Italian Banks' credit approach towards low-income consumers and microenterprises: Is there a bias against some segments of customers?

Abstract

In Italy, the sensibility of banks for financial requirements of low-income consumers and microenterprises appears still rather limited. Low-income customers include salaried employees, farmers, pensioners, young people with temporary occupation (atypical workers) or unemployed, housewives and immigrants. Microenterprices, the smallest economic units that operate in any economy, include the self-employed as well as family-run enterprises. From corner grocery shops to tailors, they operate in just about any sector of the economy. While the financial needs of these segments are similar to those of other businesses and consumers, their personal and business characteristics, as well as the relative size of their operations, diverge significantly. Specifically, microentrepreneurs and other lowincome customers tend to operate on the margins of the formal economy and society, often without requisite permits and documentation. The microenterprises have few employees, other than the owner-operator. The enterprises and households usually have limited assets, particularly lacking fixed assets with formal titles that could serve as traditional collateral. Net incomes are on the lower end of the scale although operating margins for microenterprises in percentage terms can be significant. Formal records of sales, expenses and incomes are scarce and unreliable. Business and household finances are mixed with income generated from diverse sources, such as multiple enterprises, farming and agricultural production activities, remittances, day labour and salaried employment. © Springer-Verlag Berlin Heidelberg 2007.