MICROCREDITO

Eng. Fabio Manenti has been registered since 2017 and under No. 214 on the list of Tutors “Territorial Operators in Auxiliary and Monitoring Services for Microcredit” at the National Microcredit Board based in Rome, as well as, since 2021, on the mandatory national list of “Operators in Non-financial Auxiliary and Monitoring Services for Microcredit.”

Microcredit is a form of assisted financing that provides access to credit to so-called non-bankable individuals, i.e., those who have difficulty turning to normal financial institutions, as they cannot provide the required collateral. Based on the definition provided by Article 111 of the TUB, Microcredit takes on a dual configuration:

SOCIAL MICROCREDIT

To support individuals in temporary economic or social vulnerability who are unable to provide the necessary collateral for loan repayment.

Refers to products and services useful in the fight against poverty and social exclusion, interventions that aim: 

I. to offer concrete solutions to individuals and families who are in a situation of temporary economic difficulty, through the granting of a small loan; 

II. to spread the culture of empowerment by moving, wherever possible, from the logic of a grant to the concept of a “loan.” 

Features:

  • maximum amount of 10,000.00 euros, 
  • not backed by collateral, 
  • accompanied by the provision of auxiliary family budgeting services, 
  • have the purpose of enabling the social and financial inclusion of the beneficiary, 
  • are lent on terms more favorable than those prevailing on the market.

MICROCREDIT FOR BUSINESSES

For the consolidation of self-entrepreneurship and development of local economic activities.

Refers to useful products and services to foster people’s right to economic initiative. It aims to create a virtuous mechanism for microentrepreneurs to generate income and become economically self-sufficient:

I. For this objective to be realized, it is necessary to adopt a rigorous selective process aimed at verifying the professional reliability of applicants and the technical, economic and financial validity and consistency of the activity and/or project for which financing is requested: a reliable personal guarantee instead of a collateral.

II. It is not the people’s past that matters-the ex post profitability of one’s already operating business and/or the collateral that the potential borrower is able to give (criteria that often greatly condition the behavior of ordinary banks)-but the sustainability and effectiveness of the project presented for financing.

Features

    • Microcredit loans are backed by the public guarantee of the SME Guarantee Fund for 80% of the financed amount.
    • It is possible that banking institutions may require additional guarantees with respect to the part not covered by the public guarantee (maximum then equal to 20% of the financed amount).
    • The aforementioned guarantees may only be personal and not collateral under Article 111 of the T.U.B.
      • to reduce the information asymmetries suffered by the ordinary bank, since it has a way of getting to know the customer, his life, his work, his family, his environment;
      • it succeeds in creating a climate of mutual trust between institution and customer, which allows the quality of the financial product to be improved. 

Purpose of funding

  • Purchase of goods (including raw materials necessary for the production of goods or services and goods for sale) and services related to the business;
  • payment of salaries of new employees or partner workers;
  • incurrence of costs for business training courses;
  • aimed at starting or developing business ventures or entering the labor market;
  • accompanied by the provision of ancillary services for assistance and monitoring of financed subjects.

The funding’s Features

  • Fixed-rate unsecured mortgage;
  • maximum duration 84 months including maximum 12 months of pre-amortization;
  • amount not exceeding euro 40,000.00 (raised through the Ristori Decree of 18/12/2020). The limit can be increased by euro 10,000.00 if the loan agreement provides for fractional disbursement by making subsequent payments subject to the following conditions:
  • (a) the timely payment of at least the last six past installments;
  • (b) the development of the financed project, attested by the achievement of intermediate results established by the contract and verified by the Bank;
  • public guarantee of the National Guarantee Fund managed by Medio Credito Centrale SPA, the Bank may apply for additional personal guarantees (not collateral) only with respect to the part not covered by the public guarantee.

Evoluzione Regulatory developments in microcredit

  • Law No. 234 of December 30, 2021 (Budget Law for the year 2022): Article 1, Paragraph 914 makes the following amendments to Article 111 of the Consolidated Text of Legislative Decree No. 385 of September 1, 1993:
  • the maximum amount that can be financed with microcredit is increased from €40,000 to €75,000;
  • only those registered on the list provided for in Article 111 TUB, i.e. microcredit operators, will also be able to provide financing to LLCs,
    • In addition, loans provided by 111 to LLCs may have a maximum amount of 100,000 euros;
  • duration of amortization is extended to 15 years, compared to the current seven (Art. 4, paragraph 4 DM 176/2014);
    the dimensional requirements in Art. 1, para. 2(d) of DM 176/2014, regarding revenues, debt level and assets, have been eliminated.
  • NB: The above regulatory amendment is not yet enforceable.

TUTORING AND SUPPORT SERVICES

Auxiliary services of assistance and monitoring as provided for under Article 111, Paragraph 1 of Legislative Decree 385/93 (T.U.B.) and Article 3 of Ministerial Decree No. 176/2014 must be carried out by individual microcredit operators in accordance with the Guidelines for the Provision of Auxiliary Services contained in the guidelines published by ENM for inclusion in the national list and through the information technology tools that will be made available to the institution.

In carrying out their activities, operators in auxiliary services are required to ensure a comprehensive relationship with local communities, as well as an understanding of the evolution of their socio-economic needs and their difficulties in accessing credit.

Support and monitoring services are to be carried out by Tutors towards the applicant both in the pre-credit disbursement phase and in the post-credit disbursement period. 

Specifically, the following services are to be provided in the pre-disbursement phase:

  • support in defining the strategy for the development of the business project and analysis of solutions for the improvement of the conduct of business;
  •  support in the identification and diagnosis of any critical issues in the funded project.

The following services could be provided in the post-delivery phase:

  • guidance to possible solutions in order to prevent any critical issues of the enterprise;
  • support to the definition of the business idea in order to verify the economic and financial sustainability.

In the period before the microcredit disbursement and in the period after, the mentor may offer:

  • support in solving legal, tax and administrative problems and information about related services available in the market;
  • support in setting prices and sales strategies, including conducting market studies;
  • training in the techniques of business administration, from the point of view of accounting management, financial management, personnel management;
  • training in the use of the most advanced technologies to raise the productivity of the business.

It is the obligation of microcredit providers to guarantee in favor of the beneficiary throughout the amortization period of the individual loan granted:

  • appropriate monitoring activities;
  • detailed progress report on the activities carried out and the results achieved by the funded entity.

The service provision activities of the territorial operators, will be monitored by the Authority, in order to assess their impact on the success of microcredit operations assisted by them. 

In the repayment phase, monitoring services will have to be provided in the first three years of amortization, while in the further years, in the absence of reported critical issues, the tutor may be limited to sending quality and social impact measurement questionnaires to the financed micro-entrepreneurs.

IF YOU ARE INTERESTED IN APPLYING FOR A MICRO-CREDIT FOR BUSINESS AND WOULD LIKE MORE INFORMATION, PLEASE CONTACT US!