The personal microcredit
I recently met, during the last green drinks event, two very nice people that were working for the Red Cross, in the Microcredit Service. What is different comparing to micro loans, is that the credits are not necessary granted for entrepreneurship purposes. As explained on the red cross site, these microcredits have 3 main goals :
- allowing people who are excluded from the banking system to finance their personal projects in good conditions
- starting a social insertion and improving the status of the applicants and their self-confidence
- rebuilding cooperation between the banks and the applicants with fragile situation
The personal project remaining a vague concept, microcredits can be used for several purposes: buying a motorbike, a TV, medicine… with a ceiling amount of 3000 euros. Which can also bring many embarrassing and extreme situations: is it worthy to help an alcoholic obtaining a microcredit while he is spending all his money on beers? Can we consider financing a TV as a helpful action with positive social impacts?
Of course, each case haa his own specificities (“Yes a TV can be considered as a positive good when the applicant is staying in a very remote village”) and I personally trust the Red Cross in the allocation of its actions and the funds of its partners. However, in my opinion, complete “financial coaching” should be automatically offered with these microcredits. Applicants should be taught how to become financially disciplined, how to track their expenses, how to pay themselves first ( saving money even if they are still in debt), how to set up their emergency fund etc…
Some situations are very complex but when a 50 year old man could not save 500 euros over his career, one can see an obvious problem in his personal financial practices that should be fixed as soon as possible.
Personal finance seminars and classes are very common in the US but I have seen none in France. This link can be a good start.