Microcredit in Italy: Past Present and Future Pasquale Stefanizzi, pasquale.stefanizzi@unisalento.it University of Salento via per Monteroni – complesso Ecotekne, 73100 Lecce, Italy
Microcredit in Italy: Past Present and Future Abstract The aim of this paper is to investigate the microcredit offer in Italy with a particular focus on the peculiarities that distinguish the different areas of intervention (microcredit to business and/or social cooperative microcredit) . We tried to understand if there is an inclination to generate products specifically targeted to immigrants and to see if there is any other space for intervention for a more balanced development of microcredit within the network of Cooperative Credit banks. We have adopted a statistical approach to this research with a descriptive-explorative approach. We used a questionnaire aimed at the Italian operators in microcredit sector. We studied the work done by such organizations to understand whether there is a common denominator within the different initiatives operated in Italy and the Grameen work. Finally we tried to understand if the current microcredit operators use a similar or different approach to the cooperative credit system when addressed to immigrants 1.
1. Methodology The methodology used in this work follows the principles of classic statistical analysis applied to quantitative research, adopting the questionnaire as a data collection tool (Molteni, Troilo, 2003). Such methodology envisages a rational timely sequence of data survey stages, analysis and development and presentation of results. In particular we carried out the analysis of a fraction of the total statistical corpus of data. With the aim of reproducing a clear picture of what microcredit is in Italy, including the different dynamics operating in the sector, we also decided to adopt and combine different techniques of data collection and the analysis of results such as cluster analysis, historical events analysis and the descriptive-explorative analysis. In summary, through this research we tried to answer the following questions: • In Italy is microcredit a phenomenon with a "history" or is it just a fashionable term derived from the high popularity of Prof. Yunus' results? • Does the high volume of so far generated activity follow an ascending trend to be able to justify a more structured approach? • Is there a geographical concentration of the so far generated microcredit operations? • Are the Italian operators going through an experience similar to Grameen? If so what are the common key factors to the various projects? • Do the bureaucratic-administrative approaches that release the micro finance projects share a common ground among the different experiences? • Are the immigrants a potential target? • Can the credit cooperation system develop a structured offer of microcredit in Italy?
2. Statistical survey To define the statistical survey plan, given the already mentioned diversification within the Italian sector, we utilized different sources as a data base in particular: • list of the operators registered with RITMI (Association of microfinance institutions), where the various institutions are classified and grouped together according to the geographical areas of intervention (operational level), typology of the activity (typology distinguishing between No profit organizations, ONG, public body, financial intermediaries, bank, foundation, other) and legal status (profit and non profit), • Italian writers (Viganò, 2004; Brunori, 2005; De Bernardo and Pezone, 2008; Eurispes, 2007; Scarpa and Delise, 2007; Sgroi, 2008; Tramonto, 2008; Borgomeo & Co., 2007) 2 whose work on specific topics, have recalled projects and best practices of real interest and depth with the common aim of launching microcredit and microfinance. This is how we defined the statistical corpus of data i.e. the universe of microcredit projects/initiatives
operating in Italy3, to structure our research (based on the above mentioned questions). As for quantitative data processing, the statistical literature (Orsi, 1985; Pieraccini, 1991, Posa and De Iaco, 2005), envisages that error measurements and the level of significance of the analysis are established beforehand, in order to obtain a balance between the multitude of the sample and the nature of the operation. Because of the typical limitations of statistical quali/quantitative surveys carried out by questionnaires 4, and with the aim to increase the sample population, this study focussed on the parameters of relevance given by the distribution of the questionnaire to the whole universe of this survey. Overall we identified and contacted 48 microcredit organizations in Italy that operate for the residents (excluding the national institutions working exclusively on projects abroad). Out of these, 19 replied to the questionnaire5 and have been adopted as the sample of our research. Therefore the results are valid with a confidence level of 95%, with a confidence gap of 15%. The first step of this analysis shows: • nearly the total of the projects operate on a local basis, except some rare exceptions6, • similarly to what happens to the rest of the world, microcredit is a phenomenon strictly connected to the social development and human rights environments, campaigns against poverty and, more generally, not for profit, • the onset of management structures typical of the financial market often derives from the acquisition of levels of knowledge or volumes that can be hardly managed by voluntary assisting bodies (Vikram, 2008). In Italy, moreover, microcredit has found a stable operational ground amongst: • the Mutue di Auto Gestione –MAG- (self managed lending operations) are historically renowned for having launched the first microcredit projects in favour of third sector bodies, cooperatives, businesses involved in fair trade and in a few instances, individuals experiencing temporary financial difficulties 7, • foundations against “loan sharking” developed mostly by Dioceses or single parish priests and that often have become a point of reference for the entire area and population (De Bernardo and Pezone, 2008).
