have also set up
                     their own microcredit product, which despite being aimed at those
                     unable to obtain commercial loans, covers a range of people whose
                     level of exclusion is not as serious as those targeted by ANDC.

                -    Credit unions: The Caixas de Crédito Agrícola are starting, at a local
                     level, partnerships to promote microcredit projects

                -    Associations in partnership with banks: Associação Nacional de
                     Direito ao Crédito (ANDC), by means of agreements signed with
                     Millennium bcp, BES and CGD.

Sources of      -    Commercial loans: carried out by commercial banks by means of
funding for          agreements with microcredit institutions (in this case, only ANDC)
microcredit
institutions    -    Subsidies and donations: Subsidy from the Ministry of Labour and
                     Social Solidarity (Employment and Vocational Training Institute),
                     proportional to the number of financed initiatives, justified by the fact
                     that, while promoting microcredit, ANDC also promotes
                     employment.

                -    Aid comes mainly from public sources, although also, to an extent,
                     from private sources. There are no autonomous administrative
                     regions in Portugal and therefore all support is centralized.

Operational /   This is one of the problems faced by microcredit institutions.
financial
autonomy        From an operational perspective - because they do not grant loans
                themselves - they are not able to generate income and are therefore
                dependent on those who finance them, namely the State.

                This support is regulated by agreements signed by the parties involved,
                which may or may not be renewed, leaving the institutions in a state of
                great dependency.


                                                                                          64
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                     JURISDICTION SUMMARY: PORTUGAL

                                 Source: EMN with ANDC

                    It is not certain that microcredit institutions could be financially
                    independent, even if they could grant loans and practice higher interest
                    rates.

Usury rules         There is no legislation on this matter.
(Interest caps)
                    However, ANDC in its agreements with the financial institutions has
                    defended an interest rate close to Euribor at 90 days plus a 2 to 3%
                    spread, which is similar to that used for home loans.

                    In the case of the microcredit programme, developed by Millennium, the
                    interest rate applied depends on the risk of the project and is usually
                    around 15%.

                    There is no evaluation system of the impact of interest rates.

Tax incentives      Since there is no legal framework, there are no benefits for microcredit
                    institutions.

                    The same happens with individuals or companies, since legally there are
                    no microfinance institutions.

Access to           Mutual Gurantee Systems are starting to appear and operate in Portugal,
guarantee           making access to financing easier, although they require beneficiaries to
schemes for banks   become shareholders.
and non bank
institutions        However, for inclusion purposes, there are no guarantee schemes to
providing           cover financing of socially excluded people, other than those created by
microcredit         the institutions themselves -such as ANDC- imperative to the agreements
                    signed with financial institutions.

                    Unlike other countries, there are no institutions whose activity is to
                    guarantee projects in the area of social economy and solidarity.

Existence of a      The Bank of Portugal (Central Bank) controls credit information.
database
recording
borrowers’
history

Access by non -     Only banks and financial institutions can access this information and
bank microcredit    only for their clients or potential clients.
institutions to
such databases      ANDC may have access to that information when authorised by potential


                                                                                         65
 PA\619426.6
                         JURISDICTION SUMMARY: PORTUGAL

                                  Source: EMN with ANDC
                     clients.



Obligation for non   There is no obligation for non-bank microcredit institutions to provide
bank microcredit     information on their borrowers‟ credit defaults to such institution or
institutions to      database, since in legal terms, microcredit institutions do not exist as
provide their        financial institutions.
borrowers' credit
history to such
databases

Significant          National level:
initiatives taken to
develop              - The development of microcredit in Portugal has been a slow and
microcredit             difficult process. Over the past three years, especially since the
                        International Year of Microcredit, there has been a greater awareness
                        of this instrument.

                     -    It should be pointed out that the government, through its Employment
                          and Vocational Training Institute, has supported, from the beginning,
                          the activity of Associação Nacional de Direito ao Crédito (ANDC).

                     -    However, besides the support to ANDC‟s activity and the interest
                          always shown, so far no significant steps have been taken towards the
                          development and legal framework of microcredit as a financial
                          institution with specific characteristics.

                     European level:

                     -    On a European level, the reflection that has been promoted in its
                          midst is an important contribution to a greater unity in decision
                          making by member states on this subject.

                     -    The document “Microfinance Community Initiative” is a vital step
                          towards the creation of institutional conditions that match the
                          demands of microcredit development, as an effective instrument to
                          overcome the ever greater market flaws, which can be found even in
                          the most developed countries.




                                                                                           66
 PA\619426.6
                       JURISDICTION SUMMARY: PORTUGAL

                                 Source: EMN with ANDC

Suggested          For microenterprises/self-employment:
measures to
improve existing   -    Improve access to financing.
framework/create
a framework (as    -    Improve business training and technical support as well as
applicable) for         coordination among different organisations involved.
microcredit
                   -    Implement adequate inclusion policy.

                   For microcredit:

                   -    Implement legislative framework on microcredit.

                   -    Carry out evaluation studies on impact of microcredit.

                   -    Allow the future microcredit institutions to operationally articulate
                        their needs in terms of the structural and sustainable development of
                        micro entrepreneurship initiatives, with other initiatives developed by
                        local governments, regardless of their nature.

                   -    The lack of appreciation for the risk taken by those suffering from
                        serious social and economic exclusion who take on the responsibility
                        of creating their own employment or small business, particularly the
                        cutting off of social aid after creation of self-employment and the
                        lack of support in case of failure.

