Summary country report France

This report is written in the general context of discussion concerning the availability of social credit in France. In the course of the past ten years, this type of credit has developed enormously in response to what has become known as "community disinvestment". Our objective is to demonstrate how social credit structures today can succeed in making credit products available to socially excluded people within the constraints of the legislative framework of French banking.

In practice, banks have a monopoly over credit provision and deposit-taking in France. Those activities are accordingly closely supervised by the banking regulators, which control access to the profession and the introduction of the regulations which govern it. They also scrutinise the health of credit institutions because of the risk at which any failure on the part of such institutions would place depositors and the general financing of the economy.

In France there are a number of types of credit institution recognised by the Banque de France. They include institutions which have the benefit of a full licence (banks), those which enjoy limited accreditation (finance companies); the latter may not take deposits for periods of less than two years and they require less capital. Finally, they include specialist financial institutions, and this status is confined to institutions designated by the State for specific purposes.

The Nouvelle Economie Fraternelle (New Fraternal Economy - NEF) and the solidarity fund of the Nord Pas de Calais region are two examples of structures which grant social credit within the statutory banking framework. These two organisations are co-operative societies of variable capital, which have adopted the status of finance company. Among the most significant restrictions placed upon them are their operating ratio and the limits on their ability to take deposits.

Certain banking institutions with a specialist function play, or may be persuaded to play, a role in the development of social credit in France. An example is the Caisse de Dépôts et Consignation (the Deposit and Consignment Office), which is involved in the financing of numerous social credit organisations outside the banking framework; another example is the Caisses d'épargne et de prévoyance (savings and provident banks) who were allocated a public interest mission in 1999 to "combat banking and financial exclusion".

Nevertheless, most steps taken to further social credit have been taken outside the banking framework. Indeed, banking law envisages a dispensation in the context of Article 11 for non-profit organisations. This is where ADIE has its role. Other structures, such as the platforms created by local initiatives, are founded upon Article 3, which authorises the grant of "small loans".

The most difficult area for organisations operating outside the banking framework remains the acquisition of capital funds and operating finance. The costs involved in the grant of small loans are high and receipts generated by interest payments do not cover the costs. Running costs could only conceivably be met by economies of scale. As far as capital resources are concerned, loans can only be financed from own funds, thus limiting the volume of loans made. The funds used are ordinarily public funds either converted into loans or enabling a guarantee fund to be created, thus facilitating access to the banking sector. A proposed amendment of banking law allowing micro-credit organisations to borrow directly from the banking system is currently under discussion. These organisations would then be able to borrow in order to lend, which is not the case under current banking law provisions.

The State also intervenes in the context of support for social credit through SOFARIS, the EDEN device or the PCE. Through these initiatives, the State is attempting both to maintain programmes which support enterprise creation and to encourage the banking sector to become involved in financing very small enterprises.

Whether within the traditional banking framework or in the community sector, whether in the context of a State-operated mechanism or a private initiative, there has been a noticeable growth of organisations providing social credit over the past decade.

Two possible scenarios now emerge: on the one hand, the development of structures promoting credit provision through the banks, with a view to greater involvement on the part of traditional banks in financing micro-enterprises; on the other hand, the recognition of a specific status for micro-credit organisations with special status within the banking sector.