3. Main Features of the microcredit initiatives in Italy The first aim of this work was to understand the position of the microcredit initiatives in Italy and their operatively in the national financial panorama in terms of space, time, volumes and nature of the operations. In other words, we tried to summarize the elements that can offer a critical/constructive reading to the phenomenon. The first main feature has been the geography of microcredit in Italy. We then moved on to observe the characteristics of the nature of the supplier 8 and the geographical location (the belonging to the so called Nielsen area) through the development of a location finder to assist in the reading of the data. The country area more keen to use microcredit against poverty is the so called Area Nielsen 2, which is also the one most evidently sensitive area to issues of social support and progress, thanks to the work developed by the operators living in Toscany (Innocenti and Ortolani and Rizzitiello, 2007; Brunori, 2005; Borgomeo & Co, 2005); followed, with a short gap, by Area 3 and Area 1. The south of Italy ranked as last since the precarious economic and social conditions of a few areas and the high level of unemployment which make the demand of microcredit really high. When shifting the attention towards the nature of organizational structures chosen for the development of microcredit projects and looking at number in distribution, it comes out that the least frequent operations come from Public Bodies, followed by Foundations, Onlus and the financial intermediaries. Amongst the least take part the so called Mag, which are mainly no-profit cooperatives. Fig.2 shows that microcredit in Italy started clearly after 2000, after the popularity of the Grameen Bank work and various changes that happened within the national context of Italy. On this the following works (Borgomeo C. & Co, 2007) show:
FIG.1: SPACE/ORGANISATIONAL DISTRIBUTION OF MICROCREDIT INITIATIVES IN ITALY
• the agreement picture amongst the numerous public and private political actors, of national entrepreneurship and associations with the common aim to use, develop and apply preventative Funds against “loan sharking” (law 108/96), • the transformation of the “National Italian committee for Microcredit” into “Permanent National Italian Committee for Microcredit” with the aim to promote and monitor the ongoing projects and those under “work in progress”.
FIG.2: HISTORICAL CONCENTRATION OF MICROCREDIT INITIATIVES IN ITALY
Before the onset of the new century, it is possible to identify only four initiatives of microcredit , three of which developed by MAG . When looking more thoroughly at the objectives achieved by the different projects, except from Mag2 which operates undistinguishly in both sectors, there is a clear difference between the subjects operating in favour of businesses and those operating to support people 9 or families with temporary lack of cash; hence, microcredit in Italy is increasingly characterised by area of specialisation. The first part of this paper aimed at identifying the relational positioning of the microcredit organisations. With this aim we suggested a methodological comparison with the recommendations given by the management literature in the life- systemic theory (Golinelli, 2000-2002). Assuming microcredit is a coordinated system of institutions, instruments and resources that need to interact with the connected systems to grow and thrive, we then measured its strength in the relations with the actors that belong to it and: • themselves, in Italy and abroad. A similar proxy has been recognized in the degree of participation in national and international networks, • Public Administration we surveyed the existence of strategic relations between public institutions and microcredit operators and the inclination of the last ones to demand/obtain supported sponsorship to launch or develop initiatives, • the financial intermediaries, through the identification of potential collaboration with the credit/banking brokers to carry out lending operations, • their own customers, i.e the inclination to concentrate the efforts towards one target. The summary shown in Fig.3, concludes that microcredit initiatives do not belong to an initiative of common nature, they rather develop via single actions (operators in the civil sector, public local bodies etc.) and, as stated before, they belong to a very recent past. On this purpose, the establishment of RITMI, a system which includes the major number of surveyed activities, like the European Microfinance Network, should put together the
various initiatives aimed at creating a “critical mass” able to retain attention of the Institutions and an increased interest among the potential clients, who often ignore the existence of support tools to their advantage. The degree of interaction between microcredit organizations and public institutions (in particular when it comes to financial support aimed at start-up as well as development of own initiatives) is are instead working really well. The public bodies involved in the most successful relationships are the borough and counties, followed by the regions and in some cases small business associations, job centres and universities.
