Microcredit scheme for businesses

MICROCREDIT, an idea designed for the Third World, is catching on in France.

The main body offering this kind of loan to entrepreneurs - Adie - is on target to give 20,000 this year, compared to 10,000 two years ago.

Microcredit was developed in Bangladesh in the 1980s by Nobel prize-winner Muhammad Yunus.

He decided to take the gamble that those on low incomes or the unemployed, who would normally be refused a bank loan, should be given small loans to get business ideas off the ground.

He trusted they would be as responsible as anyone else in paying them back.

In the Third World microcredit often involves sums of only €100 or so. In France the sums are appropriate to a western economy - loans with the main provider Adie (www.adie.org) range from €500-€6,000 and have a set interest rate of 9.71%. The average loan is €2,800.

Adie spokeswoman Audrey Thirot said: “The maximum can also be topped up to €11,000 with the help of state aid that we can help the person to access. We want to make sure that they have enough to make their business idea work. These can include interest-free loans and regional grants.

To apply you have to be unable to get a traditional bank loan - many borrowers are registered unemployed or claiming RSA income support.

“They are often immigrants and there is no nationality requirement or need to have worked in France as long as you are a resident.”

Ms Thirot added: “To get a loan you need to convince us you have really thought your idea through. Once you have it, we have a nationwide network of volunteers who will support people with advice while they are paying off the loan. It makes sense to us that your business should not only get started but should keep going for years to come.”

There is no need to provide proof of having been refused by banks, she said.

Two MPs who are enthusiastic about microcredit are planning to launch a law to boost its use in France. Their ideas include raising the ceiling for the amounts that can be given and getting more funding for microcredit by allowing ordinary people to invest in it.

One idea could be a type of savings plan where funds would go towards microcredit, they say. They also suggest the government should look at ways of linking up the loans with the auto-entrepreneur scheme.

The MPs say current rules stop individuals from supporting microcredit - for example www.babyloan.org - where people can choose to give a free, guaranteed, loan to a business project of their choice - must only offer projects abroad due to French rules.

Similar forms of help available in France include interest-free loans from www. france-initiative.fr while the body www.franceactive.org may be able to give you a bank guarantee so you can obtain a traditional loan.