Loans up to € 25,000 without collateral in rem and with a repayment term of up to 10 years, will be able to receive soon micro and small enterprises, Young entrepreneurs, the self-employed, but also Individuals who at the moment, due to the circumstances and their inability to provide guarantees, are excluded from the banking system.

This possibility will be given through the legislative framework for microfinance, which in November is expected to be submitted to the Parliament by the Minister of Economy and Development Giannis Dragasakis.

The relevant legislation creates the conditions for the widespread use of the microcredit tool in Greece. Microloans will be able to be granted autonomously by those entities (businesses, banks, chambers, etc.) that meet the conditions set by law.

According to the promoted framework, microfinance institutions based in Greece will be established and operate in the form of a public limited company or private capital company following an operating licence granted by the Bank of Greece.

We clarify that today the provision of microloans in Greece is extremely limited, as microfinance institutions currently operating in the country, such as the AFI and the Centre for Business Cultural Development (KEPA), in the absence of an institutional framework similar to that in other EU countries, they are obliged to provide loans through the existing banking system. Microfinance institutions will now be able to be set up and operate outside the banking system, as long as the requirements of the law are met.

The first licences for microfinance institutions are expected to be granted in the first half of 2019. It is open to the possibility that some of them may also grant loans at subsidised interest rates, as it is envisaged that these institutions will be able to obtain funds from national or Community resources.

As is currently the case with ETEAN, in these cases, a part of the interest rate will be subsidized. However, these parameters will be specified by decision of the Minister of Economy.

The forms of loans

According to the legislative initiative of the Ministry of Economy, the microfinance institutions to be set up will have to provide the following forms of microfinance:

1. Business microfinance This means in particular:
   • all forms of credit up to a limit of EUR 25 000 either to cover investment needs or as working capital;
   • leasing products up to EUR 25,000, for the acquisition of equipment,
   • stand-alone guarantees up to a limit of EUR 25 000, which cannot be used to obtain loans from other financial institutions.
2. Personal microfinance This means, in particular, fixed-term personal credits for:
   • educational purposes up to EUR 10 000,
   • the strengthening of public policies or with a view to the social and economic integration of vulnerable social groups up to the amount of EUR 25 000, relating in particular to addressing the following situations: – unemployment, – suspension or reduction of working time for reasons not attributable to their own will.

Who can get loans

1. The beneficiaries of business microfinance are:
   • micro and small enterprises;
   • Individuals setting up micro and small enterprises;
   • Self employed
   • Social and Solidarity Economy bodies.
2. Beneficiaries of personal microfinance are:
   • natural persons to meet educational needs,
   • beneficiaries of public policy implementation programmes;
   • vulnerable social groups.

Consulting services

It should be noted that in addition to funding activities, microfinance institutions are required to provide business education and mentoring advisory services for all business microfinance to their beneficiaries.

Advisory services shall include in particular:

• Business training in business management techniques, in terms of accounting management, financial management, personnel management.
• Support for solving legal, tax and administrative problems and information on relevant services available on the market.
• Support for defining the path to labour market integration.
• Support to identify and diagnose the potential criticality of the implementation of the funded project.

No mortgage for Loans up to €25,000

Given that the legislative initiative aims to enable those who cannot provide the guarantees currently requested by banks to obtain a loan, it is foreseen that microfinance will not be secured by a security or lien but will not exceed the threshold of EUR 25 000 for each beneficiary.

The microfinance institution may provide the same beneficiary with new microfinance in an amount to be added to the balance, and in total it shall not exceed the threshold of EUR 25 000, and may require the existence of a guarantor before granting a business microfinance.

The minimum repayment term of the microfinance granted is 12 months. The maximum repayment term may not exceed 10 years. Microfinance is charged with the contribution of article 1 of Law 128/1975 (A' 178), for the return of which the microfinance institutions are responsible. In any event, microfinance institutions shall check, before granting any form of microfinance, whether the purpose of microfinance is being complied with and shall require specific documentary evidence from the beneficiary.

Obligation of transparency in the terms of transactions for Loans up to € 25,000

Microfinance institutions shall enter into a contract with the beneficiaries which, inter alia, describes the loan conditions and in particular:

• the interest rate on the microfinance, indicating whether it is fixed or variable or a combination of both, as well as information on any charges included in the total cost of the credit to the consumer;
• the total cost of microfinance;
• the repayment term of the microfinance;
• the number and amount of instalments,
• the number and amount of instalments,
• the procedure for the recovery of outstanding debts,
• the right to complain,
• the out-of-court dispute resolution procedure.

It is noted that the beneficiary has the right of withdrawal within 14 days from the signing of the contract, regardless of whether during this period the loan has already been disbursed. In the latter case, the total amount is returned interest-free in full in a lump sum, at the same time as the declaration of withdrawal, but the borrower bears the corresponding administrative costs.

In the event of a non-performing debt, the microfinance institution shall apply the procedures set out in the Code of Conduct for the management of non-performing private debts.