FIG.3: SUMMARY OF RELATIONAL POSITIONING OF MICROCREDIT ORGANIZATIONS AND RELATED CHARACTERISTICS
The relationships between microcredit institutions and the financial intermediaries are much stronger compared to what we analysed so far. Strategic partnerships aimed at increasing the knowledge of the potential marginal clients, available resources and organizational structure are working effectively. With specific reference to the business models adopted by the operators working in synergy with the banks, it turns out that the organizational framework (Innocenti and Ortolani and Rizzitiello, 2007) are used to satisfy the specific needs of those requiring them, are often unique and difficult to track down. The interaction between microcredit organizations and financial intermediaries is due to become stronger thanks to the new development of financial activities within the European community aimed at supporting microcredit. In particular we refer to the measures called Jeremie and Jasmine 10. The first aims at improving the financial context of operation for the PMI (small, medium business) at a national, regional and local level. The intention is to facilitate access to financial borrowings and increase the stake of risk capital through the development of warranty instruments. In the specific case of microcredit, Jeremie envisages the creation of a warranty fund aimed at microfinance Institutions. Jasmine is instead a measure for the development of microcredit whose objectives are to: • improve the legal and institutional context of the member states. • positively improve the entrepreneurial mood. • promote best practices. • provide capital necessary for the so called “unbankable”. Microcredit organizations seem to have established a strong bond with their own customers. 85% of the activities are aimed at specific targets, generally defined as unbankable. The literature on this topic (La Torre and Vento, 2005) has shown that in the last few years the users of microfinance at a global level have become much more complex compared to the one of microcredit, in shifting the attention from the “poorest amongst the poor” to all those excluded from the financial system (as the victims of loan sharking activities) which can be tracked down into five macro categories:
• self-exclusion which derives from self inadequacy of the individual in front of the demands of the financial mediators (poor amongst the poor), • access-exclusion deriving from the lack of financial requisites to obtain credibility of a potential client, further to a risk assessment with negative result, • political-exclusion where the ineptness of the socio-political system that ignores the demands of specific individuals. The immigrants, for example, are a main typology of financial exclusion, • condition-exclusion which derives from the high cost or the narrow conditions to credit access, • marketing-exclusion where the so called "marginal" individuals are considered a low added value to the financial mediators according to the traditional values of customer valuation.
FIG.4: TIME SERIES OF THE NUMBER OF MICROLOANS
FIG.5: TIME SERIES OF VOLUMES OF MICRO LENDING
The progressive involvement of the financially excluded individuals due to the last three points above described, demonstrates a major complexity within the financial architecture and more involvement on behalf of the banks from the traditional schemes of microcredit. This trend should guide the institutions of national microfinance to focus their attention towards specific targets or individuals (in particular the immigrants) and develop synergistic efforts with the cooperative credit system which similarly work with the same principles and values. When looking at the features of areas of specialisation (shown Fig.2) and customer targeting, it emerges that microcredit is addressed still today to a specific target, difficult to be tracked by the classic finance system. The last interesting characteristic investigated through the field analysis is the development of the phenomenon in Italy in terms of volumes and number of operations. The statistical analysis of the data determined by graphic equalization (Pellicciari and Tinti, 1998), that the evolution of the phenomenon is similar to an exponential function like. Its performance shows a peak since 2006, putting more emphasis on the volume variable (see Fig.4 and Fig. 5). In the central phase of the investigated time frame (between 2002-2005), it comes out that microcredit projects have progressively strengthened and consolidated, increasing by number of loans as well as by intermediate volumes despite a lower growth of the same ones (the relative strength of growth in absolute values is smooth compared to the points highlighted by the weighted average). Since 2006 the number of initiatives, loans and traded volumes has increased dramatically. As for economic returns microcredit offers reasonable areas of intervention. Currently the applied interest rates include: • between a minimum of 2.5% to a maximum of 12% for microcredit to business, despite there is more attenuation around the median distribution values (the average rate is 6.3% against a variable -standard deviation equal to 3.3), • between 2.5 and 6% in case of emergency microcredit against an average rate equals to 4,4% and the variable equal to 1.29. The cost of funding cannot be found to be appropriate to the high degree of risk assumed by the category of