                   -    The lack of coherent commitment on the part of governments to
                        include microcredit in the active employment policies, in spite of the
                        references made in various plans (PNAI, for example).

                   -    Reluctance from social institutions, still with a strong
                        “assistentialistic” mindset, to adhere to microcredit as a solution for
                        some exclusion situations.

                        Sustainability difficulties for organisations and great dependency
                        from public funding.




                                                                                           67
PA\619426.6
                        JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme

Types of vehicles   Easiest form to implement microenterprise: limited liability company
available for
microenterprises    Easiest for to implement self employment : authorised physical person
and self-
employment          (authorised individual entrepreneur)

Costs and           -   Registration and licensing of MFI as Non-Bank Financial
procedures              Institutions - Microfinance Companies

                    -   Limited Liability Company: average timeframe for registration is
                        one week (reduced from 8 weeks) and costs related to this procedure
                        amount to approx. €200.

                    -   The registration of the individual entrepreneurs (freelancers, family
                        associations, etc) is de-centralised and takes place at the community
                        fiscal and administrative office; the average time necessary to
                        register is two weeks and the costs are around 50 euros.

                    -   There is a one-stop-shop administrated by the Chamber of
                        Commerce and Industries network and the Trade Register.

                    -   The Ministry of SMEs is testing the new on-line registration system
                        available since fall 2007. This system will further reduce the costs
                        and time necessary for the registration.

Financial support There are no provisions or specific financial instruments that
programs during accompany less favourable social groups, including unemployed, to be
transition period reinserted into economic activities.

                    On 12 March, 2007 the Government organised the first reunion of the
                    recently set up National Commission for Social Inclusion whose agenda
                    was to discuss mechanisms and procedures for social inclusion of the
                    most un-favourable groups.

Business            There is a well managed Business Development programme
development         implemented through the employment agencies. The unemployed may
services            have access to it. For the other categories there are specific business
                    development programmes but their impact is rather punctual and not
                    sustainable.


                                                                                            68
PA\619426.6
                         JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme

Specific laws &      The existing legal framework is recognising the Microfinance Sector as
regulations          part of the Romanian financial sector. This is due to continuous
applicable to        lobbying effort to make the stakeholders aware of the sector‟s main
microcredit, self-   characteristics: efficient financial services with a positive social and
employment and       development impact.
microenterprises
                     In less than 2 years the Romanian microfinance sector, passed from not
                     being regulated at all, to the other extreme overregulated.

                     The most important laws are:

                     -   Government Ordinance no. 40 sets up a framework for licensing of
                         non-bank credit organisations to administer public funds

                     -   Microfinance Companies Law no. 240 creates an favourable
                         environment for MFIs to grow and expand their portfolio of
                         products and support services with micro-loans of up to €25,000

                     -   Government Ordinance no. 28 regulates non-banking financial
                         institutions sector. National Bank of Romania is supervisory
                         authority of all non-bank financial institutions, which include leasing
                         companies, mortgage companies, credit unions and MFIs

                     -   Law no. 300/2004 regarding physical persons and familial
                         associations carrying out economic activities independently

                     The drafting of the current microfinance legislation was based on
                     general microfinance principles, at the same time taking into account
                     the Romanian legal, economic and cultural background:

                     -   Minimum share capital imposed: 200.000 euros in order to ensure
                         the self-sustainability of microfinance companies and enhance
                         market legitimacy and reputation: By imposing this minimum share
                         capital, microfinance companies are forced to be more efficient in
                         their activities and achieve desired self-sustainability.

                     -   Limited regulatory barriers for market entry of microfinance
                         companies, as “finance-only” entities  absence of limitations on
                         foreign ownership, management and sources of capital: This is
                         especially true since the recent European Union integration of
                         Romania and anticipated economic development will most likely
                         determine a decrease or termination of donor granted funds and
                         force current microfinance entities to seek non-donor sources for

                                                                                             69
PA\619426.6
                       JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme
                       funds on-lent to micro-borrowers.

                   -   Consumer protection by truth-in-lending requirements: (1)
                       protection of borrowers against “abusive” lending and collection
                       practices, and (2) “truth in lending” - providing borrowers with
                       accurate, comparable and transparent information about the cost of
                       loans. This is designed to be an efficient tool to help applicants
                       evaluate the true cost of micro-credit, and this should promote price
                       competition on the microfinance market. Finally, the requirement to
                       disclose interest rates may determine microfinance companies to
                       focus on the necessary steps to increase efficiency and thus lower
                       interest rates.

Types of           -   Commercial banks;
institutions
providing          -   Specialised microcredit banks : Pro Credit Bank, Transilvania Bank;
microcredit
                   -   Credit unions : represented by National Association of Credit
                       Unions (credit unions can only lend to natural persons and cannot
                       receive any deposits);

                   -   Foundations: Centre for Economical Development CDE, a non bank
                       financial institution that administrates currently only the micro-
                       credit lines from World Bank through the Romanian Ministries for
                       micro companies, self-entrepreneurs from the former mining areas ,
                       farmers and un- employed;

                   -   Associations: Local or community development projects with micro-
                       credit component developed by local associations with no
                       commercial purpose within a limited location and timeframe, not
                       aimed particularly to become sustainable;

                   -   Non-bank financial Institutions – Micro credit Companies (MFIs):
                       Opportunity Romania, CAPA Finance, Express Finance, FAER,
                       LAM, ROMCOM – extending business micro-credits to micro
                       enterprises, self-employed and farmers,

                   -   National Bank of Romania (Central Bank) regulates microfinance
                       activity, registers and licenses MFIs;

                   -   Besides the first 8 Micro Finance Institutions established with the
                       support of international donors, around 20 newly NBF Companies
                       established under the new legal framework registration and licensing
                       with the National Bank of Romania.- the newly established NBF

                                                                                         70
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                        JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme
                        Companies are extending mainly consumer credits for personal
                        investments of the borrowers .

