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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Minutes of the nd 2 European Microfinance Conference 2005


Microfinance for financial and social inclusion
Barcelona Spain 26 28 October 2005

In collaboration with :
Fundaci Un Sol Mn Caixa Catalunya Obra Social0la Caixa

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Acknowledgements
EMN wishes to thank all panellists at the second European Microcredit Conference for their valuable contributions and also for taking the time to re-read the minutes of the Conference. EMN would particularly like to thank the University of Rennes I (France) and especially Rene MADROLLE, Meline HARDY, Michaella AUDRIN and Pauline CHANCELEE who wrote the minutes of the conference and elaborated this report that we now present to you. We are extremely grateful for their excellent work. In addition, EMN wishes to express its thanks to the DG for Employment and Social Affairs as well as to the Levi Strauss Foundation which made the organisation of this conference possible. EMN would like to thank more particularly Obra Social la Caixa and Fundaci Un Sol Mn de Caixa Catalunya, two of its Spanish members which hosted the conference and contributed greatly to its success.

This Conference has been organised with the support of the European Commission within the framework of the Community Action Programme to Combat Social Exclusion 2002 2006. EMN is solely responsible for the content of this document. The Commission is not responsible for any use that may be made of the information contained therein.
Photo Credits: EMN, Maud Chazeau, Street UK, Geoffroy Lefort European Microfinance Network. No part of this publication may be reproduced in any manner or form without prior permission from the publisher and EMN.

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Table of Contents
FOREWORD................................................................................................................ 4 PLENARY SESSION: MICROCREDIT IN SPAIN: RAPID EXPANSION THANKS TO THE SAVING BANKS............................................................................................................5
1. 2. 3. CLIENT PROFILE AND ACTIVITY LEVEL .......................................................................................... 5 CLIENT IDENTIFICATION PROCESS AND RISK GUARANTEES ............................................................ 6 PARTNERS AND FINANCING SOCIAL ORGANISATIONS.................................................................... 7

WORKSHOP 1: SCORING OR NOT SCORING YOUR CLIENTS? .................................... 9 WORKSHOP 2: MORE THAN A LOAN: INNOVATIVE WAYS TO INTEGRATE YOUR MICRO-ENTREPRENEUR INTO THE BUSINESS WORLD..............................................13 WORKSHOP 3: WORKING WITH IMMIGRANTS IN EUROPE: A NEW CHALLENGE FO MICROFINANCE PROVIDERS .................................................................................... 16 WORKSHOP 4: HOW CAN INTERNATIONAL MFIS REACH A BALANCE BETWEEN THEIR SOCIAL AND FINANCIAL OBJECTIVES? ..........................................................22 PLENARY SESSION: POLICY MEASURES TO PROMOTE MICRO CREDIT IN EUROPE FOR SOCIAL INCLUSION, WHAT CAN WE LEARN FROM EACH OTHER? ................26 WORKSHOP 5: INFORMAL SECTOR: THREAT OR OPPORTUNITY? ..........................32
1. DEFINING THE PUBLIC. .............................................................................................................. 32 2. WHAT ARE THE OBSTACLES? ...................................................................................................... 33 3. HOW TO LEGALISE THIS SECTOR? A POSSIBLE SOLUTION: MICROCREDIT ? ................................... 33 4. IMPORTANCE OF THE SOCIAL DIMENSION ................................................................................ 34 CONCLUSION ...................................................................................................................................... 34

WORKSHOP 6: TRANSPARENCY: AGREEMENT ON BASIC BENCHMARKS IN EUROPE? ...................................................................................................................35 WORKSHOP 7: CLOSING THE LENDING GAP: ARE SPECIAL PROGRAMMES NEEDED FOR EUROPES FEMALE ENTREPRENEURS? ............................................................ 40
1. MODERATOR PRESENTATION.......................................................................................................... 40 2. PRACTITIONER PRESENTATIONS ..................................................................................................... 42 3. QUESTIONS AND RECOMMENDATIONS ............................................................................................ 44