borrowers discussed in this paper. This is because of the use of agreements between three parties aimed to reduce the exposure of the lenders by introducing adequate warranty funds, which positively influence the credit recovery rate. Hence the introduction of specific safeguards, reduces the rate of loss in case of default, improves the degree of risk exposure of the borrower and lowers the cost of financing11. Generally speaking the individuals partaking in a microcredit project are: • promoting organizations, whose work is to identify potential customers and start up/manage the lending projects, • public or private bodies of high social orientation, that release unbanked warranty funds of level II (often of rotative nature), which are useful once reimbursement cannot take place, • partner banks that review practices and operate the loan and are the only counterparties to the debtors because they are the only authorized brokers to the lending activity. The presence of third structures, overlooking the stages of screening and monitoring of the relationship of trust, also becomes a fundamental element in order to reduce the friction components in the provision of loans (properly highlighted in the position paper work and in order to facilitate the financial intermediation, which would otherwise be impossible. Management schemes of this nature should be activated in the case of structured products offered by microcredit BCC. The location on site and, therefore, the territorial proximity of the bank to potential small entrepreneurs could reduce (but not zero) the distances in the operation of the logical-functional new product financing. The microcredit organisation, as discussed in greater detail below, operate at a strong social level through their own players (usually belonging to voluntary welfare associations located in public or private clinics throughout the areas). To develop this into a banking product and business opportunity in the eyes of the credit intermediaries, it is necessary to shape it into the mentality of privatisation. In summary, therefore, the intensity and speed of growth of the phenomenon, the attractive rates of financing and the significant community resources to support the development of micro-credit are the economic and financial conditions to support a more stable supply of microcredit on behalf of commercial banks and, specifically, the BCC.
4. Similarity Between the Italian Project and Grameen Model and Comparisons Between the Different Operating Experiences The second part of the work aimed to measure the degree of connection between the Grameen experience and achievements in Italy, has also investigated the degree of uniformity in the bureaucratic and administrative path adopted to initiate loans among the different projects in Italy. At the question “are there common elements between your initiatives and the inspiring values beneath the work of Grameen bank?”, 85% of the organizations sampled responded positively. There seems to be therefore a high appreciation of the initiative that has brought worldwide attention to the existence of micro-credit, re-vamping techniques and tools, as demonstrated in previous work, that have characterized the history of European cooperation credit. It was also investigated which of the elements of the paradigm Grameen characterize more significant initiatives undertaken so far in Italy, the Fig.6 shows, in descending order of importance, these aspects. The first main characteristic of microcredit in Italy is the addressed market (non-bankable) which, as noted, is the essence of many initiatives for the benefit of the weakest. The strength and consistency of the findings of this research leads to the conclusion that in Italy there is a vulnerable area of the population which would not have access to credit, due to the absence of self supporting initiatives hence the inability of the traditional banking system to identify and capture it. These are followed in order of relevance by the principles of compulsory repayment, the elimination of loan guarantees and containment of the amount of the instalments. These elements, although essential, are of lesser importance compared to the features of the Grameen experience due to the fact that: • mandatory reimbursement characterizes also any other lending activities, • the elimination of loan guarantees is often only replaced by the above-mentioned revolving fund made available by organizations of collective interest in case of repayment difficulties by the microcredit users, • containment of the amounts of the instalments is a technique also used by commercial banks to facilitate the debtor in the regular loan repayments stretching the payback deadline.