Sources of          -   Commercial loans: BRD - Groupe Sociéte générale ; OPIC
funding for
microcredit         -   Equity investments: Balkan Accession fund, Coop- East, Oikocredit,
providers               etc

                    -   Soft loans: BERD, Oikocredit, Coop – East; the interest of the loan
                        is at commercial level but the loans are accompanied by technical
                        assistance grants, risk funds.

                    -   Guarantee: Deutsche Bank

                    -   Romanian Government as contributor to the Micro-credit schemes
                        implemented by MFI and administrated through the related
                        Ministries e.g. Ministry of Labour, Ministry of Development, Min.
                        of Economy and Finance, etc.

                    -   International sources: Initially : CHF - International, Opportunity
                        International, Soros Fundation, USAID, Swiss Confederation,
                        MEDA; World Bank, IFC, BERD; EU funds (PHARE)

Do non-bank         Yes
microcredit
providers achieve
operational /
financial
autonomy?

Usury rules         -   No usury rules
(interest caps)
                    -   System of evaluation of the social impact of this situation: self-
                        evaluation and external evaluation at request of the donors and
                        funders, eg. Micro-Finantza rating on social performance assessment
                        of CAPA finance and OMRO; Banyan Global US impact
                        assessment on the targeted beneficiaries of the USAID investment
                        funds granted to Romanian the MFIs: CAPA, Omro and Express
                        finance.

Tax incentives      -   Tax exemption for micro-loans granted by credit unions;

                    -   Companies that invest into MFIs (however it difficult to apply and


                                                                                         71
PA\619426.6
                        JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme
                        to obtain this tax exemption due to the complicated procedure);

Access to           -   Romanian Rural Guarantee Fund (providing guarantee to the rural
guarantee               clients of CDE)
schemes for
banks and non       -   Public Guarantee Fund for SMEs
bank institutions
providing
microcredit

Existence of        The National Bank of Romania (NBR) administrates a database for
database            default loans of minimum amount of €5,000 named Central Banking
recording           Risks Office.
borrowers’
history             Other credit agencies:, Credit Bureau administrated by the banks
                    association.


Ability of non
bank microcredit    Non-bank micro-credit providers can access the NBR database, but it is
providers to        not free of charge.
access such
databases           Microcredit providers are authorised to exchange and share information
                    on the credit history of borrowers with the Central Banking Risks
                    Office, Credit Bureau „s information can be consulted only by banks.




Obligation for      No obligation.
non bank
microcredit         The experience in other countries suggests that when microfinance
institutions to     companies begin to compete with each other for customers, over-
provide their       indebtedness and default will rise sharply unless microfinance
borrowers' credit   companies have access to a database that captures relevant aspects of
history to such     their clients‟ credit history.
databases
                    At the same time, available credit history may allow microfinance
                    companies to be much more aggressive in lending without collateral
                    requirements and may also have a beneficial effect on competition
                    among lenders. The combination of credit bureaus and statistical risk-
                    scoring techniques has expanded lower-income groups‟ access to credit.



                                                                                          72
PA\619426.6
                        JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme

Significant         -   Implementation of “Romanian Microcredit Scheme” funded by EU-
initiatives taken       PHARE programme, the Romanian Government and BERD: micro-
to develop              loans for microenterprises and start-ups;
microcredit
                    -   Special microcredit schemes for rural areas former mining areas and
                        unemployed entrepreneurs;

Suggested          For microenterprises
measures to
improve existing / - Maintain unemployed allowance for the first year of operation as
create a new          self-employed
framework for
microenterprises - Reduce labour taxes for employees
and microcredit
                   - Subsidize the cost of registration of micro-enterprise for
                      unemployed entrepreneurs

                    -   Adapt financial reporting standards for microenterprises and SMEs

                    -   Improve access to financial services (80% of microenterprises are
                        not bankable)

                    For self-employment:

                    -   Renewal of authorisation each year

                    -   Pension and social security contributions are not considered as
                        deductible expenses

                    -   Limited access to financial services

                    For microcredit:

                    -   Establish a legal framework at EU level for non saving MFIs and for
                        the micro-credit banks

                    -   Extend risk funds and special guarantee funds for the beneficiaries
                        and microcredits to disadvantaged groups

                    -   Reduce and simplify the reports of MFIs for the National Bank

                    -   Reduce average cost of borrowed capital which is too expensive for
                        MFIs

                                                                                         73
PA\619426.6
                       JURISDICTION SUMMARY: ROMANIA

   Sources: 2 EMN Surveys, Benchmarking Microfinance in Romania 2005 – 2006 Study;
                   Presentation on the Romanian microcredit Scheme

                   -   Simplify the procedures of transformation of an MFI to a micro-
                       credit bank

                   -   Foster benchmarking at EU level of MFIs for both financial and
                       social performance and best practice shared among countries sector

                   -   Provide specialised technical assistance and training to new MFIs




                                                                                           74
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                       JURISDICTION SUMMARY: SLOVAKIA

                           Source: EMN with Integra Venture

Costs and            There is no simplified status or procedure for self-employment or for
procedures           microentreprises.

                     There is no one stop shop, bur the registration process has been
                     simplified over the past few years.