PARTICIPANTS LIST ..................................................................................................45

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Foreword
The second conference of EMN was organised in Barcelona, the place where the network was created in April 2003, with the support of our Spanish members, especially la Caixa and Fundaci Un Sol Mn de Caixa Catalunya. The participation of Queen Sofia, of Pasquall Maragall, President of the Generalitat, of Narcis Serra, President of Caixa Catalunya, of Xavier Casas, Deputy Major, of Jess Caldera, Minister of Labour and Social Affairs and of Josep Vilarasau, President of la Caixa at the opening ceremony showed the importance given to the development of microcredit in Spain. Introducing these minutes of the conference, I would like to stress three points presented in my opening speech: First, microcredit is a powerful instrument of growth The first equation we learn in economy is labour+capital= creation of wealth and this equation applies to all kind of activities including microentreprises, which play a growing part in European economy. Second, microcredit is also a tool of social cohesion It is not only a financial instrument providing investment and working capital to self-employed and small entrepreneurs. By helping the excluded to enter or re-enter the market economy, it restores also dignity, self-esteem and social links. Last, but not least, microcredit is one of the foundations of the democracy Financial exclusion is not only a result but also a reason of economic and social exclusion Opening access to credit to all segments of the society, means reducing dependency on the Welfare State, improving equity and decentralising decision-making to all segments of the population. These are three good reasons to combine efforts of all stake holders: EMN to extend the best practices among its members, European Commission and Governments of the members states, to improve the legal and regulatory framework Structural funds, banks, local governments and socially responsible enterprises to support the development of microfinance institutions.

Maria Nowak President of EMN

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Plenary Session: Microcredit in Spain: Rapid expansion thanks to the Saving Banks
(27 October 2005 10.00 am to 11.00 am at Cosmo Caixa)
The objective of this plenary assembly was to present the microcredit sector in Spain and to explain why it is so dynamic. Based on three savings bank examples, the session illustrated the methods of operation and the strong points of the main actors in Spanish microfinance. A second aim of the focus on Spain was to highlight methodological tools that may be replicable in other Western European countries. Facilitator : Jan Evers, (EVERS & JUNG Germany) Panelists: Angel Font, (Fundaci Un Sol Mn de Caixa Catalunya Spain), Marcel Abbad, (Obra Social la Caixa Spain), Jon Mancisidor, (BBK Spain)

The microcredit sector in Western Europe is growing rapidly and it is particularly dynamic in Spain where the savings banks have played a major role. Most of these savings banks have existed for more than a century. Historically, they are organisations with a social character that include charitable activities which operate on the basis of donations from the middle class. The evolution of economic and banking systems together with regulatory changes have led the savings banks to develop purely financial operations. They have thus evolved into competitors with the banks in offering financial products. Nevertheless, they have managed to maintain their special status as result of their social commitment. In effect, a share of their profits is allocated to social works.

1. Client profile and activity level


First, it is important to be aware of the profile of savings banks clients who are able to benefit from the microcredits offered and their level of financial activity. According to Jon Mancisidor from BBK, targeting clients is the key problem. Spain is not a homogeneous and uniform country. In fact, several different social realities co-exist. During the 1970s and 1980s, the Spanish Basque country experienced a very serious industrial crisis which led to an explosion of unemployment in the region with a rate of up to 60% for those under 30. Although the situation has improved since then, BBK clients remain mainly young men (60% of clients) who aim to launch a small business in the field of services (20%), trade (20%), public health (10%) or building (7%). The remaining 43% include a very wide variety of other income generating activities. Personal resources average 2000 euros. BBK itself has approved 1,318 microcredit operations giving rise to job creation. A second reality in the Basque Country concerns the problem of severe exclusion, especially among immigrant populations. This recent phenomenon has caused BBK to establish a second project in

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

which microcredit no longer serves to launch an economic activity but rather to respond to current consumer needs. According to Marcel Abbad of the Obra Social la Caixa, it is also difficult to define the profile of microcredit clients since this definition is largely based on subjective concepts (such as poverty or exclusion) Clients in the Canary Islands, for example, have a different profile from those in the north of Spain. Thus, rather than defining a model profile, it is necessary to look at the organisation which works with these clients and the level of knowledge that they have of their clients. In 2005, la Caixa doubled its microcredit business compared to 2004. To date, the microcredit department of la Caixa has examined 1,816 dossiers of which 1,354 have been approved. La Fundaci Un Sl Mn de Caixa Catalunya, a pioneer in the microcredit field in Spain, started with the observation that one in five Spaniards live below the poverty line. Its vision of labour market insertion is based on two main axes, namely access to employment and access to housing. However, the Foundation is also developing other areas of work such as the promotion of enterprise insertion and international cooperation, especially with Morocco. With respect to the level of microcredit activity, the foundation has assisted 800 clients to date including 300 in 2005 (twice as many as in 2004). The investment level is 7 million euros and the average loan is 8,000 euros. The latter figures were 13,000 euros and 9,000 euros in 2001 and 2002 respectively. This downward trend in the average amount of the loans is an indicator that needs to be watched closely since it makes it possible to evaluate the level of success in achieving the social objectives. In fact, the downward trend is also the outcome of better targeting of clients needs since 5,000 euros seems to be adequate to launch an entrepreneurial activity. Rather than presenting a model client profile for Un Sl Mn, Angel Font preferred to outline the profile of their most recent client. He is a 20 year old young man of Pakistani origin who has been living in Spain for 8 months and who manages a cybercafe sold to him by a compatriot. This man who had already saved around 1000 euros was able to obtain a loan of 9,000 euros. In this context, Angel Font recalled the words of Mohamad Yunus to the effect that microcredit exists not only to make business possible but also to enable a destitute person to generate income with microcredits from 1000 to 1500 euros.

