This is a CTP of initiative: FEBEA/Credal (Belgium)
This critical turning point relates to the pioneer microcredit project launched by Crédal in 1994, becoming the first financial institution offering this innovative loan product in Belgium. Crédal credit cooperative was founded in 1984 aiming to collect savings for funding associations that promote social justice. Initially, only associations could benefit from the credits offered by the cooperative but, in 1994, the cooperative launched a new type of loan -called microcredits- which were intended for those entrepreneurs with difficulty gaining access to credit in regular banks.
In October 1994, the cooperative´s Board of Directors approved to launch a pilot project in support of microenterprise creation and self-employment. Crédal targets unemployed people who find it difficult to integrate into the labour force but which have assets such as entrepreneurship and a desire for creating their own job. As a result, the foundations for the Crédal's professional microcredit were laid.
In the early 2000s, microcredits were not very popular in Belgium but Crédal proved that these small loans could be an effective tool against social exclusion in Wallonia and Brussels when professional counselling was included in the service. Based on the experience gained during the experimental phase, Crédal relaunched this project in 2000 (under the name of “MC²”) which allowed independent professionals (entrepreneurs) with difficult access to bank credit to find the financing needed to start or develop their professional activity.
Counselling services were offered free of charge by Crédal to its professional customers. To guarantee the advisory services are provided, Crédal collaborates with volunteers, giving them specific training. In the following years, Crédal reinforced the microcredit services with specific programs such as the “Affaires de femmes, femmes d’affaires”, aimed at the promotion of women's entrepreneurship.
More recently, Crédal adapted its microcredit service to new social demands. In 2002, together with the Walloon Regional Authorities, Crédal created the denominated personal microcredit. This type of loan was intended for people who had no access to bank credit and who wanted to purchase a useful and necessary good (i.e. the «realization of a life project or the acquisition of a durable good which is necessary for the improvement of the daily well-being).
According to the respondent, the microcredit program constituted a critical turning point for several reasons. First, inspired by previous microcredit experiences, such as the Yunus’s Grameen Bank, "Crédal was the pioneer institution in launching these services in Belgium" and microcredit permitted credal "to extend the range of financial services offered until then, also reaching a wider public". Due to this pioneering microcredit project:
The initiative became more popular in Brussels and the Wallonia region, increasing its loan activity and gaining in public acknowledgment and political influence
With this new service, the cooperative diversifies in relation to its two historical "publics", namely banking excluded and the social economy sector (no-profit entities, nursing homes, NGOs, cooperatives, etc.)
By doing this, Crédal began to work not only with social and solidarity associations but with entrepreneurs who found in them the only financial institution which offered small loans.
Besides, according to the interviewee, microcredit has involved the opportunity to demonstrate that ethical finances are successful alternatives to traditional banks:
We have proved that financing alternative projects is possible
Crédal approached microcredit services to “non-bankable” people in an ethical manner, with stable interest rates, which that are neither market-related nor credit risk. More recently, microcredits have been an opportunity for social innovators to start profitable projects grounded on social economy values:
We aimed at entrepreneurs who want to have a societal impact, exploring more sustainable business models, whether through organic farming, eco-building or recycling. They are entrepreneurs who want to push the boundaries of a certain market, an economic model or a product
In terms of coproduction, Crédal members highlight the role of the former CEO, Michel de Wasseige, the first to have the idea of the microcredit, convincing the remaining members of the Board of Directors that this type of loan would involve a great opportunity for Crédal. De Wasseige was also the person who took the first steps to professionalize the initiative, hiring young qualified staff in an "Initially driven by committed and passionate volunteers" organization. According to Lacroix’s (2009):
"Michel is gradually implementing a first change in Crédal. He said that we must expand our criteria for credits and take economic relevance in a broader sense. So, considering all non-profit associations and not only the so-called self-managed cooperatives, cooperatives that have an economic activity and therefore have less need for financing” [1].
In its early stages, the cooperative operated exclusively on a voluntary basis. Currently, the imitative is run by the Board of Directors, although the respondent also remarks the commitment of employees and volunteers for the successful development of this CTP.
Crédal counts on 120 volunteers who are members of the Board of Directors or the Credit Committees. They either accompany entrepreneurs who have obtained credit or contribute with their expertise in the management of Crédal. Their commitment represents hundreds of hours of work and accompaniment which enriches Crédal’s activity with their vision and skills
Credal is a cooperative grounded on the principles of « collective management », (accountability, participation and transparency), which are implemented at all levels, from day-to-day management to the development of strategic guidelines, including the Credit Committees that evaluate each loan granted by Crédal. Credit Committees are made up of financial and social experts, independent members and volunteers, which, gradually, gained decision-making power and became more autonomous.
