JOB CREATION & POVERTY ALLEVIATION IN THE V4 COUNTRIES

BY MICROCREDITING

Dr. Antal Szabó

UN ret. Regional Adviser and Scientific Director of ERENET

YOUTH UNEMPLOYMENT IN EU

The youth unemployment rate reached new historic high of 23.5 % in February 2013, more than twice as high as the adult rate, with some 5.7 million young people affected. Young people that have only completed lower secondary education (early leavers from education and training) bear the highest risk of unemployment. In 2012, the EU average youth unemployment rate was 22.8 %, but reached 30.3 % for low-skilled youth.

Basic Data

COUNTRY POPULATION

[ millio ]

AREA

[x 1000 km²]

GDP per capita

[ US$ ]

CZECH REPUBLIC 10.5 78.8 26,389

HUNGARY 9.97 93 21,403

POLAND 38.5 312.7 21,313SLOVAKIA 5.4 49 24,035

TOTAL: 64.37 millió & 531620 km2

GDP at current price in 2011 by the UNECE

YOUTH UNEMPLOYMENT RATE

for population aged 15-24 – UNECE, 2013

POPULATION

in

million10.5 9.97 38.5 5.4

UNEMPLOY-

MENT RATE

in %6.7 10.9 9.7 13.6

YOUTH UNEMPLOY-

MENT RATE

in %

in 2011

18.0

in 2012

19.5

in 2011

26.1

in 2012

28.1

in 2011

25.8

in 2012

26.5

in 2011

33.2

in 2012

34.0

YOUTH UNEMPLOYMENT RATEannual average for those below 25 years

POVERTY IN EUROPEAT-RISK OF POVERTY RATE in % by the Report of

the EUROSTAT 2010Around 84 million people in the EU (17% of the population live

below the poverty line)• EU27 17• CZ 16• SL 17• SK 28• PL 32• HU 37• RO 50• BG 51

At-risk-of Poverty or Social Exclusion

Rate by age group in 2012 - EUROSTAT TOTAL CHILDREN

(1-17)

ADULTS

(18-64)

ELDERLY

(65 & over)

24.8 28.1 25.4 19.3

15.4 18.8 15.5 10.8

32.4 40.9 32.9 20.6

26.7 29.3 26.7 23.4

20.5 26.6 19.9 16.3

PRIORITY OF THE GREEKEU PRESIDENCY

• Promotion of employment and the creation of jobs, notably amongst the young population.

• The Greek Presidency will speed up the implementation of actions such as the “Initiative for the Youth” and the “Youth Guarantee”.

• The Greek Presidency also seeks to finalise the negations on the proposed directive of the posting of workers, as well as the establishment of a quality framework for internships across the EU,

• The ppromotion of the programme for employment and social innovation and the PROGRESS microfinance facility

V4 Youth Roundtable – April 2013, Warsaw

• During the Poland’s Presidency of the V4 - between July 2012 and June 2013 a report was prepared by Ewa Krzaklewska is to provide the reader with a comparative analytical review of the situation of young people in these countries for the prospective development of youth policy in the region of the Central Europe.

• Youth faces with new challenges caused by economic and financial crises, they continue to search for varying solutions to appearing issues. Therefore, the exchange of ideas within youth policy field appears critical.

Youth in V4

• The economic crises cause widening of poverty or stagnation in improvement of young people’s economic situation. Among the ethnic communities, most activities are directed towards Roma young people.

• Unemployment in the V4 countries is relatively high. Difficulty to find jobs in the locality and low salaries remain young people’s concern. Many of them migrated to EU after the accession.

• The good practices are needed aiming at supporting young people’s entrepreneurship.

KEY CONCEPT OF MICROFINANCE

MICROCREDIT

small loan (> € 500-2,000) without collateral

to unemployed & very poor people, usually women

for self-employment project aiming at generating income

allow them to care themselves c their families

MICROFINANCE

consisting of microcredit programs with social orientation

includes micro-saving, micro-insurance, remittance transfer

provide traning, advice, councelling, coaching

SO MICROCREDIT IS A PRODUCT OF MICROFINANCE

Give a man a fish, he eats for a day.

Teach a man to fish, he eats for a lifetime.

Provide credit and training, he opens a seafood stand, feeds the surraundigs, and becomes a healthy entrepreneur in the community.

• Dignity• Motivation

MICROFINANCE AS A KEY POLICY TOOL FOR JOB CREATION & POVERTY

ALLEVIATION• There is no single policy model for the promotion of

entrepreneurship among youth.

• The lack of adequate start-up finance is one of the most significant barriers to young people seeking to create their own businesses.

• MICROCREDIT is a “bottom-up” local economic development process assisted by special MFIs.

• There is a paradigm change in crediting activities: unemployed people and poor become creditable. Credit can create economic power that would generate into social power, lifting the poor out of poverty.

Celebrating the Founder of Microcredit

2006 Nobel Peace Prize

Winner

1998-99 Rotary International

Award for World Understanding

Dr. Mohammad Yunus

CELEBRATING THE FOUNDER OF MICROCREDIT

Microcredit as a Platformfor job creation & poverty eradication

“There is no conflict in having microcredit, education, health, empowerment, [and] training together; they support each other.

If you laid out the foundation of the financial system, it makes other interventions so much more powerful. If you come with education, health, and training, everything will make much more sense, and you get much more mileage out of your effort, provided you have the microcredit framework already built into the system.”

