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

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

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

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

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

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