Transcript Diapositive 1 - The Cicero Foundation

JOB CREATION BY BOOSTING
ENTREPRENEURSHIP
W TO STIMULATE AND FINANCE THE CREATION
OF MICROENTERPRISES ?
CICERO FOUNDATION
March, 11 2005
A - Why is it so difficult to
stimulate the creation of micro
enterprises in Europe ?
« It is not easy to find a black cat in a black room,
especially if the cat is not there » (Confucius)
In spite of their importance, micro enterprises
are not recognized in a « wage labour » and a
« welfare state » culture
250 + employees
36
50 to 249 employees
163
10 to 49 employees
1084
1 to 9 employees
7447
No employees
9320
Informal sector
Thousands of enterprises
Source : EUROSTAT
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The real problem is not lack of
entrepreneurship but a hostile
institutional environment
Complexity of the regulatory and administrative framework
CCAS
CLI
CANAM
DDTE
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11
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8
ENTREPRENEUR
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ORGANIC
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City Hall
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9
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URSSAF
Prefecture
Chamber of
commerce
Tax
collection
office
• creates high fixed costs for small enterprises
• increases need for administrative and business advice
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High national insurance contributions and
difficult administrative transition from
unemployment to enterprise creation
Insurance contributions
Family allowances
Health insurance
Pensions
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Micro enterprise A
Annual income : 4 600 €
Micro enterprise B
Annual income : 13 850 €
2 339 €
(51% of the income)
5 622 €
(42% of the income)
Micro enterprise C
Annual income : 12 290 €
• results in an « informal
sector trap »
Cicero Foundation
7 427 €
(41% of the income)
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Access to credit and risk capital limited
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o
Banking sector regulations set a « usury rate ceiling »
and give the right of borrowing and on-lending to the
banks only
Banking sector is reluctant to develop micro credit
because of high operational costs, lack of collateral,
lack of experience as regards a low-income clientele
Majority of micro enterprises and especially micro
enterprises created by unemployed have no equity
Majority of micro enterprises are sole traders not
eligible to risk capital
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B - How to develop micro
enterprises ?
Lessons from ADIE’s experience
3 success 'factors
1)
A demand-driven, bottom-up
approach
o Association created in 1988 by three volunteers,
without any capital, inspired by the Grameen bank
experience
o Adie’s mission : help unemployed to create their own
job
o A 5 years pilot phase allows to find clients, identify
obstacles to self-employment, work out methods and
control risk
o Initiative and entrepreneurship of the unemployed
are the engine of the programme. ADIE provides
access to financial and non financial services.
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2) - Partnership with banks
o Under the banking law an association can lend only out of its
own funds.
o The banks are keen to extend their clientele and improve their
social image if the association takes in charge all social and
financial intermediation, controls the risk and externalizes the
additional costs.
o The partnership with Credit Mutuel (1994) is extended to other
cooperative banks and some commercial banks.
o The French Association of Banks helped ADIE to pass a law
authorizing associations financing the micro enterprises created
by unemployed to borrow and on-lend. The Government tries to
eliminate the « usury rate ceiling » but faces the opposition of
the Parliament.
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3) - Public support
o The additional costs of front-office, business training
and advice are taken in charge by the Government,
the European Social Fund and the Local
Governments.
o The risk (6,5%) is shared between the banks (30%) and
ADIE (70%).
o ADIE is counter-guaranteed by a public Guarantee
Fund (FGIE) and the European Investment Fund.
o United Nations have chosen 2005 to be the
International Year for Micro Finance: a true
recognition
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C - Results and lessons to
be drawn
Target population : qualifications
Illiterate or
almost
illiterate; 18%
University
Degree; 21%
Bachelor
Degree; 19%
Professional
Degree; 42%
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Target population : social status
Poor workers
4%
Other unemployed
22%
Others
8%
Long-term unemployed
17%
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Beneficiaries
49%
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Types of activities
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Examples :
Carpenter
Painter
Market seller
Grocery shop
Beauty shop
Hair dresser
Multi-services
Mechanics
Massage
Tattoo shop
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Trade; 45%
Services;
31%
Craft; 8%
Agriculture;
5%
Cicero Foundation
Building;
11%
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Loans Granted
6000
5700
5400
5100
4800
4500
4200
3900
3600
3300
3000
2700
2400
2100
1800
1500
1200
900
600
300
0
5349
5587
4618
3563
2844
1929
1276
698
34
91
159
1990
1991
1992
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388
1993
1994
1995
1492
852
1996
1997
1998
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1999
2000
2001
2002
2003
2004
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A well developed local network
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22 regional delegations
104 offices
300 rep offices
6 initiative shops
287 employees
700 volunteers
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Diversity of financial products
o Loans for the creation and development of micro businesses
o 5 000 euros maximum
o Market interest rates (currently 5,2 %)
o + Solidarity contribution (0.1% per month)
o Term 24 months maximum
o Personal guarantees from friends or family cover 50% of the
loan
o Progressive loan amounts and solidarity groups for income
generating activities in deprived areas
o Complementary products
o Quasi-equity funds : interest-free subordinated loans
o Regional grants associated with ADIE loans
o Equipment loans to test the projects
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Other services
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Business training sessions
Marketing and legal advice
Administrative, support
Micro business circles
Internet forum and micro-entrepreneurs’ virtual
association aimed at :
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Exchange of experience
Mutualisation of certain services
Information and training
Proposals to the government
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Operational results
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Active clients : 10010
Outstanding loans : 23,6 million euros
Number of loans disbursed : 30 000
Recovery rate : 94%
Number of micro enterprises created : 25 500
Number of jobs created : 30 614
Cost of creating a micro business (risk and
operational costs, including business support) : 2000
euros = 1/10 annual cost of an unemployed
o Survival rate (2 Years): 64%
o Success Rate: 75%
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Why we exist?
Samira
Street Shop
Vincent
Internet
Amir
Open Market seller
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Pierre
Electricity
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