Social Credit in Belgium Caroline EVRARD CREDAL Nice – Septembre 2008

Context and history Banking Context in Belgium: –2003 law on universal banking service, –positif and negatif register within national banque of Belgium –1991 law on consumer credit –Preventive measure of the over-indebtedness: service of mediation of debts + legal device for collective payment of debts

Origin and objectives Initial status: –people with low incomes are excluded from traditional consumption banking credit or are offered a inadequate credit. Objectives : –to give access to an adapted credit to enable them to maintain or improve their daily well- being –prevention against over-indebtedness: the establishment of a specific credit pedagogy = avoid to give « the credit too much»

Partners Public authorities –Social credit = a prevention tool against over- indebtedness –Public guarantee –Subsidy to cover operations cost Crédal: social credit co-operative has been active for 25 years in the sector of the social economy –2000: professional microcredit –2003: Social credit Bank of the Post was the lender in the early srages of the activity (between 2003 and 2007)

Methodology Loan application=opportunity for people in financial difficulties to openly speak about their situation and find personal advice that can avoid the "credit too much." Credal is a lender whose primary objective is not to make credit at any cost but to find the most suitable solution for the customer. The government support allows us to have a priority objective of prevention rather than profitability. Social Credit = personal advice, low interest rates, non- commercial purpose, loan amount adapted to the budgetary situation of the person

Public target: –People excluded from traditional bank loans (low income, benefit recipients, negatively registered, age, health,…) Objects : « financing of objects that allow a project life or improve the daily welfare : –Mobility : used car, scooter, driving licence … –House:guaranteed rent, household appliances, renovation work in the house,… –Health care costs, notary fees, family reunification for migrants, … –in some cases, the consolidation of debts and credits –inovation in 2008 : « social green loan »

Features of social credit –Interest rates: 5% –Size of the loan : from 400€ to 7500€ –Maximal repayment period :3 years Productivity 4500 phone contacts 1300 people met during an personal interview 550 social credits granted in 4 years Total amount that has been granted so far: € Average loan size : 3000€

Default procedure and default rate: Unpaid loans: 8% Loss of rate : 1,5% Personalized followed-up procedure

Conclusions Acces banking after the device: access to customized banking services individuals who are better informed and better « equipped » People with low incomes are not bad debtors Integrated model in Belgium Unique structure (CREDAL) that fills the role of lender and support / consultancy Evaluation Importance of quantitative and qualitative assessment (to develop indicators) Financing The cost of instruction is expensive Need multiple sources of funding to insure sustainability the activity