The other side of the moon: microcredit

Just a few years ago the word “microcredit” did suggest a mix of social, remote and third world invention, good for a prize but not really fit to the complexity of western societies. Now, we have learnt the lesson about this invention that can express its potential also in our society and we have experience about the effects of microcredit, where a chance given to excluded can create new businesses that would otherwise be inexistent, create jobs, improve self awareness about finance, distribute mentoring services that support entrepreneurs… a new world has come to life.

New entrepreneurs, jobs created, mentoring offered…. all this is just the visible side of the moon, the other one being the less known personal microcredit.
For some reasons personal microcredit has not yet gained the same visibility of business microcredit, it’s not target of EU programs, its’ less mediatic, it’s whispered in some corridors with kind of a shame since it can be target of the worst anti social accuse: it’s a devil’s tool, it has interest, it is disguised consumer credit!

The hidden face of the moon reveals the same distance from earth: it’s originated from the same social segment of population served by business microcredit, the excluded, also called unbankables or semi-bankables; BOP, the base of pyramid in our society needs access to credit and has not.

Is this consumer credit aimed at supporting commercial practices ? Is this a way to sell more goods? No: it’s an aid to family needs, events, accidents, its’ the only available tool to reduce financial exclusion of this fragile segment of population, a way to conquer at least part of what’s normal with many:

• Home set-up expenses
• Necessary means of transport and driving licences
• Positive family events, (weddings), and negative such as accidents and temporary difficulties
• Events regarding the family in the country of origin
• People with disabilities
• Education needs and health accidents

No ordinary credit company, no bank would include these people and these needs in their grids,
there are no tvs, electronics, bikes… there is not even a seller… moreover there is no long term job and no guarantee of future flows: no profit sharing with consumer goods sellers and no formal and permanent jobs, this is enough to cancel any suspicion of the worst devil’s diguise, an horrible commercial credit profit maker trying to serve the sub-premiums (you remember ?) by wearing a social dress.
This is a Credit to Hope, a support to improvement, aimed at financially include the rest of the (enlarged) family of the entrepreneur served by a business microcredit: I like to call it Social

Inclusion Personal Credit (also called by Financité “Affordable Personal Inclusive Credit”) aimed at serving:
• primary financial needs (home, health, work, education) or emergencies
• expressed by the excluded from traditional credit channels because of insufficient credit history or precarious working position

The hidden face of the moon will reveal that these credits are offered to low income families, at market rates and without collaterals, by a social credit provider struggling with high unit operation cost, lack of information due to inexistent position at credit bureau, need to build from scratch a valid and specific scoring model, need to provide professional service together with financial education, in a context of extremely complex and expensive compliance to central bank rules, in
EU, where there are not two countries sharing the same legal labyrintic legal framework.

Corrado Ferretti
Member of the EMN Board
President of PerMicroLab

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