What is microcredit?
According to the microfinance observatory’s annual report, “microcredit is above all a tool for economic and social development, allowing people with limited resources to carry out a personal project to benefit from loans that are denied by the banking system traditional “.
Microcredit is born in emerging countries. And that’s where it’s most prevalent. Globally, and especially in developing countries, according to the Convergences barometer, 112 million people borrowed $ 87 billion in 2014, an increase of 12.6% in one year. And 81% of the borrowers are women.
Personal microcredit allows anyone who is excluded from conventional bank loans to obtain a loan to finance a personal project. This is a credit, with a rate of interest! One of the conditions for granting is even that the person is able to repay it. Essentially, these credits relate to projects with the ultimate goal of professional reintegration (purchase of a vehicle to get to work for example). In 2015, total outstanding loans distributed amounted to $ 192.2 million, with an average amount of $ 2,285 per person.
These credits are between 300 USD and 5000 USD, they have a fixed interest rate and the maximum duration of 3 years. The person is accompanied in the management of his budget. These credits (80% of microcredits) can benefit from the guarantee provided by the State under the Social Cohesion Finance Company.
The professional microcredit
It is a loan that finances the creation, purchase or consolidation of a craft or commercial enterprise. This program allows its manager to create or reinforce his own job. Some professional micro-credits benefit from the guarantee provided by the Social Cohesion Finance Company.
177,539 programs were proposed for a total amount of $ 1,051 million in 2014.
The actors of microcredit
Authorized banking networks
A number of banking institutions are accredited by the Social Cohesion Finance Company to participate in the microcredit scheme. These institutions study the file transmitted by the accompanying network and take the decision to grant or refuse the loan according to the personal situation of the applicant. If granted, they have the loan contract signed by the beneficiary and follow it for the duration of the loan.
The Association for the Dev to Economic Cooperative (ADEC) was founded in December 1988 to help people in difficulty to create their own jobs. It finances and supports companies created by unemployed people and recipients of the RSA. It offers financing possibilities, but also personalized support.
The Social Cohesion Finance Company
The Social Cohesion Finance (SCF) was created at the initiative of the State (law of 18 January 2005). The SCF has a number of guarantee funds managed by France active guarantee. This system makes it possible to guarantee bank loans granted under the microcredit, which constitutes a security for the banks. In addition, a support procedure for microcredit applicants is put in place, this is the NACRE system.
Internet and microcredit
Since the law of 21 January 2010, any individual can make a donation on the internet for a microcredit project. Babyloan, in France, is the first solidarity micro-loan platform. In 2014, Babyloan financed 4,500 projects in France (22% of the total).