Volunteers are also relevant in counselling and monitoring services and Crédal appeals to volunteers in guaranteeing the professional skills needed to assess credit applications. Each type of credit has its own committee, composed of experts with different socio-professional backgrounds, who are familiar with the field and the problems of the sector.
Regarding the context in which this CTP happens, it arises as a response to the financial exclusion situation suffered by a sector of the Belgians, mainly by people who wanted to create their own job but did not have access to the traditional banking system. Besides, after the 2008 economic crisis, Crédal grants credit for individuals or families facing financial difficulties and who cannot afford to meet certain basic needs (for example, the purchase of a vehicle for an unemployed person wishing to find a job and who cannot benefit from a suitable bank loan).
Finally, microcredit is considered a high-risk activity and the interviewee doubts whether granting can be sustainable and profitable it in the long term without patronage or public subsidies. Indeed, both professional and individual microcredit activities have been supported by external institutions such as the Foundation Roi Baudouin- in the beginning-, Dexia Foundation -until the end of 2016- as well as by several regional administrations or the European Social Fund program (ESF).
[1] Lacroix, Patricia (2009). “Biographie de Crédal” (Printed document facilitated by the initiative).
In 2005, Crédal launched the first "peer coaching" program for women without access to bank credit. Under the name of "Business of Women, Business Women" (AFFA hereinafter). Based on the microcredit principle, this project was aimed at women who wanted to launch their own activity as self-employees. It targeted, in particular, women of foreign origin, who are often victims of discrimination in the labour market and offered them support and training, tailored to their needs. The program was an immediate success and is still active, counselling among 60 to 100 women per year.
Crédal receives “Princesse Mathilde Award" in 2005. From its beginning, the AFFA program received the acknowledgement of different Belgian institutions for their innovative approach. For example, Crédal was the winner of the 2005 Princess Mathilde Award, a prize which rewards initiatives that support those socially vulnerable people. In 2005 the prize focused on the economic role of women in a multicultural society and the project "Business of women, business women", launched by Crédal, received the award.
Related to the previous event, Crédal received in its headquarters the royal visit of Prince Philippe and Princess Mathilde on 10th January, 2006. According to Crédal “this visit by the royal couple is a sign of recognition and strengthens Crédal projects and its clients” (Crédal report 2013). Crédal watched closely the effects of the 2008 economic crisis in Brussels and the Walloon region. Since 2008, the cooperative noted that the number of companies in difficulty was increasing constantly “and while many of them have good growth potential, they are excluded from the banking sector, which generally refuses to take any risk”.
Thus, Crédal reoriented its microcredit services towards providing financial solutions and counselling to entrepreneurs in trouble. An example of this is the “Microcredit Relance” programme which Crédal launched in 2013 in partnership with the Brussels Center for Businesses in Difficulty (CEd) and the Chambre de Commerce & Union des Entreprises de Bruxelles.
Crédal’s popularity has significantly increased after the economic crisis. In 2013, the cooperative received more than 4,400 phone calls concerning microfinances. In order to provide a prompt and adequate response to all requests and to increase the availability of credit advisors, Crédal created the Reception and Orientation Center and reinforced its two people team, specially trained for this purpose.
The respondent did not report any opposition concerning this critical turning point. It seems to be a consensus regarding the positive side-effects that microcredit programmes have for Crédal in terms of social impact, public acknowledgement and increasing reputation. As several internal documents confirm (Crédal, 2010), meeting needs in areas not covered by traditional banks is a priority for Crédal:
"Within the limits of our available funds, we are also funding major projects. These allow us to preserve the cooperative's financial equilibrium, which ensures the sustainability of our business and makes us win certain reputation or visibility. In 2009, 22% of the loans granted were equal or above €125,000" (Crédal, 2010).
Indeed, microcredit is not a lucrative activity and should be sustained by the benefits of the cooperative as well as by external funds that the initiative raises under this purpose. Besides, the initiative counts with the selfless collaboration of many qualified volunteers (more than 100) who place their professional skills to help the initiative and this concrete programme. This is a clear example of the broad endorsement microcredit receive from Crédal’s shareholders.
[1] Reference: Crédal (2010). 2009 Annual Report.