2. Client identification process and risk guarantees


In order to better understand the operating and risk management methods of the Spanish savings banks, session moderator, Jan Evers, proposed to examine their working methods. The BBK process of client identification is based on two main entry points. Requests for microcredit may arrive through the BBK agency network. Alternatively, the social network (associations, foundations) identifies excluded persons likely to need microcredit. In both instances, the microcredit department at the BBK head office handles the requests. This department first analyses the viability of the project. It then sets up a programme of mentoring, training and follow up for the person seeking microcredit. Once this has been approved, the project is transferred to the commercial section of the BBK. The client is thus treated similarly to an ordinary bank client. According to Jon Mancisidor, the main difficulty arises from the financing of mentoring costs and structural costs. The methodology of la Caixa is very similar except that in contrast to BBK, la Caixa covers the operating costs. Marcel Abbad noted that in effect the foundations which manage the social works receive a share of the profits from la Caixa. There is a special committee which is in charge of the approval of microcredits. This brings together employees from the social work departments and the bank risk department of la Caixa. The outcome is a collaborative partnership that enables the raising of awareness among all actors concerning the social integration objective of microcredit.

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

When Fundaci Un Sl Mn de Caixa Catalunya makes a loan agreement with a client, it is handled by the savings bank as an internal financial process. After a long trial period, a new method of identifying clients has been introduced. The Caixa Catalunya network of social institutions develops close contacts with clients. This proximity (an important vector in large regions) enables clients to be followed up throughout the insertion process. The new method consists of establishing pre-committees known as territorial tables which analyse requests for microcredit. These committees estimate the project risk and make a social assessment which functions as an initial filter. Prior to the introduction of this new method, 60% of cases were refused. Now, the proximity working groups have enabled the Caixa Catalunya to develop much closer links to the situation on the ground. Once the microcredit has been accepted, the borrower also becomes a full client of Caixa Catalunya (although in the case of non-payment, it is the Fundaci Un Sl Mn itself which follows up). Thus, the second or third loan granted may be an ordinary loan. Caixa Catalunya therefore prefers not to isolate microcredit clients but rather to re-integrate them into the banking system over a period of 2, 3, 4 or 5 years.

3. Partners and financing social organisations


According to Jan Evers, the territorial approach and the links between social associations and banking agencies comprise keys to the success of the Spanish savings banks. Therefore it could be interesting to promote such partnership networks between savings banks and social entities or more generally with the kinds of social entities that exist in Spain. According to Jon Mancisidor, BBK works with two kinds of institutions. First, there are the decentralised institutions such as public bodies and municipal councils which set up development agencies financed by the State. Secondly, BBK works with a whole series of associations, NGOs and foundations which work for the integration of people, including handicapped people, abused women, one parent families and others. These are the essential link organisations for identifying needs, promoting microcredit activities and raising awareness of excluded persons concerning microfinance. These organisations are financed by the state, business social responsibility programmes and the savings banks which launch calls for projects. As a result, BBK works with 40 local development agents and 150 social organisations which deal with different aspects of social exclusion. This method of work which is characteristic of the associative sector gives good results and assists in maintaining a solid social structure. In the view of Marcel Abbad, it is also important to collaborate with the associations who do most of the close quarters work with excluded people. The banking activities of la Caixa rely on a powerful network of 5,000 territorial agencies and more than 25,000 employees. This assists in promoting distribution of information and more efficient work. The social commitment that is characteristic of the Spanish savings banks has also led la Caixa to sign more than 130 partnership agreements with different social bodies throughout the country. In contrast to BBK, la Caixa tends to work more with the central government which either subidises NGOs or involves itself directly in social action through the management of public and European funds. For example, La Caixa has signed an agreement with the Institute of the Woman, an organisation attached to the Ministry of Labour and Social Affairs. These agreements enable three actors to be brought together around the common objective of developing microcredit as a tool of economic and social integration. Marcel Abbad also insisted on the fact that the NGOs with which they work each have their own management methods, their own specific form of organisation and a well-defined budget. In terms of operating costs, it should be underlined that these associations depend greatly on the work of volunteers, which considerably reduces the operating costs, even if the present trend is towards professionalisation of the sector.