Dr. Muhammad Yunus, Founder of Grameen Bank and Nobel Peace Prize Winner 2006

"A European initiative for the development of microcredit in support of growth and

employment„ by the EC as of 13 November 2007

four priority areas for action:

i. improving the legal and institutional environment in the Member States,

ii. changing the climate in favour of employment and entrepreneurship,

iii. promoting best practices and

iv. providing additional financial capital for microfinance

AMOUNT BY THE EU• In 2010, the European Commission by its

Decision No. 283/2010EU launched the European Progress Microfinance Facility (EPMF) for setting up and/or developing microenterprises and small businesses by the availability of microcredit – loans below € 25,000.

• Progress Microfinance does not directly finance entrepreneurs, but enables selected Microcredit providers in the EU to increase lending

• "Progress Microfinance is clearly an effective facility both for microfinance providers and entrepreneurs. By providing access to microfinance to create jobs, particularly for disadvantaged people, the Facility has proved to be an important social investment tool that should continue in the future."

European Commissioner of Employment, Social Affairs and Inclusion László Andor

• Through this Facility twenty microfinance providers throughout the European Union have received guarantees or funding (debt or equity) to facilitate their lending to would-be micro-entrepreneurs worth €170 million over the coming two to three years.

• Progress Microfinance provides loans of up to €25,000 and aims to generate a total loan volume of €500 million for 46,000 micro-borrowers across Europe until 2019. 

Progress Microfinance proves

as tool for micro-entrepreneur start-ups

Established in 1998, the Microfinance Centre is a regional microfinance resource centre and network. It brings together 103 organizations - including 78 microfinance institutions - in 27 countries of central Europe, Eastern Asia and the Caucasus Region. MFC serves over 800,000 low-income clients. The MFC headqurters is located in Warsaw. It has also a regional office in Bishkek (Kyrgyztan).

http://www.mfc.org.pl/

• The European Microfinance Network (EMN) aisbl gathers organizations primarily involved in the European Union (EU) and EFTA countries that address issues related to professional and personal microcredit, as well as business development and training to entrepreneurs. Other financial services (i.e. insurance, savings) are still underdeveloped. http://www.european-microfinance.org/

MICROFINANCE INSTITUTIONS IN V4

COUNTRY MICROFINANCE INSTITUTIONS

CZECH REPUBLIC

NFMF - Nadacni Fond Microfinance

Electronic Loan Exchange Network - myelen.com

HUNGARY

MVA

Hungarian Microcredit Network

MiFiN Microfinance Financial Service ZRT

START Garancia ZRT

POLAND

Polish Agency for Enterprise Development

Fundusz Micro

FM PBP Bank SA

Iniciatywa Mikro (“IM”)

SLOVAKIA

NADSME National Agency for Development of Small and Medium Enterprises

INTEGRA Foundation

VOKA NGO

MICROFINANCE INSTITUTIONS IN V4

• 11 LEADING MICROFINANCE INTERMEDIERIS WITH HUNDREDS OF REGIONAL FILIALS

• CLASSICAL GROUP LENDING FACILITY IN POLAND

• GOVERNMENT BANKS IN HUNGARY & POLAND

• NGOs IN HUNGARY, POLAND & SLOVAKIA

• NATIONAL SME DEVELOPMENT AGENCY IN SLOVAKIA

• NO INDIGENOUS MFIs IN THE CZECH REPUBLIC

• INDIGENOUS BANKS DO NOT RECOGNISE THE SIGNIFINACE OF MICROCREDITING

• THERE IS NO SINERGY AMONG THE MFIs IN THE V4 COUNTRIES

MICROFINANCE IN POLAND

• Microcredits are granted by very diverse organisms. The main ones are commercial banks such as BPH, the cooperatives grouped into a National Association (SKOK) which are essentially granting consumer loans to their members, the MFIs among which one of the most important is Fundusz MIKRO Bank, and the Loan Funds, grouped together into an Association at the national level. FM Bank  is the most recent microcredit provider in Poland and the first financial institution to specialize in servicing micro and small companies.

• It is important to underline that Fundusz MIKRO is changing its status to become a microfinance bank. The amount of a loan within the microcredit framework cannot exceed € 30,000 (PLN 120,000).

• Since the beginning of microfinance activities up to the end of 2008, the number of loans granted exceeded 171,000. The average credit amount is a little more than PLN 16,000 (€ 3,900).

• The opportunity for microcredit provision in Poland lies within the significant number of micro-entrepreneurs (95,9% of the total number of enterprise).  The main challenge for the MFIs is the access to funding for on-lending to microentrepreneurs.

MICROFINANCE IN THE WORD• Microcredit/microfinance is reaching a state of maturity• In terms of scale, in 2011, 204.080 microloans were

granted (45% higher than in 2009), for a total value of € 1.05 million (5% higher than in 2009). The average loan amount was € 5.135 (in 2009, it was € 9.641). 

• Increases are attributed to the development of national microcredit programs, such in Germany, Hungary, the Netherlands and Poland

• There are >4000 NGO Microfinance Institutions (MFI) worldwide

• There are effective regional models• Infrastructure has made a difference; villages are connected• Large charities such as the Gates Foundation and many others

now getting involved• The is a healthy ongoing debate between commercialization and

philanthropy

CONCLUSIONS

• There is no single policy model for the promotion of entrepreneurship among youth, and programs developed in different cultural and national settings show a wide variety of approaches.

• Every country has to find an appropriate policy mix of initiatives that fits to their cultures.

• Microfinance in CEE has been portrayed as a key policy tool for job creation and poverty reduction.

• Microcredit is not a panacea for job creation and poverty alleviation.

• In addition to provision of loan, there is a need clever advocacy and consulting support how to create a business plan and how to start-up.

RECOMMENDATION

So far the V-4 countries did not organized any workshop where the country practices and their main characteristics were presented and discussed. This is why it is suggested:

• to launch such kind of project based on the existing Visegrad Found,

• organize workshops, share experiences in job creation programms and

• elaborate joint standpoints and recommendations for good conduct.