In terms of anticipation, it should be remarked that this CTP started in 1994, more than 20 years ago, when the initiative was under the leadership of Michel de Wasseige. The former general director appears to have been the person who had the inspiring idea that microcredits could be useful tools for supporting the activity of non-profit associations and cooperatives and, probably, he was one of the few persons that anticipated this CTP. In the 90s microcredit were not very popular in Belgium and Crédal was the first financial entity to offer this kind of service.
As Patricia Lacroix (2009) documented in her brief study[1], the first steps of Credal’s microcredit activity in the following quotation:
“On the basis of the experience set up in France by ADIE (Association for the Right to Economic Initiative), an idea that Michel had to fight “tooth and nail” in order to obtain the support of the Board of Directors. Microcredit was finally launched as a pilot project. Crédal granted BEF 1 million from 1995 to 1997. It took until 2000 to see the revival of this activity under the name of “MC2” [1]
[1]Lacroix Patricia (2009) “Biographie de Crédal” (printed document facilitated by the initiative).
The pilot microcredit project was an excellent learning opportunity for Credal’s employees and volunteers to experiment with innovative financial tools for social development, building experience in financial counselling. Crédal members have learned that microcredit is a suitable tool for social development and to fight against banking exclusion and to offer people in difficulty the opportunity to acquire essential goods “to break with the vicious circle of poverty and live with a minimum human dignity”.
However, microcredit can also have a negative effect or can be used for inappropriate purposes. For example, due to the 2008 crisis, Crédal was contacted by many people who tried to set up a project in order to clear their debts, which is not the objective of microcredit as the respondent explains in the following:
What I have learned is that ethical microcredit is a beautiful project for Crédal, It is clearly social-oriented and people see its positive impact on society. Microcredit allows us to gain reputation and expertise, we have more social and political influence now. But, on the contrary, I learnt that microcredit is not the solution to any societal needs. The concept can be used for perverse purposes. For instance, it can be seen as a substitute to social aids, a private solution to societal needs that should be provided by the State or by public institutions
Financial institutions have overseeing microcredit commercialization as a money-making opportunity, without any kind of social-orientation, taking microcredit as an ordinary profit-maximizing business. This idea is explained in the following text, authored by the former CEO of the credit cooperative, Bernard Horenbeek [1]:
“Microcredit is only a tool and as such can lead to better or worse. It all depends on how you use it. Newcomers from South Africa regularly remind us that it is not enough to give the name "microcredit" to guarantee the success of the social objectives of this tool. In Belgium, for fifteen years, Crédal has developed its microfinance business with the idea of enabling people to realize their professional or life projects. This implies a personalized instruction and decision. Crédal's clients are not simply file numbers. This is reflected in our human and respectful management model, even in case of delay or litigation. Crédal is embedded in ethical and solidarity finance. Crédal aims at the societal profit before its own. By supporting collective projects (social and professional integration) as well as individual projects (microcredit), Crédal has a range of tools to protect from ideologization. To address the increasing number of observed requests, Crédal believes that the time has undoubtedly come to regulate microcredit in Belgium so that it can be proposed only "for the better", that is to say in an ethical and solidarity-based approach” (Crédal,2012).
In order to avoid the negative side-effects of microcredit, the respondent highlights that:
The counselling activity is the most important part of the Crédal’s microcredit programme. Counselling is being carried out by employees and trained volunteers, which is the real factor of success
For this purpose, the initiative designed, over this 20 years, a set of complementary services and loan products targeting various customer profiles (women, social entrepreneurs, sustainable social innovators, etc). In this line, Crédal has developed and improved its coaching service over time, which facilitates their clients the acquisition of both the competences and autonomy necessary for the proper management of the company. Before the credit is granted, the advisor studies the client’s professional project and private budget in order to ensure it is sustainable and to prevent the client from overindebtedness. After the credit is granted, the client will benefit from a free accompaniment during 2 years.
Employees and, in special, volunteers, have to integrate this counselling duty: how to talk to clients, being sensitive to their needs and personal situation, and helping them to be more autonomous
In the case of individual credits:
Coaching makes people avoiding overindebtedness possible by making sure to establish, together with the customers, the budget of the household and guaranteeing their repayment capability. Work is long for such small credits at reduced rates but it prevents clients from engaging in impulse buying
[1] Source: https://www.belfius.com/FR/Media/Communique_de_presse_20120704_fr_tcm_78-34429.pdf
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