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

The management of non-payment risks was one of the main questions posed by the audience during this plenary session. The non-payment rate at Un Sl Mn Foundation is 4% although this may fall to 3%. Moreover, no difference has been noted between the reimbursement rate of men and women. The Foundation view of subsidies for borrowers very negatively. For the first microcredit, the applicable rates of interest are 10-11%. This leads many people to believe that microfinance institutions are acting usuriously. However, the fact is that borrowers reimburse their loans and that the demand for micro-loans has increased. At present, the interest rate applicable to microcredits is 6%. Although this is above the market rate, it nevertheless is not sufficient to cover the management costs of these loans. Moreover, the Foundation assumes 100% of the risk of non-payment. The microcredit sector in Spain is thus characterised by a solid associative network that plays a bridging role between the savings banks and persons who are excluded. According to Angel Font, the majority of these persons do not take the initiative to contact the banks or savings banks. They have closer links to NGOs and other associations who provide the essential linkages in the microcredit sector. This excellent social network, however, is financed in large part by the ESF. In the view of Angel Font, questions need to be asked concerning the maintenance and the sustainability of this network since certain regions of Spain will no longer be classed as Objective 1 from 2007. How will these organisations be able to meet their costs if European funds are reduced? Jan Evers thanked the speakers and concluded that the Spanish example demonstrates very strongly how micro credit and banking in Western Europe can work hand in hand for mutual profit. However, it also indicates limitations of the models so far: income from interest rates can cover bad debt and potentially the management costs but not the business support given. The dependency on subsidies is therefore an issue of the future and innovation and research in an adequate and efficient level of business support.

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Workshop 1: Scoring or not scoring your clients?


(27 October 2005 2.30 pm to 4.30 pm at Cosmo Caixa)
More and more microfinance institutions in the world are scoring their clients in order to better know them, reach them and improve the services they could provide them. How effective is this for microfinance institutions? How can it be adapted in Europe? Experience from Finland, Bosnia & Herzegovina and other Eastern European countries were shared with a general presentation of the methodology. Facilitator : Marco Habschick, (EVERS & JUNG Germany) Panelists : Dean Caire, (Bannock Consulting UK), Ilpo Jokinen, (Finnvera Finland), Ivona Planinic, (Prizma Bosnia and Herzegovina)

Many commercial banks already use scoring to evaluate and mark their clients. However, use of scoring by MicroFinance Institutions (MFIs) to assist in decision making on loan approvals is more recent. Scoring enables the risk profiles of MFI clients to be determined on the basis of knowledge of their (financial) history. This involves calculating the relationship between the repayment rate (or to be more precise, the risk of non or poor repayment) and the various factors that influence the amount, the length of the loan, the interest rate, the type of client, the form of guarantee For an MFI, the objective of scoring is to obtain better understanding and identification of their clients (poverty level) in order to improve its services. Thus, the aim of this workshop was to answer the following question: Is scoring an effective management tool for improving services to MFI clients? Do microcredit clients need to be evaluated or not? Given that MFIs have different objectives from commercial banks and that they do not focus on the same type of clients, is scoring really an appropriate tool for MFIs? Session moderator, Marco Habschick from Evers&Jung, began his presentation by posing a number of questions that the workshop should aim to address: Is scoring effective? What impact does using it have on clients? How does it work and what are the different steps to be implemented in setting up a scoring system? Are there any indicators available at present which support the use of scoring systems? What are the mistakes to be avoided? Can scoring methods be adapted for use by Western European MFIs?