FIG.6: DISTINGUISHABLE FEATURES BETWEEN MICROCREDIT IN ITALY AND THE GRAMEEN EXPERIENCE
The distinguishing features that characterize the unique mission of Professor Yunus in Bangladesh are reflected in a minimal number of current experiences in Italy (coloured differently in Fig.6). Currently, some initiatives (very few and of most recent institution) use the community of origin as an instrument of social enforcement at the start of the loans (requesting a letter of moral guarantee) as well as during the monitoring (accompaniment led to reimbursement) by the head of them (usually the pastor of the parishes belonging to the Italian people or the spiritual leaders of different religious communities or representatives of immigrant communities in the case of foreigners). Even less important are the elements for the establishment of group lending and the nature of the relationship between bottom-up micro-credit institutions and customers. According to the largest number of workers, the difficulties related to the first aspect can be traced back to poor cohesion of the social relationships between people in Italy (or more generally in Western countries) and the consequent reduction of trust and mutual respect amongst Italian people (principle that distinguishes between the so-called active poor in developing countries). The difficulties related to the second aspect are connected to the scarcity of resources available to the operators (both economically and of staff availability). Often these start working towards the loan admission procedures too late, which creates reimbursement difficulties and the lender becomes insolvent. The distinction between microfinance and the traditional banking system in Italy when it comes to offering loans to individuals (individual firms) lies on the approach to the issue of the failure to repay and the specific borrowers and micro-organisation meet to identify the causes that led to non-payment and seek ways to overcome the problem via social and operational approaches, recurring to the forced return of the loan as an extreme remedy. With regard to the degree of uniformity of the initiatives, the analysis reveals that all projects are following a standard operational guideline however adapted to the peculiarity of each single case As noted above, the microcredit organization is distinguished by the presence of three subjects: 1. an external body to the financial intermediary (bank): (usually counselling centres, departments for social policies, foundations, associations, non-profit organization) with a co-ordinating responsibility, which starts up the procedure of microcredit, prepares the additional guarantee and monitors the effective repayment of the loan, 2. the financing bank, which expresses the opinion of creditworthiness, and carries out the administrative and bureaucratic procedure at the beginning of the (credit) relationship and during its duration,
3. a guaranteeing body that, when not involved as a third party, is committed to secure the loan by acting with a specific allocation of resources in case of failure.
FIG.7: MEDIA AND THE COMMUNICATION OF MICROCREDIT PROJECTS
A clear exception to the above mentioned structure arises when a financial intermediary intervenes (mainly a Mag), in which case the whole activity is managed by its operators and, in extreme cases, only the activity of customer identification is given to the counselling centres. In some cases, and similarly to what happens in the case of Grameen Bank, the coordinating structure does: • before or alongside the provision of funding, provide training and education to access the credit to future borrowers, • in case of rejection of funding by the financial intermediary carry out activities of individual support to overcome weaknesses. Despite being a financial product in its essence, microcredit (as it facilitates the transfer of funds by persons in surplus to those in deficit), is most of all a social tool to assist; the emergence from poverty and personal depression, lack of liquidity originating from the development of small businesses, satisfaction of basic needs related to housing, work or family. We investigated on the communication channels used to promote or reinforce new initiatives, amongst the potential customers. In descending order of importance the commercial channel currently used are the voluntary associations and business services addressed to those in need of help, followed by word of mouth and participation in local markets, festivals and multicultural events. As for the promotional channels, the main attention is given to the press (third channel ), followed by internet, various publications and radio and finally mailing list. The last two, being most costly, are used by organizations (financial intermediaries) that deal with bigger volumes.
