In Europe the creation of enterprises is becoming one of the main vehicles of employment creation. Now we need financing for it.
Guest blog post written by Maria Nowak, President of Adie International.
Unemployment has been a heavy burden on the European economy since the economic crisis: currently 23.5M people, i.e. 9.7% of the active population, are unemployed. We have also known it to be particularly worrisome for young people (of which 4.7M or 20.7% are without a job). What is less well known is the focus, in most EU member countries, on creation of enterprises as a means of restoring employment. This trend brings with it new requirements for financing. It is linked to the decline of the number of workers in the industrial sector, particularly as a result of new technologies and globalization, as well as an increase in the number of workers in the service sector, which, unlike manufacturing, allows the creation of small units of production without substantial investment. It also reflects the desire of young people to become their own boss.
The rise in the creation of enterprises and self-employment is now officially recognized, not only by the member countries, but also by European institutions. Last year the European Commission and the OECD published together a report entitled «Missing Entrepreneurs: Policies for Inclusive Entrepreneurship». The report compares the situation of, and policies practised by the different countries in the Union, and highlights the importance of the initiative taken by unemployed people creating their own jobs. In France, where the number of enterprises created has doubled with the status of auto entrepreneur adopted by Parliament in 2008 a third of creators of enterprises now comes out of unemployment.
This new trend carries with it new requirements for financing, since the unemployed do not normally have access to bank credit, because of lack of collateral and steady income. It also highlights the need to develop microcredit granted by non bank microfinance institutions as a source of financing for those who don’t have access to banks.
That is why Adie, the pioneer microfinance institution in Europe, which is financing, in France, 200 new jobs every week, and Crédit Coopératif, involved for the last 120 years in the social economy, have launched Helenos, an investment fund coupled with a technical assistance fund. The object of this new facility is to finance and support European microfinance institutions, combining a strong social and environmental mission and financial sustainability, that are too small or too young to benefit from classical financing and need equity rather than debt. By covering a market gap, Helenos will become a sort of incubator, fully complementary to the new instruments developed by the European Investment Fund on behalf of the European Commission under the Employment and Social Innovation program (EaSI 2014-2020). It will be a social and economic innovation by itself.
Helenos Investment, which looks towards having a strong social impact as well as a 5% return rate and risk limited by a first loss tranche, expects to benefit from both public and private financing that is sensitive to this orientation. It expects also to reach its double goal: be a first step towards a European capital market for starting up and expanding MFIs, and help an increasing number of these MFIs transform job seekers into creators of wealth .
Economist specialized in development, Maria Nowak pursued her career in Agence
Française de Dévelopment and the World Bank. She started the first microlending programs in West Africa, in Eastern Europe and, on a volunteer basis, in France, in the framework of the Association pour le Droit à l’Initiative Economique (Adie).
She is author of «La Banquière de l’Espoir», «On ne prête (pas) qu’aux riches» and «Espoir économique». She is also Doctor Honoris causa of the University of Leuven and Commandeur de la Légion d’honneur.