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

In order to explain its usefulness for evaluating MFI clients, Marco Habschick outlined the following scoring matrix:

Real situation Predicted situation GOOD GOOD BAD OK Error BAD Error OK

This matrix compares the predicted behaviour of a client making loan repayments with his real behaviour. It highlights two kinds of error. Error arises if a credit agent predicts that a client will be a bad re-payer or that he will face difficulties in meeting his debts and this does not correspond to the real situation. Similarly, error arises when a good client is predicted but who fails to make loan repayments. Based on this theoretical framework, the use of a scoring system enables better identification of clients, adaptation of financial products to their needs and minimisation of both kinds of error. A credit agent needs to make decisions based on the likelihood of future events over which he has no control. The question is whether a client is capable of repaying the loan or not. He or she therefore needs to be in a position to make predictions. Dean Caire is convinced that scoring is a tool that can be applied by MFIs. He gained his experience in Eastern European countries where many commercial banks use scoring. Now working for Bannock Consulting (United Kingdom), he develops scoring models for public and private institutions, which enable them to achieve greater effectiveness with their clients. In Dean Caires view, the main advantage of implementing a scoring system for an MFI is to significantly reduce decision making time for approval of a microcredit to an average of around one day. Simply entering the statistics of a client who wishes to obtain a loan into a software scoring programme enables a client scorecard or evaluation file to be generated. Depending on the response obtained other information may be required. Based on this score, the Credit Committee makes the decision on whether or not to grant the loan. Scoring thus improves the effectiveness and the efficiency of an MFI and reduces the subjectivity inherent in a loan approval since the decision is based on a concrete model. It thus also enables standardisation of the procedures for granting loans and for facilitating adjustments in terms of the credit policy. Finally, scoring improves portfolio risk management, especially for MFIs. Dean Caire explained that any bank is able to implement a scoring system based on its own portfolio history and on its existing client database. Two kinds of scoring models are usually distinguished, namely statistical models and judgment models. The first model is based on empirical information for each client. It is therefore necessary for the institution to have a reliable database including the financial history of each client. These figures may involve financial balance sheets, repayment history for previous loans, etc. The model thus enables probabilities to be calculated for the risk potential of the agreed loan, or in other words, the probability that the client will become insolvent, will be a poor payer or that the loan will become problematic. On the other hand, the judgment model is addressed to institutions which have no or little historical or other information concerning their clients. They are based on pre-established decisionmaking rules such as experience, knowledge of the local market, etc. This model enables loans to be classified in terms of relative risk. Priority is given later to sharing all the information collected in order to transform the model into a statistical model. Other hybrid models also exist that combine the two preceding methods. These scoring models have provided positive results. In the European Union, they have already been used for evaluating more than 10,000 transactions. Decision time has been reduced to a day and the quality of the portfolio is constantly increasing (>2%) for all the institutions that have used the models developed by Bannock Consulting.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Based on his experience, Dean Caire makes several recommendations. It is necessary to find a scoring champion who will manage the model and to provide ongoing training in different scoring methods for this person. He/she will then be able to continue to manage the performance of the model. It is a dynamic system which needs to be updated continually based on new information gathered, especially with respect to loans that are declined or the MFI policy on cancellation of a credit. Ready made models should therefore be avoided. It is better to take the time needed to develop a good scoring model that is appropriate to the institution and to collect good data rather than applying an existing model which could be inappropriate. Each different scoring model has its own limits. In effect, they must simplify rather than reflect the true complex reality of a situation. The various models have been tested many times and suggest repayment probabilities based on a non-exhaustive number of factors. In this sense, they can even distort an analysis. However, they do provide indicative results and thus enable uncertainty to be reduced. Hence, it is important to remain vigilant concerning the evolution of various factors. Scoring thus can improve decision making both for approving and rejecting microcredits. In Bosnia-Herzegovina, the MFI Prizma, represented by Ivona Planinic, recently introduced a scoring system for its programmes for a number of reasons. First, scoring corresponds perfectly to the self-sufficiency objective of an organisation. Secondly, Prizmas social objective of improving the well-being of poor women and their families exists in parallel with its financial objective of providing its clientele with sustainable access to quality financial services. As an enterprise with a social vocation, scoring enables Prizma to increase its effectiveness and efficiency. Ivona Planinic explained that Prizma works closely with the Micro Finance Center (MFC) within the framework of the Imp-Act programme. This involves developing a system to enable the evaluation of client poverty levels as well their evolution over time. The aim is to design scorecards or poverty evaluation files. The next challenge for MFIs will be to implement an integrated scoring system enabling the evaluation of client poverty levels (Poverty scoring), to evaluate the proposed credits (Credit scoring) and to integrate these results in a single evaluation file. Prizma has chosen to implement a scoring statistical model. In order for the system to totally operational and usable, some time is required to gather client information, lines of credit, etc. that will enable reliable analyses to be made. This model is based on many social indicators such as the level of education, training, SPC (SocioProfessional Categories), access to transport, access to food, number of household members These indicators enable an appreciation to be made of the client standard of living. The following stage consists of incorporating the evaluation file into a financial balance sheet for the client thus ensuring the overall transparency of the model. As well as a scoring system, many processes have been developed in order to improve social performance. The viability of an established scoring system requires carrying out research on existing clients and on certain groups of the target population. This analysis aims to better appreciate client needs through interviews and questionnaires. This approach enables us to develop leadership within Prizma as well as to develop an enterprise culture and to provide incentives. Finally, ongoing controls provide a continual evaluation of client poverty. Ivona Planinic believes that establishing a scoring system leads to improvement in the client loyalty rate, the development of a client statistical database and to the promotion of a client needsbased approach by Prizma. Ivona Planinic concluded by emphasising that scoring is a risk management tool that reinforces the competitiveness of an organisation in an expanding market. In order to improve the likelihood of success, all staff should be trained to achieve a good understanding of the issues involved in such a system. The system developed by Finnvera resembles a rating system more than a scoring system. The aim is to define a marking system that will measure the reliability as well as the present and future