5. Microcredit For the Immigrants and the Cooperative System The last two points of our research focussed on understanding if microcredit organisations view microcredit as a standard product offered to immigrants (potential demand) by the cooperative credit system (the potential offer). We asked microcredit organizations if the national banking system has any knowledge of microcredit in its operations, and if not how to justify the need of it existence. When asked “in your personal experience have you ever noticed banking systems that approach a microcredit mentality?”, 36.84% of the sampled population replied yes, 57.89% no and 5.26% do not know. Reasons given for positive responses are related to the presence of:
• Banca Etica (ethical bank) in the national banking scene is, according to many, the only bank close to the logic of micro-credit, • the classic banks that, are locally committed to the success of these initiatives. Relevant aspect to the research is that almost all relationships have been closely connected with the BCC. Operators who have considered the national banks as “close” to micro-credit banking experiences have acknowledged that in the long term, the interest of banks towards microcredit may decrease because of poor guarantee on economic returns and because of the high operating costs to assist the clients and for these reasons they have considered microcredit as an “unsustainable product” when not supported by public assistance funds (although this is at odds with the logic Grameen). Another interesting idea is to be found operating in the “confidi” (trust credits) as a link between the national banking system and micro-credit. The reasons which led the largest share of sampled population to respond negatively to the above question are of course related to the recipients of micro-credit, or the non-bankable, which are not because considered a greater risk, instead because of their inability to provide adequate effective or personal guarantees, hence the need for constant mentoring during the entire duration of the loan (a process which increases costs and decreases the product profitability). The degree of closeness, then, between the traditional micro-credit and credit is, in the opinion of the operators, discriminated by the number and quality of guarantees offered to support loans; therefore to improve the degree of bankability the presence of a third subject with the principal task of guaranteeing the loans (as usually happens, however, already today) seems a necessary step. In terms of cost, what affects the cumbersome operation of generation of a microcredit is the definition of a "trustworthiness" process based on subjective prerequisites which, however, should be uniquely detectable by different operators of front-office. The standardization of the procedure and the identification of specific tasks to be undertaken by stakeholders, both in start-up phase of the relationship as well as during its duration, lead to useful economies of scale, economies of learning and act to consolidate the competitive advantages (Porter, 1999), which together with a diversified customer base (both in favour of retail and small corporate banks) should reduce the risks from micro-credit (Vikram, 2008). Getting into the heart of the inquiry and examining the nature of the responses to the question “Do immigrants, in your opinion, constitute a privileged target to devote more attention?”, there is a substantial equity between positive and negative responses. To facilitate the reading of the data we built a map showing the relations between the nature of the subject and the result of the response. This shows that within the categories “foundations” and “public bodies” there is an even bipartition between subjects whose privileged target for microcredit operations are the immigrants and subjects with no privileged targets and who think microcredit should be considered an instrument of social emancipation, i.e. for all those who find themselves in difficult situations. Of particular interest are institutions as non-profit organizations and onlus that see immigrants as the prime target customers in a bid to address micro-credit, in contrast with the MAG which disagrees with it. Deepening the analysis, the reasons that have led the operators to see immigrants as a specific microcredit target, include: • the strong connection between social integration and credit. Immigrants need access to resources at the arrival in the host country and at a time of family reunion; during the stages the probability of integration increases with the trustworthiness given by their funding agencies (usually specific projects by the municipal social services), • a critical analysis of the current law (primarily the Bossi-Fini law), according to which the issue of a visa to live in the country relies on the duration of the employment contract. This is often part time and is linked to temporal patterns of mobility which are difficult to reconcile with the need for stability on behalf of the immigrants. This is where microcredit can help to overcome the instability problems and, more specifically, offer the opportunity of a self-starting business to immigrants; • the presence of stable and well-established networks of relationships between members of specific ethnic groups or religions, which may allow the development of warranty institutions and able to ensure the smooth return of funds through the adoption of principles of social enforcement.
FIG.8: RELATIONAL MAP RESULT TO THE QUESTIONNAIRE (IMMIGRANTS AS A PRIVILEGED TARGET)
The last step is to understand the attitude of the operators to consider BCC (within the banking context) as intermediaries to implement new micro-credit projects and / or developing existing ones. The responses indicate a clear preponderance (73.68%) in favour of it. That statement means that the current operators of national microcredit are positive about the principles, objectives and achievements of the credit cooperation system in Italy (see Fig.9). This confirms the assumptions underlying the entire work and is demonstrated by the convergence of theoretical inspirations (identified by a critical analysis of scientific literature on the subject) and operational reality (that of micro-credit organizations in fact).
FIG.9: PERCENTAGE DISTRIBUTION OF INDIVIDUALS WHO CONSIDER BCC AS THE LEGITIMATE SUPPLIER OF MICROCREDIT
The recommendations can be summarized as follows: BCC could operate with the mentality and goals in line with the specific needs of applicants, in order to develop strong and positive micro-credit initiatives, working more effectively at proposal stage and with a greater presence in the network area (currently not fully covered by the structures of ethical finance). The nature of their work being inspired by principles of mutual aid, cooperatives and local authorities (at least on paper). Being banks as such they could then implement a standardized process to identify more beneficiaries, spread the risks and reduce costs.