Financial support There is no financial income support during the transition for
programs during unemployed or welfare recipients who set up a business or provisions to
transition period allow a return to unemployment benefits or welfare in case of failure.
                  This is a major obstacle.

Business             - The para-statal organisation “National Agency for the Development
Development            of SMEs” provides business development to larger SMEs. However,
Services               their support for microenterprises and socially excluded persons is
                       very limited.

                     - There are some NGOs that focus on providing business development
                       for microenterprise start-ups and socially excluded people.

Specific laws &      No specific laws and regulations, general corporate rules apply.
regulations
applicable to        Essentially there is a banking monopoly, although there is limited
microcredit, self-   freedom to grant loans to limited companies and co-operatives, provided
employment and       that these are made out of the companies own resources.
microenterprises
                     There is no credit union law in Slovakia.

Types of             - commercial banks
institutions
providing            - foundations: Integra Foundation
microcredit
                     - associations: VOKA

                     Due to existence of banking monopoly which prevents foundations and
                     associations from receiving deposits from the public, foundations and
                     associations can only grant loans from their capital

Sources of            - Equity investments: Angel investors
funding for
microcredit           - Soft loans: specialist microcredit funds in Western Europe
providers
                      - Donations from natural persons (in practice, small amounts only)


                                                                                           75
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                      JURISDICTION SUMMARY: SLOVAKIA

                          Source: EMN with Integra Venture

                     - Very limited public and private sources



Operational /       Very rarely
financial
autonomy?

Usury rules         No interest caps; no system of evaluation of the social impact of this
(interest caps)     situation

Tax incentives      Only incentive: There are tax breaks for companies that set up a
                    “protected workplace” for the employment of disadvantaged groups.

Access to           Private guarantee scheme arranged by Integra
guarantee
schemes for
banks and non
bank institutions
providing
microcredit

Database            Such credit bureau exists
recording
borrower credit
history?

Access of non-
bank microcredit    Non bank microcredit providers do not have access to this database
providers to such
databases

Obligation for      No obligation
non bank
microcredit
institutions to
provide their
borrowers' credit
history to such
databases

Significant         National Agency for Development of SMEs
initiatives taken
to develop          Integra, based in Slovakia, has developed microenterprise schemes in

                                                                                         76
PA\619426.6
                       JURISDICTION SUMMARY: SLOVAKIA

                           Source: EMN with Integra Venture
microcredit          Romania, Bulgaria, Serbia and Russia.




Suggested            For microenterprises/self-employment:
measures to
improve existing /   - Set up tax incentives
create a new
framework (as        - Improve access to finance for microenterprises
applicable) for
microenterprises     - Reduce social security costs to employ workers
and microcredit
                     For microcredit:

                     - Set up tax incentives

                     - Create a legal framework for either credit unions or non-bank MFIs

                     - Authorise non bank MFIs to take savings

                     - Enable the use of EIF, JEREMIE or similar instruments to provide
                       local funding for non-bank microcredit providers




                                                                                        77
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                         JURISDICTION SUMMARY: SPAIN

   Source: Latham & Watkins Barcelona and EMN with Caja Granada and Nantik Lum de
                                     Microfinanzas

Types of vehicles   Two most common corporate forms:
available for
microcredit and     - Limited Liability Company (Sociedad de Responsabilidad Limitada)
self-employment
                    - New Entrepreneurship Limited Liability Company (Sociedad
                      Limitada Nueva Empresa)

Costs and           Limited Liability Company:
procedures
                    - Central Commercial Registry          (Registro   Mercantil    Central):
                      obtaining corporate name

                    - Notary Public: grants public deed of incorporation, which contains
                      by-laws and evidence of deposit of share capital in a financial entity;
                      notarial fees amount approximately to €300 where minimum share
                      capital subscribed (for a LLC €3,005)

                    - Inter alia, payment of taxes related to incorporation (approx. 1% of
                      share capital)

                    - Commercial Registry: registration of company

                    New Entrepreneurship Limited Liability Company: share capital, which
                    ranges from €3,012 to €120,202; process of incorporation which is
                    mostly electronic; no possibility of appointment of board of directors
                    (Consejo de Administración) as management body; corporate purpose
                    does not need to be specific but it has to be one of following:
                    agricultural, livestock farmer, forest, fishing, industrial, construction,
                    commercial, tourist, transportation, communication, intermediation or
                    professional services in general; legal entities cannot be shareholders of
                    company; maximum 5 shareholders who can incorporate a company;
                    only shareholders may participate in management body.

Financial support Spanish public authorities and private institutions (chambers of
programs during commerce (Cámaras de Comercio)) provide income support during the
transition period transition for unemployed or welfare recipients who set up a business.

                    Spanish labour authorities allow total or partial capitalisation of
                    unemployment subsidies to which an individual is entitled in a sole
                    instalment provided that certain requirements are fulfilled.



                                                                                           78
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                          JURISDICTION SUMMARY: SPAIN

   Source: Latham & Watkins Barcelona and EMN with Caja Granada and Nantik Lum de
                                     Microfinanzas

Business             Social Microcredit Support Ogranisations SMSOs (see below) provide
Development          potential microcredit clients with training and preparatory courses in
Services             business management, negotiation, and/or banking processes.

                     Public and private training programmes for socially excluded people in
                     general: Public Institute of Employment (Instituto Público de Empleo)
                     promotes different courses for unemployed people which allow them to
                     acquire and/or develop specific skills that may help them to set up a
                     business as entrepreneurs.

