Social Credit in Belgium

Caroline EVRARD

CREDALNice – 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:

1.500.000€• Average loan size : 3000€

Default procedure and default rate:

• Unpaid loans: 8%

• Loss of rate : 1,5%

• Personalized followed-up procedure

ConclusionsAcces 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