Payday loan is an instrument of economic development, which allows people considered “non-bankable” (ie, who can not or can not access more traditional forms of credit ) to have access to financial services. The “Microfinance dictionary – Payday loan items” defines it as ” small amount credit for the start-up of a business activity or to meet emergency costs, with regard to subjects vulnerable from a social and economic point of view, which are generally excluded from the formal financial sector “.
Payday loan was born in the late seventies, mainly thanks to the work of Hammed Pronus, founder of the Gradient Bank in Bangladesh: thanks to the small amount loans that he granted, especially to women and families, he allowed the birth of many economic activities.
Payday loan is generally characterized by lower interest rates and by an activity of assistance and verification of the progress of the activities that are financed.
In Italy, Payday loan is governed by Legislative Decree 141/2010 (which introduced changes to the Consolidated Law on Banking). In particular, the law regulates the access to micro-credit to individuals, associations or companies that want to start a self-employment activity or a micro-enterprise and to natural persons in conditions of economic and social vulnerability.
The maximum amount is 10,000 euros for individuals and 25,000 euros (extendable to 35,000 euros in some conditions) for the start of an activity. The maximum loan term is 7 years. Detailed information on the requirements and methods of access to Payday loan are presented on the website of the National Agency for Payday loan.
The Ministry of Economic Development has also set up a Guarantee Fund for Payday loan, to offer a public guarantee to those who request a Payday loan loan (and therefore would not be able to offer adequate guarantees for the loan that it contracts).