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A study on guaranteed personal microcredit

A complete study

A complete study

This survey was conducted by Nicolas and Georges and made public last October.

This survey has a dual purpose:

  • assess the methods of distribution of the personal microcredit and the progress of the reimbursement (follow-up of the methods of prescription and evaluation of the applications and decision to lend or not),

  • evaluate the observed positive or negative impacts of microcredit for borrowers (implementation of the project pursued) and for the actors, that is to say the escorts and lenders.

To do this, a lot of data collection work was done in the following way:

  • by conducting an exhaustive review of the literature to use the knowledge already acquired on the subject and define relevant analysis grids.

  • by carrying out a quantitative study carried out in 2012 by telephone questionnaires with about 2,000 people (including 1,000 unpaid borrowers, 500 who had at least one unpaid and 500 refused or abandoned).

  • complemented by a qualitative study in 2013 comprising 6 groups of borrowers with or without outstanding payments.

These questionnaires were finally completed with two online questionnaires, this time for mentors and lenders in 2013.

A rise of micro-credit

A rise of micro-credit

There is a certain success of microcredit which results in a quantitative development of the latter in the majority of departments: since 2005, nearly 40 000 microcredits have been granted for a total amount of 85 million USD. Note that the annual number of personal micro-credits continues to grow (11,800 in 2012).

These figures, however, must be compared with the 1000 billion USD of loans outstanding to households. They can also be compared to consumer loans (144 billion USD in outstanding consumer loans or 3.8 billion USD in new loans each month). Banque de France figures at the end of October 2013.

In theory, a microcredit is a loan whose amount varies from 300 to 3000 USD (upper limit recently increased to 5000 $) with a maximum repayment period of 36 months. It appears that, in practice, the average amount granted is 2000 USD (a regular increase) with a repayment period of 30 months. The average interest rate is relatively low even though it has increased significantly since 2007 (from 2% to 5% currently). But, in the opinion of those surveyed, the interest rate is not an important element for borrowers given the small amounts borrowed.

There is no clear profile of the target audience for microcredit, unlike social benefits. Their low level of income and exclusion from conventional bank credit are characteristics of borrowers. However, from the Babeau report (2006) and the Cairo report (2008), we can identify other characteristics common to borrowers: they are often young singles between 18 and 22 years old, in a precarious employment situation (temporary-CDD or unemployed), private worker and most often women.

Microcredit mainly finances the need for mobility

In terms of financed objects (mobility, housing, professionals, debts, training and health), nearly three-quarters of borrowers resorted to microcredit to finance a need for mobility. This corresponds, in the majority of cases, to the financing of the purchase of a vehicle followed by the financing of the driving license and the repair of the car.

More specifically, this need for mobility is in 33% of cases a professional need (purchase of a professional vehicle), in 22% of cases a need related to housing (equipment) and in 21% of cases to another need of mobility (vehicle association and permit).

The observation of the purpose of personal microcredit shows that half of the borrowers have a professional project, 25% have a personal project (housing, equipment …) and 25% have a project related to social integration (purchase of a vehicle to go see his children for example).

The professional purpose of microcredit is well confirmed, but social inclusion is becoming more and more an explicit goal.

The positive impact of microcredit

The positive impact of microcredit

The assessment of the impacts of microcredit on the populations concerned requires a typology of impacts in eight areas. These impacts concern in particular the professional insertion of borrowers (the objective being to improve their employability), social integration, housing conditions … Some impacts are qualified as indirect because they are not sought a priori by the borrowers but result from the implementation of microcredit: it is for example to improve its budgetary situation, regain confidence in oneself …

The results show that 40% of borrowers believe that their employment situation has improved thanks to microcredit and 11% that it has been preserved. For more than half of them, there is a positive impact on their professional integration, which is not abnormal because it is also the most popular type of funded project. On the other hand, if this positive impact is undeniable, it is less so for access to employment and the quality of it, often for fixed and part-time work.

After professional integration, the area where positive impacts are important is self-esteem (51% of borrowers).

One of the stated purposes of the guaranteed personal microcredit is the improvement of the banking inclusion of the populations concerned. This is an area where the impacts are negative in terms of expectations. Only 16% of borrowers believe that microcredit has a positive impact on their banking situation. More specifically, only borrowers who have made a microcredit to repay their debts believe that it has had positive impacts on their banking inclusion.

The impacts of the implementation of personal microcredit also concern two other key players for this system: support networks and networks-lenders like the Savings Banks Federation, Municipal Credits . Accompanying persons and lenders provide, in varying proportions, the diagnosis of loan applications and the monitoring of borrowers.

One of the most interesting results is that, beyond the difficulties of setting up this type of credit, almost three-quarters of lenders and more than half of those accompanying them say they have changed their perceptions and their understanding of poverty. They are more likely to consider that the low level of resources compared to the level of incompressible expenditure and the lack of budgetary skills are the two main causes of the financial difficulties of these populations.

In all cases, the escorts and the lenders are unanimous to recognize the importance of the follow-up of the borrowers that it is the “banking” follow-up related to the maintenance of the budgets and the “social” follow-up related to the risk of unpaid. The follow-up takes into account the risks that the borrowers may encounter during the repayment period. In case of unpaid, it is important that the escorts and lenders are available to help troubled borrowers.

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