EMN 2008-2009 Overview - Réseau Européen de la Microfinance

25%
20%
15%
10%
5%
0%
Eighty percent of respondents indicated
that they offer grace periods of varying
lengths. The mean grace period is 6 months,
the maximum is 24 months and the minimum
is 1 month, exactly the same as seen in the
previous survey.
5.2 Interest Rates
One hundred and thirty two institutions
responded to this question. The average
interest rate charged across survey
respondents is 9%, one percentage point
above the average of the previous survey.
Graph 26: Average interest rate by country
22,2%
uK
17,0%
Poland
16,9%
Romania
14,3%
Bulgaria
11,0%
Croatia
9,0%
Ireland
8,6%
Spain
8,3%
Netherlands
7,8%
Hungary
7,0%
estonia
Interest rates are related to the existence
of usury laws. At the present time, nearly
all EU countries have usury rates or rate
ceilings in order to protect consumers
against over-indebtedness and predatory
lending practices. Only two countries have
a specific law regarding the regulation of the
microfinance sector, France and Romania
(European Commission, 2007a). Where usury
laws are in place, lenders must not charge
above these stated maximums. Interest caps,
when not too low, enable lenders to establish
an adequate interest rate that covers their
operational and financial costs. In the UK and
Romania, however, which do not have these
types of restrictions, we find higher average
interest rates. In fact, amongst UK lenders
participating in survey, the maximum interest
6,7%
Sweden
Graph 26 shows the average interest rate by
country. The highest interest rate charged
is 22.2% in the United Kingdom and the
lowest interest rate charged is 2% in Finland.
As a reference, at the time of the survey, the
average Euribor rate in 2009 was 5%. We
continue to find that there is a relationship
between high interest rates and the mission
statements and legal status of the lenders. In
Eastern EU countries (Romania, Bulgaria and
Poland) where a greater number of for-profit
organisations are found and SME financing
is a means of reaching sustainability, interest
rates tend to be higher in order to price for
risk and for operating and financial costs.
rate charged was 36% and the minimum 5%,
demonstrating a wide range of practices when
rates are unrestricted. France is the only other
country without interest rate caps on loans to
individual entrepreneurs 25 . This has enabled
the largest French microcredit organisation to
increase its interest rate by around 4% since
2005, and it now sits at 9.71% which is in the
lower range when compared to the other
countries (see Graph 26 26 ). This example
shows that the lifting of the interest rate cap
for organisations that operate in the field of
social inclusion does not necessarily lead to
usury.
The issue of interest rates and their
possible impact on the financial sustainability
of microfinance institutions needs to be
25 In France, the usury rate for loans to individual entrepreneurs was abolished through article 7 of the n°2005-882 law of 02/08/2005 in favour
of SMEs.
26 The average 4.8% interest rate for France can be explained by the fact that the so-called “prêts d’honneur”, zero- interest quasi-equity loans
that are connected to a bank loan have been taken into account.
6,0%
Latvia
6,0%
Norway
4,8%
France
4,7%
Belgium
4,5%
Germany
4,0%
Lithuania
4,0%
Switzerland
3,7%
Italy
3,0%
Portugal
2,0%
Finland
41