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Microcredit in France: Adie ’ s experience

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  1. Microcredit in France: Adie’s experience Milano, october 15th 2013

  2. Long time predominance of wage labor Welfare State culture High administrative complexity High level of social contributions for businesses High density of bank branches Microcredit in France : institutional context 2

  3. Microcredit in France : employment context • 13.4 % of population lives under the poverty threshold • 2 230 000 households live on welfare (June 2013) • 1 536 000 employees are considered working poors (2011) • Unemployment rate is 10.8% in Q4 2012 • The figures for business creation have grown and reached 549 976 in 2012 • Creating its own job is now recognized as a way to fight against economic exclusion 3

  4. Microcredit in France : entrepreneurial context Business pyramid  : 93% of businesses stay small (less than10 employees) 200 employees and more In thousands 7 (0,3%) Between 50 and 199 employees 25 (0,8%) Between10 and 49 employees 163 (5,6%) Between1 and 9 employees 984 (33,6%) 0 employee 1 746 (59,7%) Secteur informel 4 Péfecture de Région IDF 15/11/11

  5. Microcredit in France : legislative context 2005 2008 2010 Today 2001 BIRTH LEGITIMITY GROWTH MATURITY August 2nd 2005 Cancellation of the interest rate cap on professional loans for self-employed people January 18th 2005 Non banking microcredit institutions are allowed to lend for needs related to job integration. Non banking microcredit institutions have access to the National Bank debtor files August 4th 2008 Non banking microcredit institutions are allowed to disburse professional loans to entrepreneurs, regardless of their social situation July 1st 2010 Non banking microcredit institutions can borrow from individuals to onlend to their clients May 15th 2001 Non banking microcredit institutions are allowed to borrow from banks to onlend to their clients. (Article L.511-6 du Code monétaire et financier). 5

  6. Adie’s missions Deliver microcredits and business development services to the largest possible group of people with professional needs to create or develop a business and no access to classical bank loans.  Finance micro-entrepreneurs  Deliver BDS to micro-entrepreneurs • Contribute to improve the legislation regarding microcredit and business creation 6

  7. Adie’s clients People excluded from the classical bank loans • Unemployed, people on welfare, working poors, micro-entrepreneurs… • Strong activity in the poor suburbs (23% of new clients) • Special effort to target the rural areas (23% of new clients) • Strong activity among migrants (28% of new clients were born abroad) • Historical activity with the gypsy communities (10% of new clients) • All type of economic activities represented … 7

  8. Examples of the variety of activities conducted by Adie’s clients 8

  9. Tools to fight against economical exclusion + + € Business Development Services Business Microcredit and Family Microcredit = Micro-insurance In 2013 (up to September 30th) : 9051 business microcredits disbursed 1679 family microcredits disbursed Average business loan: 3650 € 34 000 active clients 734 micro-insurance contracts subscribed 12 092 persons benefited from at least 1 BDS 5842 benefited from at least 2 BDS 9

  10. Business microcredit • Product The business microcredits can finance whatsoever need (working capital, investments, supplies, etc.) • Up to 10 000€ • Interest rate : from 6.76% to 7.76% • Upfront fee: 5% Possibility to have access to further funding : quasi-equity loans, grants • Conditions • No access to traditional bank loans • Business creation or business existing for less than 5 years • Total cost of the project < 20 000 € • Co-signer up to 50% of the loan amount 10

  11. Family microcredit • Product The family microcredits can only finance job inclusion needs : strong focus on transportation expenses • Up to 3000 € • Interest rate : 7.76% • Upfront fee: up to 5% • Conditions • No access to traditional bank loans or credit institutions loans • Co-signer up to 50% of the loan amount 11

  12. Micro-insurance Micro-insurance products target new businesses or existing businesses Products have been tailor-made to meet Adie’s clients needs Products are delivered through Adie and managed by two insurance companies : Axa and Macif Multi coverage product for activity which requires commercial premises: Professional liability Store related coverage (fire, water damages…) Damages on professional assets up to 10 K€ Financial support in case of accident or hospitalization Multi coverage product for activity without premises Auto Insurance: Third-party liability Damages on transported goods Assistance in case of accident or breakdown 12

  13. Business development services adapted to clients All BDS are free for clients and non clients 13

  14. An extensive and multichannel network 15 regions/ 119 branches in metropolitan France and overseas A national call center for appointments set-ups Campaigns to meet with clients Adie Connect A website dedicated to clients 450 employees & 1 300 volunteers 14

  15. Social impact • Since 1989 • 127 000 microcredits disbursed • 91 205 business created or sustained 15

  16. Social impact • Creation of a « social and financial exclusion rating » to evaluate the fidelity to the most excluded people 16

  17. Social impact • SPI report (Social Performance Indicator) once every three years to assess the alignment of the organization and process with the social goals of the institution SPI report issued by Cerise, a French NGO Last report in 2011 : grade 63/100 (medium 54/100 for 500 MFI in Europe and developing countries ) 17

  18. Social impact • « enterprise sustainability and job inclusion » study once every three years 18

  19. Business model for credit funds • Adie received the agreement to borrow from banks or financial institutions to onlend to its clients in 2003 19

  20. Business model for credit funds • Adie built up an extensive garantee scheme thanks to French public devices and to banks 20

  21. Business model for operating expenses Adie’s model is relying • On the expense side, on a mix of employees and volunteers workforce • On the revenue side, on a mix of subsidies and financial income from microcredits 21

  22. Business model for operating expenses 22

  23. Business model for operating expenses Current strategic plan : the stress is on productivity 23

  24. Thank you for your attention 24