Role of microfinance and technical support for self-employment/start ups

1. International Role of microfinance and technical support for self-employment/start ups Maria Nowak, founding president of Adie, president of Adie International Athens, May 2016

2. Introduction • We are in a period of structural change combined with a crisis of confidence and purpose • One of its worst signs is youth unemployment : an average of 23% in Europe, but more than 50% in Greece and Spain. • Its consequences are : => A lost generation as regards integration in the labour market => violence or passivity => dependence on family or society => welfare policies more and more unsustainable

3. Self-employment and enterprise creation have become in France a major road towards employment Thérèse, vente de gâteaux sur les marchés Robert, éleveur canin Tithouan, artisan cuir Yao, boutique de prêt-à-porter Cécilia, accessoires pour enfants Tevaite, horticultrice Fouzia, artisan peintre Tinivarii et Mohea, restaurant snack Guillaume, apiculteur

4. Number of enterprises in France FRANCE • 93% of micro-enterprises have fewer than 10 employees 200 employees 8,5 M million people live below the poverty line 2,4 M million homes recipients of RSA 3 760 100 unemployed ( DOM included) Informal sector= 11% du GDP 7 (0,3%) Between 50 and 199 employees 25 (0,8%) Between 10 and 49 employees 163 (5,6%) Between 0 and 9 employees 984 (33,6%) 0 employees 1 746 (59,7%) Informal Sector

5. Major structural changes Number of workers in industry and services in France 

6. Allowing the unemployed to create enterprises : • Two starting points : • Everyone can become an entrepreneur • • Low-income people repay their loans • Three pillars of enterpreneurship : • • Access to credit • • Business Development Services • • A more favourable legal framework

7. Example of the Association pour le Droit à l’Initiative Economique (Adie) Association created in France in 1989 by threevolunteerswith no capital more than 200 new jobs per week, created in 2015 (thisnumber continues to grow)

8. Number of loans disbursed Production Outstanding

9. Plateforme de Roubaix Adie branches cover all of the French territory 119 antennes 360 permanences 470 employees 600 volunteers

10. Crédit 166 000 loans disbursed since 1989 Outstanding (01/01/2016) : 104 186 289 € Default rate : 6,81% Loss rate : 3,23% au 31/12/2015

11. Business Development Services 121 321 microenterprises created since 1989 Survival rate : 70% after 2 years Inclusion rate of the unemployed : 84%

12. Modification of the legal framework Three main amendments obtained by Adie : • An amendment to the Banking law allows nonbank microfinance institutions to borrow and on-lend (2001) • Self-employment and enterprise creation are recognized as a vehicle of economic and social inclusion (2005) • Self-employed people are allowed to postpone paying fringe benefits until their business has generated a profit (2007) And many others…

13. Clients 12

14. Clients 13

15. Economic model of Adie Financing of vulnerable people , with a low education level : unemployed,  people on welfare, youth, women, migrants etc…  Financing of start ups   Low interest rate : 7,38% difficult to increase in a welfare state and many other…factors make difficult to reach full sustainability  but the cost of creating an enterprise (1500€ for individual business, training and advice as well as  administrative assistance) is much less than subidized jobs (10 000€ per year) or the cost of unemployment  (14 000€) 14

16. Financing of Adie Credit ressources are provided by banks and public institutions such as EIF The risk is shared between the banks, a public gurantee fund, EIF and Adie Business development services  are financed by subsidies from  Government, local governments , ESF, ERDF and a few foundations or enterprises 15

17. Lessons learned • More than ever, need for a permanent link between doing and thinking. • Governments fail to recognize the experimental knowledge gained by NGOs as a valuable input in economic and social policy, which often remains more passive than active. • Absence of the vital relationship between the micro and macro economies Microcredit can play an increasing role in Europe • by becoming a financial instrument of the new economy • by creating social links and developing confidence in economic growth and social cohesion • by creating hope and empowering people to build their own future

18. In Europe,the distribution of enterprises according to size is very similar to the French one • 22 M enterprises in EU • 93 % of enterprises in Europe are • micro-enterprises (0 – 9 Sector) • Population under the poverty level: • 80 millions • Informal sector represents • 10 to 15 % of the GDP > 250 employees 4 Between 50 and 249 employees 200 Between 10 and 49 employees 1 400 Between 0 and 9 employees 19 200 InformalSector

19. The trends in EU are similar, even if deindustrialisation is, on average, slower than in France Number of workers in industry and services in EU (source : Eurostat)

20. Inspite of a rapid growth on the supply side, there is still a market gap as regards microcredit  in Europe :  • The number of microloans has increased by more than 400% since 2009 and the amount has more than doubled.(EMN survey 2013) • The number of microloans provided in 2013 was on the order of 388 000 for a total amount of €1.52 MM • The potential demand in 2012 was  estimated at 1.2 M microloans for EU-28 in 2012, for a total amount of €8.6 MM.

21. Growing recognition of the importance of self-employment , enterprise creation and microcredit at EC level • 2003 : Creation of the European Microfinance Network • 2006 : Publication of the EC regulations regarding financial engineering of structural funds , including microfinance • 2007 : Publication of the European Initiative in favor of growth and employment  • 2010 :  The PROGRESS Microfinance Facility for Employment and Social Inclusion provides support via guarantees and funding for microcredit to small and micro-enterprises, and to unemployed who wish to start up their own small businesses • 2014 : EU Programme for Employment and Social Innovation (EaSI) continues guarantees and funding program for microcredit  • 2014 : Publication of the OECD/CE report on « Missing entrepreneurs : Policies for inclusive entrepreneurship  • 2016 : Advocacy for inclusion of microfinance in the EU capital markets union

22. Development of self employment, and microenterprises should be a priority in Greece for three main reasons: • the high level of unemployment, especially as regards youth (more than 50%) • the experience of small business is most developped in Greece, as compared to other member countries • the only way to restore trust and reduce the high credit risk in the banking sector is to start a pilot project from the bottom up Microcredit could be an important factor of reversing the trend of social despair, because it is not only the financial instrument of economic initiative, but also a tool of solidarity creating social links . It restores hope and trust, without which it is impossible to you cannot get out of the present difficulties.