Particular emphasis needs to be given to the answers offered by two operators who already work in concert with two different BCC and have affected the experience of the national microcredit positively. Specifically, we refer to the experience of ‘Fondo Essere’(provision of social welfare) operating microcredit to the family and to cases of emergency, and Micro.bo, an ONLUS association founded to promote, knowledge and practice of microfinance in Bologna and its province (Quarta, Stefanizzi, 2008). From both responses it can be concluded that the partnership with the BCC give positive results both in economic and social terms to all the parties involved in the micro-credit relationship, in fact they are considered as best practice. The first representative of the organization has specifically stated that “l’esperienza del rapporto con la Banca del Chianti Fiorentino (appartenente al circuito BCC) dimostra che è possibile coniugare le forme di tutela del sistema bancario con gli intenti solidaristici e di attenzione ai “non bancabili” del fondo di aiuto sociale Essere”. The representative of the second expressed the following: “l’esperienza di Micro.Bo è sicuramente un esempio in questo senso, infatti le banche che sin dall’inizio si sono dimostrate disponibili a collaborare con l’associazione sono due banche di credito cooperativo. Inoltre tali banche sono caratterizzate da un forte legame col territorio (caratteristica molto importante per il microcredito) e perseguono valori molto simili a quelli sottesi al microcredito stesso”.
6. Conclusions The research showed that micro-credit in Italy is a rather recent phenomenon and is strictly related to the work of the Grameen Bank which aroused interest in the whole international arena . Moreover 2005 was recognized as the Year for International Microcredit . The establishment of RITMI, an association with great partnership potential in the cooperative credit system is growing in popularity and impact. This could increase the possibility to create a financial product with a high standardization that could be offered to a wider audience of unbanked individuals. There seems to be a positive relationship between MFI and public institutions, financial intermediaries and customers. Currently the target is very specific and initiatives are divided into specific area sectors. Since the turn of the century the phenomenon has evolved both in terms of number and volume of loans brokered. Its growth is similar to an exponential function, so the annual growth rates are very high. While most of the initiatives were inspired by the work of Prof. Yunus, the principles that characterize most of the Grameen bank model have exerted little influence on the national operators. This is due to the breakdown of social relations typical of all developed countries and the scarcity of resources (both economic and personal) available to organizations. Consequently, the basis of the distinction between micro-credit and traditional banking lending has been found in the approach to the problem of inability to repay: basically the loaners communicate with the micro credit organizations in order to identify the causes that led to non-repayment and seek social and operational ways to overcome these, recurring to the forced return of the loan only as an extreme solution. As a promotional channel the national microcredit organizations use regional / social associations and word of mouth as main communication tools. According to businesses and onlus organizations the immigrants represent a potential future target of micro-credit operations, whilst Mag have the opposite view. Finally, microcredit operators have given high recognition to the BCC to act as intermediaries within the banking context since they demonstrated to be highly capable to embrace the principles and pursue the goals of microcredit, thanks mainly to the positive experiences that can be regarded as best practice.
References [1] Anfosso F. (2004), Il microcredito come strumento di poverty alleviation. Economia, impresa e mercati finanziari, 1, 65-101. [2] Baccini M. (2005), La via italiana alla microfinanza, Bancaria, 61, 10. [3] Borgomeo C. & Co. (2005), 1° Rapporto sul microcredito in Italia, Rubbettino, Soveria Mannelli (CZ). [4] Borgomeo C. & Co. (2007), 3° Rapporto sul microcredito in Italia, Rubbettino, Soveria Mannelli (CZ). [5] Brunori L. (2005), La rivoluzione del microcredito: dai paesi poveri ai paesi economicamente sviluppati, Autonomie locali e servizi sociali, 28- 3, 429-440.