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

profitability and effectiveness of the MFI. Finnvera is a Finnish state company with limited liability. Loans to micro-entrepreneurs represent 10% of its entire vast portfolio of financing activities in its network of 27,100 clients. Finnvera mainly works with enterprises. Thus the rating consists of an analysis of the entire enterprise or MFI. Rating, like scoring is a tool to assist in financial decision making and is a risk management tool. Thus, when an MFI wishes to make an investment, it will be the subject of a detailed analysis that will lead to the preparation of a report. This report will make conclusions about the viability of the enterprise. The rating uses a marking system that enables the classification of MFIs according to their level of risk: A, B1, B2, B3, C. Finnvera is granting finance to gategories A to B2 and in special ocassions also to B3, but the maginal of the interest depends on the risk classification so that the weaker rating is the higher is the marginal. Ilpo Jokinen, risk management manager at Finnvera, explained that this process was chosen in order to control the risk level of financial portfolios after the recession in Finland at the beginning of the 1990s Evaluation of MFIs is based on many indicators, such as management which includes structuring (composition of the Board of Directors, director, organisational flow chart, key persons), the organisation of the institution (products, clients, marketing, competitiveness, technology used) and in depth financial analysis of its structure (profitability, cash flows, capital structure). These indicators are not exhaustive. All statistics are subsequently integrated into a model and a risk level is thus obtained for the business analysed. Ilpo Jokinen considers that a good rating system will enable products to be priced and financial decisions and follow up of client behaviour to be delegated and measured. Ilpo Jokinen also noted that Finnvera was able to build up a privileged relationship with micro-entrepreneurs while using this method, especially with those clients who were in the process of launching their businesses. This was very fortunate because it also enabled them to remain in continuous contact with the client. The microfinance sector is risky and some form of marking is necessary whether by a scoring or rating process. It all depends on the kind of clientele being served. It is not possible to manage a portfolio without appropriate follow up. Marco Habschick concluded the workshop by emphasising two points. The first is that any scoring system needs to be structured. We need to go further in our analysis, he said. The second illustrates that scoring should not be limited to a view of financial performance. It should also be linked to social objectives as the experience of Prizma shows.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Workshop 2: More than a loan: Innovative ways to integrate your micro-entrepreneur into the business world
(27 October 2005 2.30 pm to 4.30 pm at Cosmo Caixa)
In the European context, the simple provision of microcredit will not guarantee the success of a micro-enterprise. The development of specific services or new approaches has proven to be necessary in order to better integrate the micro-entrepreneur in the business world. This workshop presented practitioners with new ideas based on innovative experiences from Slovakia and France. Facilitator: Faisel Rahman, (Fair Finance UK) Panelists: Allan Bussard, (Integra Slovakia), Roger Abehassera, (Microsoft France), Amlie Benais, (Adie France)

