EMN 2008-2009 Overview - Réseau Européen de la Microfinance

Case study 1:
Personal microcredit
Access to microcredit, not only for the creation or the development of
a microenterprise but also for personal purposes, can be a powerful
instrument for helping excluded persons to improve their situation.
Without access to bank credit, people are restrained to easily available
consumer loans from private financial companies and moneylenders that are often
disbursed without any check of the borrower’s credit history and at very elevated cost.
This risks pushing them into the spiral of over-indebtedness. Personal microcredit
differs from consumer credit because it primarily aims at improving the situation of
excluded persons, reintegrating them into the normal banking system and preventing
over-indebtedness. It serves for supporting specific needs and paying for unexpected
expenses (such as health expenditure, a driving license fees, special insurance…)
and purchasing durable goods. It is adapted, in terms of amount, loan term and
cost to the budget situation of persons with low income, social welfare beneficiaries,
persons registered negatively at the credit bureau, the elderly or people with health
problems. And it is systematically coupled with information and support such as
budget advice, financial capability training and debt settlement. Recently and often
on an experimental basis, various stakeholders in Europe have started to develop
personal microcredit.
In France 30% of the population does not have access to normal bank credit and
more than 2.5 million persons are negatively registered at the credit bureau 16 . To
improve this situation, the government launched a Personal Microcredit Programme
on an experimental basis in 2005 through the establishment of the Social Cohesion
Fund (Fonds de Cohesion Sociale) with € 73 million over five year - a guarantee
fund for both business and personal microcredit. The specificity of the programme
is the close collaboration between three types of entities: the promotional bank
Caisse des Dépôts et Consignations (CDC) which manages the Social Cohesion Fund
for the government and so guarantees the loans up to 50%, the banks that disburse
the loans (15 banks and three financial companies are part of the programme 17 ) and
the social associations that accompany the borrowers (ten national and 86 regional
social support networks 18 ). Credit amounts are fixed from €300 to €3,000 over 36
16 Banque de France, 31 Dec. 2009.
17 As of end of 2009.
18 As of end of 2009.
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