Because microcredit and crowdfunding foster financial inclusion
How alternative credit mechanisms foster financial and social inclusiveness
The ongoing financial crisis we are experiencing shows no sign of stopping and the phenomenon of financial exclusion , which affects both private citizens and businesses that want to start new business projects, risks irreversibly blocking the development of the entire economy.
To contain this phenomenon, suitable tools are needed to support the weakest social categories of the population, which are those most affected by the financial crisis.
In this regard, as we will explain to you in this new blog article, microcredit and crowdfunding can be powerful weapons to defeat social and financial exclusion in a country.
Financial inclusion has a significant impact on economic development, as it favors the increase in consumption by private citizens and encourages the growth of small and medium-sized enterprises which, as everyone knows, constitute the beating heart of the real economy .
However, access to credit for these entrepreneurial subjects is not at all easy. In most cases, in fact, we find ourselves in the presence of “budding companies”, with a poor credit history, whose reliability and financial credibility is difficult to recognize. Or, it may happen that an applicant presents himself to the credit institution without solid collateral to protect the bank from any insolvency.
For these reasons it is useful to become aware of the existence of new forms of credit , which are developing above all on the web, and how they can stem the phenomenon of social exclusion that will continue to grow in the near future.
What is microcredit and its benefits
Micro-credit is an alternative credit instrument to traditional forms of financing , designed mainly to tackle the fight against poverty in developing countries. Subsequently, this new credit mechanism was also adopted by the most industrially advanced countries, above all to face the financial crises that weakened the economy.
Every country has microcredit rule and some of them are open too public knowledge.the most interesting is microcredit rules in Italy.
The microcredit rules in Italy were introduced with legislative decree no.141 of 13 August 2010, which subsequently amended the provisions contained in articles 111 and 113 of the Consolidated Law on Banking, reworking their conceptual definition and characteristics.
Specifically, in article 111 two forms of microcredit are mentioned: themicro -entrepreneurship and social micro -credit , for which maximum amounts of 25,000 euros and 10,000 euros respectively can be donated. Secondly, the same article specifies the beneficiaries and the lending operators, or qualified intermediaries, registered in a specific list provided for by law. On the other hand, article 113 expresses the supervisory mechanisms on the work of the creditors.
The benefits of microcredit are manifold for the community and for loan applicants.
The difficulty of accessing credit can be very dangerous in a society, as it has been amply demonstrated that this condition favors the use of usury that pushes individuals to obtain credit illegally. Consequently, microcredit, and therefore the promotion of financially inclusive activities, produces a significant decrease in these criminal activities .
Last but not least, micro-credit favors the reduction of the unemployment phenomenon , which by far affects the weakest sections of the population, while at the same time encouraging self- employment .
In fact, thanks to microcredit, new productive realities can arise that otherwise would have been excluded from any market logic, because they are considered unreliable from a credit point of view and too small to be able to make their way.
Crowdfunding and micro-credit between financial inclusion and attractive earnings for investors
Thanks to the sharing economy ( collaborative economy ) the credit sector is becoming increasingly accessible, transparent and responsible towards private citizens.
Recent technological developments have produced new and disruptive changes in the financial sector of which crowdfunding represents a channel that has achieved particularly positive results.
Crowdfunding, in fact, has succeeded thanks to the web to positively intercept the new needs of the community , largely satisfying different objectives of social and financial inclusion of our country.
Among the different forms of crowdfunding, the one that deserves more consideration is thepeer-to-peer lending. In Italy, this innovative credit mechanism, which consists of loans between individuals, has been very successful especially in the real estate sector, as it has allowed many real estate operators to obtain loans without necessarily resorting to the banking channel.
In fact, the banks are replaced by a plurality of investors , who freely donate a share in favor of the projects presented on the platform, earning interesting profits on the capital lent in addition to its repayment.
The results on some real estate lending crowdfunding platform they recorded positive performances that exceeded expectations. Thanks to the skill of the operators, who closed the property sales activities early, the parameterization of the percentage of interest on an annual basis was consequently raised.
However, it should be pointed out that crowdfunding and microcredit are not the same thing and that crowdfunding can be defined as an alternative form of microcredit that uses digital technology to finance citizens and businesses.
In the current financial context, it is evident that digital is playing a central role in the development of new business also thanks to crowdfunding, which is once again confirmed as an excellent means of promoting financial and social inclusion .