Microfinance in less developed countries around the world is generally straight and direct: it is just the provision of finance with very little training and support. The European Union experience in microfinance shows that this is not enough to ensure sustainability of micro-enterprise in European countries. The three speakers are presenting their experiences in different European countries. Integra is a foundation working in networking MFIs in 6 countries in Eastern Europe and its main office is based in Slovakia. As Integra is working with SMEs, its main activities are based on women entrepreneurship with a program which started in 1999. In July 2003, that program included more than 600 women and 22 lending cycles. In 2002, Integra started a new initiative based on market access. The main idea is that in a country like Slovakia, which economy is within a transition period, the traditional market for women clients is changing radically: supermarkets, shopping malls are selling products in competition with those produced by women locally. The program called market access is treating of these problems. 3000 women are part of this program. The vision of Integra is that microcredit is not the only product for entrepreneurship, but that women also need a wide range of interventions in order to help their micro-projects being successful and sustainable. Women at risk is the main target group of the program and Integra help them giving credit to help women produce things that they can sell on the market very efficiently. According to Allan Bussard, helping unemployed poor women into the micro-entrepreneurship development process is based on community building that means developing social capital while creating community groups, networking and mentoring. In fact, this process relies on three main factors: Skills development (communication skills, mentoring, thematic training, etc.) Financial services (microcredit, banking services and public programs) Market access services (brand, consulting, retail and wholesale). This whole process, used by excluded women in Eastern Europe, is a way to create sustainable companies and jobs and to empower clients.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Integra Foundation created Ten Senses Ltd. based on the market access idea. It is a full profit company working on fair trade principles that provides market access to producers to help them sell their products while being a good steward of shareholders investments. Ten Senses Ltd. has opened shops in different Eastern countries (Slovakia, Romania and Bulgaria). The business program of this company is based on consulting needs (quality control, design and packaging issues, costs issues). Allan Bussard underlines that, with a consulting help for producers, wholesale and stores can be sustainable. He recommends also to provide consulting for others NGOs. Lessons learnt by Integras experience are : Exclusion of clients due to globalization Product and design consulting is essential Market access will provide credit access in mature economy A high demand for others MFIs and NGOs to work with those target groups An increasing fair trade market with Southern countries Social capital growth through stable supply chain Advocacy with global retail Roger Abehassera is presenting the project of Microsoft, in partnership with Adie, which is based on the use of new technologies to help micro-entrepreneurs start their business. Microsoft and Adie set up virtual training centers to train micro-entrepreneurs on computer basis (a three-day training). This course helps people using the internet and getting information on administrative work. At the end of the training session, Microsoft offers the trainees to buy a computer for less than a hundred euros! This program has existed for a year with also the collaboration of Les Restos du Coeur, a French association. It has been going on worldwide under the name of Unlimited Potential (created by Microsoft International). Amlie Bnais, working for Adie, underlines that this project has a direct impact on microentrepreneurs because it allows them to do their own administrative papers (bills, orders, etc.), to use the internet and to send mails, to communicate with their clients. This project is giving more professionals skills to micro-entrepreneurs and is using Microsoft computer skills and Adies microfinance knowledge for micro-entrepreneurs. This first experience of the program has allowed, this year, 300 clients to follow the training (Adie is hoping to reach 800 people). Adie is offering others services in order to integrate micro-entrepreneurs into the business world. There are three different types of services: Financial services, outside of credit (insurance) Partnership with big private companies giving access to new markets Administrative services and supply Amlie Bnais points out the problem of insurance access for micro-entrepreneurs. To solve this problem, April group is working on a system of protection which gives guarantees adapted to the activities at a good price for micro-entrepreneurs. A new model of follow-up and market access is done by Adie in partnership with big French firms: Primagaz is providing help to plumbers (tools, help, networking with contacts with new clients). Leroy Merlin is employing artisans. Each partner is taking profit of the partnership because the partner company is increasing the quality of its image, which is a real advantage. Adie is also setting up a fair consummation axis with several events (like Christmas market, night market) in order to help small sellers. The administrative help and supply provided by Adie is reducing costs and expenses during the first few years of activity. Micro-entrepreneurs can benefit of a juridical

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consulting help with the participation of Linklaters group (English group of lawyers) which are solving legal difficulties (problems with landlords or with clients). This help is free of charge. Adie is also giving individual help aside of its partnership with big companies (Adie wishes to build partnerships with LOral and EDF in the future).