                     For New Entrepreneurship Limited Liability Company: Puntos de
                     Asesoramiento e Inicio de Tramitación ("PAIT"): regionally based
                     governmental entities implemented to assist entrepreneurs in general.
                     Main functions of PAIT are: arranging an appointment with Notary
                     Public; filling necessary documents and forms in order to obtain
                     corporate name; delivery of Unique Electronic Document (Documento
                     Único Electrónico). PAIT offices play a dual role: (i) inform and advise
                     entrepreneurs in definition and processing of their entrepreneurial
                     initiatives, assist them during first years of activity; and (ii) manage
                     incorporation of company through Unique Electronic Document.

Other measures       Spanish legal framework to set up microenterprises has been structured
                     in two different systems:

                     - a system which is composed by two different entities: (a) an entity
                       which is in charge of selecting projects and of their following up
                       (SMSO); and (b) an entity which is responsible for loan and financial
                       issues arising from it (f.ex. Instituto de Crédito Oficial ICO) and

                     - a system in which one entity is in charge of both selection of project
                       (usually through a feasibility committee) and into financing (usually
                       through a financing committee) (COOP 57)

Specific laws &      No specific rules
regulations
applicable to
microcredit, self-
employment and
microenterprises




                                                                                          79
PA\619426.6
                         JURISDICTION SUMMARY: SPAIN

   Source: Latham & Watkins Barcelona and EMN with Caja Granada and Nantik Lum de
                                     Microfinanzas

Types of            - Public institutions: Microcredit Programme for Entrepreneurial and
institutions          Business Women of the Women‟s Institute co-financed by ESF and
providing             in partnership with “La Caixa”
microcredit
                    - Savings banks: CAI, Caixa de Catalunya, BBK (solidarity deposit),
                      Caja Granada (solidarity bank card)

                    - Specialised microcredit banks: Microbank

                    - Commercial banks: Banco Santander Central Hispano, Grupo Banco
                      Popular, BBVA (mainly Corporate Social Responsibility)

                    - Social Microcredit Support Organisations SMSOs - acting as
                      intermediaries between the end client and the financial institution
                      (training; selection and monitoring of projects): Fundación BBVA
                      para las Microfinanzas; “Un Sol Mon” of Caixa Catalunya savings
                      bank; Fundacion CajaGranada Desarrollo Solidario of CajaGranada
                      saving bank

Sources of          Credit lines:
funding for
microcredit         - ICO Microcredit Line channeled through about 40 private financial
providers             institutions and social work institutions (Instituciones de Asistencia
                      Social);

                    - Savings banks‟ funds for social work

                    Operational costs:

                    - European funds (ESF, EIF)

Do non-bank         Depending on particular structure of non-bank MCIs, it is possible for
microcredit         them to achieve financial and operational autonomy
providers achieve   Some non-bank MCIs can be considered financially autonomous, since
operational /       they obtain financing through contributions of their own partners or
financial           through their investments and their MC projects. From an operational
autonomy?           perspective non-bank MCIs are most of times autonomous, however it
                    is necessary to point out an increasing trend towards collaboration with
                    banking institutions (e.g. Fundación un Sol Món-Caixa Catalunya)

                    However, the microcredit system in Spain may be thought as more
                    appropriate to care for the poorest strata through subsidised credit than
                    to achieve financial and operational sustainability. In all cases,

                                                                                          80
PA\619426.6
                         JURISDICTION SUMMARY: SPAIN

   Source: Latham & Watkins Barcelona and EMN with Caja Granada and Nantik Lum de
                                     Microfinanzas
                    microcredits are either directly or indirectly subsidised through savings
                    banks funds for social work, national public organisations or European
                    funds.

                    Savings banks use their funds for social work to support their
                    microcredit programmes. These funds are non-refundable, thus enabling
                    the savings banks to sustain losses in the short to medium term.

Usury rules         Yes, existence of a usury law
(interest caps)


Tax incentives      - New Entrepreneurship Limited Liability Companies are entitled to
                      tax benefits related to tax debts in connection with taxes accrued
                      during the period from their incorporation through the first two years
                      of existence.

                    - If microcredit is subject to tax regime for non-profit entities, interests
                      arising from microcredit would be partially tax exempted. However,
                      if interests arising from microcredit are really low, tax benefits are
                      equally minimal.

                    - Possible tax deduction for individuals or enterprises that carry out,
                      among others, capital grants to patronage and non-profit entities
                      (foundations, associations for public benefit, NGO, etc): individuals
                      are entitled to a deduction of 25% of capital grant amount from total
                      tax liability amount, and legal entities are entitled to a deduction of
                      35% of capital grant amount from total tax liability amount.

Access to           Risks arising out of microcredit are generally assumed by the institution
guarantee           providing microcredit.
schemes for
banks and non
bank institutions
providing
microcredit




                                                                                             81
PA\619426.6
                        JURISDICTION SUMMARY: SPAIN

   Source: Latham & Watkins Barcelona and EMN with Caja Granada and Nantik Lum de
                                     Microfinanzas

Database            Various databases record this type of information: inter alia, Defaults
recording           Register administered by Interbank Cooperation Center; EQUIFAX
borrower history    database administrated by National Association of Financial Entities.



Access by non       Access to financial data is only allowed when a third party needs such
bank microcredit    information in order to be able to assess the financial soundness of an
providers to such   individual, if the third party is already in a relationship with the
databases           individual, or it is about to enter into such a relationship.