[6] Ceccarelli P. (2007), Il migrant banking, Mercati e Competitività, 4, 159-176. [7] Coco C. (2005), Microcredito e Banche di credito cooperativo: un connubio naturale, Dirigenza bancaria, 113,3. [8] De Bernardo V., Pezone L. (2008), Il (micro)credito: capitale e lavoro per i meritevoli. Sperimentazioni e speranze di “business sociale”, Unione Industriali di Napoli - Fondazione Mezzogiorno Europa, Napoli. [9] Dunford C. (2003), The holy grail of microfinance:’helping the poor’ and ‘sustainable’?, Harper M., Microfinance. Evolution, achievements and challenges, ITDG, Publishing, London. [10] Eurispes (2007), Il microcredito contro le nuove povertà, Percorsi di ricerca nella società italiana, 19° Rapporto Italia, 19, 161-176. [11] Galvani A. (2005), Il microcredito contro la povertà, Bollettino della Società geografica italiana, 10- 2, 375-87. [12] Golinelli G.M. (2000-2002), L’approccio sistemico al governo dell’impresa, Cedam, Padova. [13] Goria A., Massetti E., Tavoni M. (2006), Microfinanza contro la povertà, Equilibri, 10-1, 141-154. [14] Innocenti R., Ortolani M.M., Rizzitiello M. (2007), La valutazione della clientela marginale nel microcredito Il modello di Microcredito di Solidarietà S.p.A., Dirigenza bancaria, 31-123, 12-17 [15] La Torre M., Vento G.A. (2005), Per una nuova microfinanza: il ruolo delle banche, Bancaria, 61-2, 68-84. Contact author for the list of references
End notes 1
Other studies have been carried out in Italy, but just at a general level, since no specific topics have been discussed on this. See “Microcredito in Italia: la situazione in Italia e prospettive future”, IV International workshop of Ethical Finance, research carried out by Metamorfosi together with Lunaria e Associazione Finanza Etica (from which we found only an tiny excerpt on the internet: http://equonomia.it/articolo.asparticolo_codice=50). 2 The paper on Microcredit, written by Borgomeo C. & Co and edited by Rubettino, reports that since 31/12/2003 103 programs have been surveyed, 77 of which are taking place. While gathering the statistic data, many of these have been grouped according to the organizational body, as it occurred for example to the Ethical Bank, various Mag, Fondazione Compagnia San Paolo Torino, Regione Lazio, etc. 3 Given a real scarcity of initiatives (both in terms of numbers and in terms of volumes), the difficulty to define “micro-credit initiative” and the complex work of collecting these data, the collective statistical corpus, constructed during the research, cannot be considered fully comprehensive. 4 In this case presenting the following limitations: abundance of the universe explored, little consideration given to the importance of statistical studies of persons belonging to different organizations, varied nature of the actors. 5 Caritas Reggiana, Comune di Torino, Comune di Venezia, ECIPAR Emilia Romagna, Fidi Toscana, Fondazione La casa, Fondazione Lucana Antiusura M. V. Cavalla, Fondazione San Carlo, Fondazione Toscana, Fondo essere Quartiere 4 – Firenze, Mag 2 – Finance, Mag 4 Torino, Mag 6 - Emilia Romagna, Mag Roma, Mag Verona, Micro.bo, Microcredito di solidarietà, PerMicro. 6 In Italy, ethical finance focussed on so called unbanked found hitherto valid national operators in Banca Etica (which is not included in the sample considered, although it's response has been requested several times) and PerMicro. 7 MAG initiatives deal to raise money from shareholders in the form of social capital for economic self-managed fund initiatives providing opportunities for ethical and mutual funds, providing loans with interest rates favourable conditions return. An important objective is transparency in the internal management. Social participation is functional to people and not to the capital invested, for which every member has the right to vote and can participate in regular meetings as the meetings of the council. Often working in the cultural field also sponsoring and hosting of a socio-cultural projects at the local level. For more info, see the websites: http://www.mag2.it/chi.htm, http://www.magvenezia.it. 8 RITMI has recorded the different organizations into the following standard categories: financial intermediary, trust, no profit and public entities. 9 In this study we thought it was useful to consider “emergency credit” as a product offered by some organizations to address problems related to the loan shark practices. Although this problem often arises from financial difficulties
of enterprises, the aim has been to support the individual rather than the company that he himself directed. 10 The internet website on the above mentioned financial support acivities: http://www.eif.org/jeremie and http://www.eif.org/attachments/about/JASMINE/JASMINE%20Flysheet.pdf. 11 In a nutshell credit risk is influenced by two components: the expected loss and unexpected loss, the latter resulting from the multiplication of EAD, PD and LGD (loss expected LGD = EAD * PD *), where EAD is the credit vulnerability at the time of insolvency, PD the probability of default, LGD rate of loss given default (equal to 1-RR, where RR stands for rate-recovery of the debt in default, positively influenced , as stated in the text, by the presence of guarantees).