Microcredit companies

Business scope

Microcredit companies provide small amounts of financing to help borrowers start up or develop self-employment or micro-enterprise initiatives (‘business microcredit’) and to support individuals in particularly vulnerable financial or social conditions (‘social microcredit’). The disbursement of funding must be accompanied by the provision of ancillary services during the preliminary assessment and the repayment period. The technical specifications, purposes and beneficiaries for each type of microcredit are set out in Article 111 of the Italian Consolidated Law on Banking (TUB) and in Ministerial Decree 176/2014.

Solidarity finance operators are a particular category of microcredit companies that benefit from specific rules concerning loan terms and amounts. However, their average overall effective rate may not exceed the sum of the borrower's operating costs and the cost of return on capital, which must not exceed the rate of inflation.

Microcredit, as a form of financing, may be granted not only by operators under Article 111 of the TUB, but also by banks and other financial intermediaries under Article 106 of the TUB without the need to be registered on the list of microcredit companies; any operations they carry out in this area are supervised by the Bank of Italy as part of its broader prudential supervisory activity.

Requirements

Registration on the list of microcredit companies is subject to compliance with the following requirements:

1. companies must have the legal form of a joint-stock company (società per azioni), a limited joint-stock partnership (società in accomandita per azioni), a limited liability company (società a responsabilità limitata) or a cooperative company (società cooperativa);
2. the paid-up share capital must be at least five times greater than the minimum capital required for the establishment of joint-stock companies (€250.000);
3. shareholders must meet the integrity requirements as provided for by law;
4. The members of the management body must meet the fit and proper requirements and there must be no grounds for their suspension from office, as provided for by law;
5. the sole purpose must be the provision of microcredit as defined by Ministerial Decree 176/2014 and of ancillary services, especially to support and monitor the financed entities;
6. companies must submit a business plan setting out the specifics of the loans they intend to provide in terms of financial conditions, target customers, purposes of financing, procedures for disbursing and monitoring loans, and any entities providing ancillary support and advisory services and how they are monitored.

Solidarity finance companies must be set up in the form of predominantly mutualistic cooperatives and their articles of association must provide as follows:

1. only shareholders, employees and associates[?] can be partners;
2. the shareholders’ meeting has sole authority to decide on strategic and management choices;
3. the names of the shareholders, the amount of the loans granted and the types of beneficiaries shall be made public;
4. the company is not for profit and dividends may not exceed the rate of inflation for the reference year;
5. each loan is subject to a socio-environmental appraisal, which is equally important as the financial appraisal for disbursement purposes.

Post-licensing requirements

Once a microcredit company is authorized, it is registered on the list under Article 111 of the TUB, which is kept provisionally by the Bank of Italy until a 'sufficient' number of registered companies is reached to justify the establishment of a dedicated body.

The intermediary is assigned to the Financial Institutions and Recognized Regulatory Bodies Division of the Bank of Italy’s Financial Supervision Directorate, which is responsible for keeping the list and monitoring operators.

Microcredit companies registered on the list shall include their registration number in documents and correspondence.