Obligation for      No such obligation
non bank
microcredit
institutions to
provide their
borrowers' credit
history to such
databases



Significant         - The important work of the savings banks
initiatives taken
to develop          - The important work of the SMSOs (Social Microcredit Support
microcredit           Organisations) to develop the spanish model.

                    - Setting up of the ICO line and the Women´s Institute Microcredit
                      line by the Public Administration.

                    - In December 2007, Spanish savings banks and their industry
                      organization CECA launched the Spanish Network of Microfinance
                      with the objective of promoting debate and lobbying to create
                      necessary financial regulation in the microcredit industry.




                                                                                         82
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                        JURISDICTION SUMMARY: SPAIN

   Source: Latham & Watkins Barcelona and EMN with Caja Granada and Nantik Lum de
                                     Microfinanzas

Suggested          For microenterprises/self-employment:
measures to
improve existing   - Reduce bureaucracy as it delays proceedings affecting to a greater
framework/create     extent small entrepreneurs with limited financial resources
a new framework
(as applicable)    - Promote evaluation processes regarding feasibility of          self-
for microcredit      employment and microenterprise projects
and
microenterprises   - Implement specific regulations on setting up of microenterprises and
                     on self-employment

                   For microcredit:

                   - Establish a consolidated legal and regulatory framework microcredit

                   - Reduce tax rates for new microenterprises (fiscal fees and social
                     security)

                   - Create a credit register accessible by all entities

                   - Strengthen professional capacity of SMSOs through both technical
                     and financial support from financial institutions and the government

                   - Strengthen public support for establishment of post-graduate courses
                     on microcredit in public universities in order to increase both the
                     number of experts in field and social awareness

                   - Improve evaluation systems re. feasibility of projects and
                     consequently of their selection by microcredit providers




                                                                                       83
PA\619426.6
                       JURISDICTION SUMMARY: SWEDEN

                                  Source: EMN (+ALMI)

Costs and           Administrative    and    tax   procedures    for   micro-enterprises    are
Procedures          complicated.

                    Start-ups can find relevant information needed to start a business at the
                    internet-service Startlinjen (Start-up line).

Financial support   Starta eget bidrag (start-up grants) are intended for job seekers who
programs during     start their own business. The grant is intended to supplement the
the transition      business owner‟s living expenses during the first 6 months of his/her
period              start-up period. It is provided if the business is estimated likely to be
                    financially viable. The target group is: unemployed individuals, people
                    at risk of losing their jobs and people living in certain less developed
                    areas.

Business            Two organisations work nationwide, NUTEK and ALMI. They provide
Development         business support to start-ups and established businesses. The target
Services            group is unemployed individuals, people at risk of losing their jobs and
                    people living in regional development areas.

Specific laws &     No specific rules for microenterprises; general corporate rules apply
regulations
applicable to       There is no specific framework for micro-finance providing institutions.
microenterprises,
self-employment     The general legislation for financial institutions (Lag om bank- och
and microcredit     finansieringsrörelse      2004:297      Förordning      om     bank-    och
                    finansieringsrörelse SFS 2004:329) fixes inter alia the amount of capital
                    financial institutions have to raise to start their business. Very extensive
                    rules exist, for instance on how to secure the savers money etc.

                    Non-governmental non-bank actors do not have the possibility to lend.

Types of                  Promotional bank: ALMI Företagspartner (state-owned)
institutions
providing                 Cooperative Bank: Ekobank, JAK Bank
microcredit
                          NGO: NEEM

                          Savings Banks



Sources of             -   Central and local government: Swedish Industrial Development

                                                                                             84
PA\619426.6
                       JURISDICTION SUMMARY: SWEDEN

                                 Source: EMN (+ALMI)
funding for                Fund; Sixth Swedish National Pension Fund
microcredit
institutions           -   EU funds

Operational /       Microcredit programmes depend on public subsidies.
financial
autonomy

Usury rules         There is no usury law in Sweden.
(interest caps)
                    The Legislation about government financing by ALMI Företagspartner
                    AB (Förordning om statlig finansiering genom ALMI Företagspartner
                    AB SFS 1994:1100) states that ALMI is obliged to take a higher interest
                    rate than banks, due to a higher risk and in order not to compete with
                    banks.

Tax incentives      N.A.

Access to           A new initiative, a Credit Guarantee Association (in Västerbotten), has
guarantee           started in the north where it is very difficult to obtain loans due to
schemes for         widespread lack of collateral. The seed capital of the members‟
banks and non       contribution is being used as a guarantee for commercial banks.
bank institutions
providing
microcredit


Existence of        N.A.
database
recording
borrower history

Access of non -
bank microcredit
institutions to
such databases

Obligation for      N.A.
non bank
microcredit
institutions to
provide their
borrowers' credit
history to such


                                                                                          85
PA\619426.6
                        JURISDICTION SUMMARY: SWEDEN

                                  Source: EMN (+ALMI)
databases

Significant         No specific initiatives regarding microcredit.
initiatives taken
to develop          Entrepreneurship has gained acceptance among public authorities.
microcredit
                    There has been a rapid increase in the supply of entrepreneurship
                    courses and programmes at universities and schools.

Suggested        For microenterprises/self-employment:
measures to
improve existing - Develop a clear policy for self-employment and microfinance
framework/create
a framework (as - Create an environment that is small-business minded in terms of
applicable) for     entrepreneurial context, legal framework, tax system and co-
microcredit and     operation between the different systems (financial system, labour
microenterprises    market and social system). Keep in mind specific target groups
                    (women, immigrants, ect.).

