With its initiative to regulate the micro finance sector in Lebanon, the BDL recently issued a set of regulations to control the credit operations performed by the small credit companies called “credit counters”. These credit counters can take any legal form (joint stock, partnership, etc.) and provide small loans (ceiling $100K) for any collateral worth no more than 120% of the loan.
The business of these companies should be confined to credit operations only. The required minimum capital of two billion LP should be deposited at once at BDL. Also they may not cut their capital or redeem any part of it. At any point of time, assets of the company must exceed liabilities by an amount equal to at least the value of the capital. Equally, they should assign a reputable audit firm to control their reported financial statements.
In addition, these companies must operate in their head office and they are prohibited from opening branches or agencies unless they obtain an earlier approval from the central bank. The circular also limits the maximum facilities granted to one client, at 5% of the credit company shareholders’ equity or 150 million LP, whichever is less. In addition, no file opening fees should be required from clients. The circular does not specify the nature of collateral. Also it prohibits them to grant loans worth less than 60% of the value of the client’s collateral and it forbids them to use sale proxies as collateral.
Besides, the client’s total monthly debt repayment to all financial institutions must not exceed 35% of the household income. It is worth mentioning that the companies (joint stock) are not allowed to hold a credit portfolio above four times their equity, while the total amount of credit allowed for all other companies (partnership etc.) stands at two times their equity. The circular bans these companies from borrowing, directly or indirectly, from banks and financial institutions.
Credit to the Private Sector in Lebanon (Up to July 2015)