Overindebtedness: what could we learn from microcredit?

1. Overindebtedness: what could we learn from microcredit? Georges Gloukoviezoff G2 Research ONPES

2. To understand overindebtedness • A need of credit • Social necessity and lack of alternatives • Borrower decision • Skills and situation • Lender products • Characteristics and advice • Overindebtedness occurs • When credit is not the right solution • When characteristic of the credit are inappropriate

3. When the situation is problematic • Main lenders can fail • Assessment by scoring only • Microcredit strengths • Borrower’s global situation taken into account • Personalised pedagogy • Better results • Refusal understood by borrower • If needed, debt consolidation is made in the interest of the borrower

4. When the credit is the problem • Main lenders credit can be inappropriate • Credit limits are too high • Interest rates are too high • When difficulties occur, fees are too high • Microcredit strengths • Amount lent is related to the need • When difficulties occur, personalised adaptation can be made • When repayment becomes impossible, guarantee fund reduces the debt

5. A microcredit at risk • To stay marginal and a communication tool • CSR approach • To become a market-based social welfare program • Poorest can protect themselves by themselves • To become a market • Microcredit will have to be profitable

6. An emergency and R&D tool • To face appropriately financial needs in emergency • To highlight unsatisfied financial needs • Lenders: Better access to appropriate credit • Third sector: Better skilled social workers and volunteers in NGO • State: Better access to social welfare program • Need for regulation • Microcredit is a complement to main lenders • Assessment in relation with financial inclusion goals • Incentive for stakeholder