                    -   Reduce walls between social, employment and financial systems.
                        The financial sector does not show much interest in the issue of
                        support to self-employment as a career for the unemployed.

                    For microcredit:

                    -   Allow non-governmental non-bank actors to lend

                    -   Foster the debate on micro-credit and the role to be played by banks,
                        savings banks, welfare and employment institutions.




                                                                                          86
PA\619426.6
                    JURISDICTION SUMMARY: UNITED KINGDOM

Source: Latham & Watkins London, with assistance of the Community Development Finance
                                     Association

Types of vehicles    Microenterprises (defined as an enterprise with less than 9 employees)
available for        or self-employment can be established through a variety of different
microenterprises     vehicles:
and self-
employment           -   sole trader

                     -   partnership

                     -   limited liability partnership

                     -   limited liability company or

                     -   company limited by guarantee

                     For smallest businesses, it is more usual to operate as a sole trader or in
                     partnership with a business partner.

Costs and            The simplest way to establish a small business through self-employment
Procedures           is to set up as a sole trader. There are no registration fees but the sole
                     trader must be registered with HM Revenue & Customs as self-
                     employed. Similarly, if a business is operated by two or more partners,
                     each partner must register as being self employed.

                     Private companies and limited liability partnerships are required to be
                     registered at Companies House which also requires payment of certain
                     fees (currently £20 for incorporation and £30 annual fee).

                     There are certain regulatory exemptions available to small to medium
                     enterprises (which have an annual profit of less than £250,000, i.e.
                     about 310,000€) such as less onerous obligations for lodging company
                     accounts.

                     The UK does not have a one-stop-shop. However, the UK government
                     has established the Small Business Service, a UK government agency,
                     whose aim is to help small businesses in a variety of ways, including
                     providing front office and registration assistance; local advisory centres
                     (Business Link offices); and advice through a website.




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                                     Association

Financial support Governmental income support programmes to support transition from
programmes        unemployed to setting up a business:
during transition
period            - Unemployment benefits are available to individuals seeking work on
                     condition that the individuals can show they are seeking work;

                   -   Unemployment benefits (Job Seeker Allowance) can continue to be
                       provided during a transition period as a self-employed business is set
                       up, tapered according to level of income that is being derived from
                       self-employment. Where allowance is tapered, a test-trading period
                       of six months is put in place to allow for a period of transition until
                       the business is self-sufficient.

Business           -   Small Business Service
development
services           -   Advice is provided by: non-governmental bodies, such as Leonard
                       Cheshire Foundation, which supports disabled people to live
                       independently and PROWESS, an organisation which promotes
                       women‟s enterprise support.

                   -   Advice as well as financing is provided through Community
                       Development Finance Institutions (CDFIs) which are „not for profit‟
                       third sector organisation.

Other measures     Social entities can establish themselves through Community Interest
                   Company ("CIC") which has been set up specifically for socially
                   established enterprises. A CIC can be established as any one of a private
                   company limited by shares, a private company limited by guarantee or a
                   public limited company. To set up a CIC, a "community interest test"
                   and "asset lock" test are applied, which ensure that CIC is set up for a
                   community purpose and assets and profits are dedicated to these
                   purposes.

                   A trade association has been set up in the UK to support CDFIs:
                   Community Development Finance Association (cdfa) whose mission is
                   to support development of finance sector that provides finance for
                   disadvantaged and underserved communities and contributes to
                   increasing prosperity of such communities.




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                                     Association

Specific laws &       No specific legislation that only relates to microcredit. However, there
regulations           are various acts and regulations which apply to microfinance:
applicable to
microcredit, self-    -   Laws relating to CDFIs: CDFIs can be registered under the
employment and            Industrial & Provident Societies Act, 1965. An Industrial &
microenterprises          Provident Society is an alternative corporate form to a company.
                          Societies created under the Act benefit from exemptions under the
                          Financial Services and Markets Act 2000 and are able to raise
                          capital through the issue of redeemable shares known as
                          withdrawable share capital. Redeemable share capital is known as
                          risk capital, so CDFIs are not regarded as credit institutions or as
                          carrying out the business of banking.

                      -   Government Supported Lending (Small Firms Loan Guarantee
                          Scheme) operates through government and bank collaboration with
                          BERR providing 75% of security for a particular loan while bank
                          takes 25% of risk. It enables banks to lend more freely to those who
                          are a lender credit risk or are less able to provide collateral.

Types of              -   Commercial banks
institutions
providing             -   Community Development Finance Institutions: CDFIs are not banks
microcredit               (they do not take deposits), they are encouraged to lend in markets
                          less serviced by normal banks. CDFIs are independent organisations
                          whose primary purpose is to provide finance, and related support, to
                          enterprises in disadvantaged communities. They operate in a more
                          complex policy environment, with a plurality of activities, products
                          and missions that go beyond just microfinance. Community
                          Development Finance Institutions are generally formed as either
                          Industrial and Provident Society or a company limited by guarantee.
                          If registered as an Industrial and Provident Society under Industrial
                          & Provident Societies Act 1965, an alternative corporate form is
                          created which benefits from certain exemptions under the Financial
                          Services and Markets Act 2000 including being able to raise capital
                          through issue of redeemable shares (known as withdrawable share
                          capital). Redeemable share capital is known as risk capital, so
                          CDFIs are not regarded as credit institutions or as carrying out
                          business of banking. Examples of CDFIs: Street Cred, Women's
                          Employment, Enterprise & Training Unit (WEETU), Fair Finance.

                      -   Credit Unions, which are limited in interest rates that they can
                          charge, with loans being capped at 2% a month (or 26.8% per
                          annum). In practice this is not a restriction, with credit union loans

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                                     Association
                        typically being offered at interest rates well below that cap.

Sources of          -    Commercial loans: corporate social responsibility programmes that
funding for              lead to them investing in micro-finance, via CDFIs and credit
microcredit              unions
providers
                    -    Equity investments: for example by buying shares in one of the
                         CDFIs that are registered as Industrial and Provident Societies.
                         Investments are structured through issue of redeemable shares and
                         may also qualify for CITR scheme (please see below)

                    -    Soft loans: often provided on a fairly adhoc basis

                    -    Subsidies and donations from:

                          Government agencies, Regional Development Agencies and
                           Housing Association

                          Private institutions

                          Funds can also be raised through bonds. For example, on a
                           regular basis Shared Interest (finance provider for fair trade
                           producers) raises funds to on-lend to Oikocredit through a five
                           year bond issuance.

                    -    International aid: JEREMIE (Joint European Resources for Micro
                         to Medium Enterprises) and JESSICA (Joint European Support for
                         Sustainable Investment in City Areas) programmes.

                    -    National level: Phoenix Fund to support development activities in
                         organisations which provide enterprise support in disadvantaged
                         areas and/or to under-represented groups.




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                                     Association

Do non-bank          Even though most CDFIs are partially dependant on subsidies from
microcredit          public and private sources, CDFIs have operational independence
providers achieve    allowing them to allocate those funds as they determine, subject to
operational /        investments they make falling within specified limits and criteria under
financial            relevant legislation.
autonomy?
                     Moreover, certain CDFIs such as Charity Bank and Triodos Bank have
                     achieved operational self-sustainability, so do not rely on public or
                     private subsidies. Other CDFIs have benchmarks which they are
                     attempting to meet to establish operational self-sustainability within
                     certain time frames.

Usury rules          Only regarding credit unions (please see above)
(interest caps)
                     Research work on the social impact of credit unions and CDFIs is
                     carried out by academics, such as the Personal Finance Research Centre
                     at Bristol University, and think tanks like the New Economics
                     Foundation.

Tax incentives       Community Investment Tax Relief (CITR) is a scheme which provides
                     tax relief for investors investing in Community Development Finance
                     Institutions. This tax incentive is available to individuals and
                     companies. It comes in form of a tax relief, which reduces investor's
                     income tax (or corporation tax) liability. Investors can (over a period of
                     time) get tax relief of up to 25% (5% per year over 5 years) of amount
                     they have invested in a CDFI on their income or corporation tax
                     liabilities.

Access to            Small Firms Loan Guarantee Scheme (SFLG) enables small
guarantee            entrepreneurs with viable businesses to borrow, backed with a guarantee
schemes for          from BERR (Department for Business, Enterprise and Regulatory
banks and non        Reform) for 75% of the loan amount. 25% of the risk is not guaranteed
bank institutions    with lender adopting risk
providing
microcredit




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                                     Association

Database             Financial databases, Experian and Equifax provide credit information,
recording            borrower history and defaults for lenders to assess credit rating of
borrowers’           borrowers
history

Access by non-
bank microcredit     Community Development Finance Institutions can access these
providers to such    databases through purchasing a membership
databases

Obligation for       No
non bank
microcredit
institutions to
provide their
borrowers' credit
history to such
databases

Significant          -    Creation Community Interest Companies
initiatives taken
to develop           -    Community Investment Tax Relief
microcredit
                     -    Small Firms Loan Guarantee Scheme

                     -    Encouragement of Basic Bank Accounts

                     -    Small Business Service

                     -    New Deal Programme

Suggested            For microenterprises/self-employment:
measures to
improve existing     Individuals going into business have to opt between being a sole trader
framework/create     (which has unlimited liability) or setting up a company (as shareholder
a new framework      they may be subject to double taxation, as company will be liable to pay
(as applicable)      tax on profits on top of personal tax liability that individual liable will
for microcredit      incur on any distribution from company).
and
microenterprises     For microcredit:

                     -    Further incremental changes could lower the barriers to micro-credit
                          in the UK. For example, increasing the current 6 month tapering
                          period of welfare allowances during the initial stage of a micro-
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                                     Association
                       enterprise business would provide a greater opportunity for the
                       business owner to develop a sustainable business.

                   -   A relaxation of the rule of mutual exclusiveness of the Small Firms
                       Loan Guarantee and the Community Investment Tax Relief scheme
                       for CDFIs would stimulate greater private and social investment
                       under the CITR and a reduction in the risk of lending via the SFLG.
                       This would increase investment in the sector as a whole as risk is
                       decreased and rewarded is increased, and improve the impact that
                       CDFIs can make towards developing people and their communities.

                   -   Support with appropriate finance is needed to enable CDFIs to grow
                       their operations and portfolio. The European Union can support the
                       future development of the sector via appropriate funding schemes
                       which provide capital for both on-lending to micro-enterprises and
                       to cover operational costs of running CDFI.

                   -   Stronger assistance to develop CDFIs' capital strategies would guide
                       their long-term sourcing of appropriate private and social investment
                       to grow their organisation at a sustainable level.

                   -   Due to the UK CDFI sector still being relatively new, any regulation
                       from Europe would need to be appropriate to the size and scale of
                       the sector. Principles-based self-regulation would enable CDFIs to
                       develop, without a too onerous regulatory burden that this emerging
                       sector might not have the capacity to respond too.




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