Why MFIs have decided to provide non-financial services to bring microentrepreneurs to market access?
Non-financial services or business development services are seen by Allan Bussard as a mission to help and to attract people to develop their own company. Aside of entrepreneurship, a wide range of non-financial needs are involved and we have to give help and support to microentrepreneurs.

What are the main goals of those types of partnership?


A lot of companies are spending some money in areas not directly related to their activities. Microsoft is spending some money according to its mission which is helping people. Roger Abehassera underlines that the partnership between Microsoft and Adie is seen as a social help which is very important for the culture and the image of the company. He says that this is a very positive experience which is hoped to last a long time. Amlie Bnais concludes by saying that this type of partnership is very profitable for the company and also for Adie and that there is a real need for the micro-entrepreneurs to get tools to become more professional.

How to measure the return on investments, working with NGOs for the partner company?
Roger Abehassera says that the measurement can be done by probes because jobless people are a key European issue. The program handled by Microsoft and Adie will increase people employability through new technologies. It is also an opportunity for Microsoft to access new clients because trainees may buy Microsoft products in the future and that day they might not need support from NGOs. Allan Bussard underlines that CSR (Corporate Social Responsibility) understand that partnership is a win-win strategy. Amlie Bnais agrees and says that this may increase company results and, in that case, it is a real part of the company strategy.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Workshop 3: Working with immigrants in Europe: a new challenge fo microfinance providers


(27 October 2005 2.30 pm to 4.30 pm at Cosmo Caixa)
Microcredit organisations in Western Europe are likely to identify immigrants as potential clients. Many immigrants find themselves excluded from the labour market as a result of discrimination and because of their difficulties in meeting employers criteria. Having already proved their capacity for initiative by migrating to a new country, they naturally gravitate towards self-employment in order to earn their living. In light of these factors, this workshop set out to consider the involvement of immigrants in Western European micro-finance programmes and to look at appropriate strategies to meet the specific needs of these people. Facilitator: Miriam Guzy (EMN - France) Panelists: Klaas Molenaar (FACET The Netherlands), Unni Beate Sekkesaeter (NCN - Norway), Maika Sanchez, (Spanish Red Cross - Spain), Catherine Chaze, (Adie - France).

By way of introduction to the debate, Miriam Guzy presented an outline of the study Participation of immigrants and ethnic minorities in Western European microcredit programmes, which was launched by EMN in June 2005. This survey forms one part of a larger project carried out by EMN with 6 of its members. It was financed as part of the European Commissions DG Justices INTI programme with the objective of improving microcredit services for immigrants and ethnic minorities. Twenty two organisations from 9 countries1 participated in the survey. An early finding is that the organisations who took part were not all able to provide statistics on loans to immigrants. This raises a preliminary question as to the reasons for this lack of information which could indicate either weakness in the information systems of the organisations operating in this field or their lack of particular attention to immigrants. In addition, there are disparities in the way data is collected, e.g. the United Kingdom gathers information on ethnic minorities and not on immigrants. For simplicity, the term immigrants will henceforth be used to designate both groups. For the period 2002 to 2004 we noted: A significant increase in the number of loans to immigrants both in terms of absolute value (696 loans in 2002 to 956 loans in 2004, an increase of 46%) and in proportion to the total number of loans (from 11.5% to 13.5%), An even greater increase in the demand for loans from immigrants (+158%). Nevertheless, the conversion rate (number of loans/number of contacts) for immigrants remains lower than the overall conversion rate.

Germany, Finland, Norway, Spain, Switzerland, France, United Kingdom, Italy, Belgium.

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Questioned on their perception of obstacles confronting immigrants, 62% of microcredit organisations identified difficulties specific to immigrants at one or more of the following stages: access to loans, business management, loan repayment. The difficulties noted included: External barriers to gaining access to loans, e.g. legal status of immigrants, lack of training and/or experience of business management, barriers from microlenders themselves, related to language difficulties, cultural differences, immigrants access to information, business management issues including government regulations. 57% of respondents suggested measures that would improve immigrant access to micro-loans, especially mentoring during the planning phase of a project. Few bodies have introduced specific measures for immigrants such as specific financial products or services, training or individual follow up. Most consider themselves as neutral with respect to the origin of their clients. This survey thus illustrated both the utility of microcredit for immigrants as evidenced by the strong demand, and the existence of specific difficulties of access to microcredit experienced by immigrants which is reflected in a lower conversion rate. These factors highlight the need to look at the adequacy of existing microcredit practices for immigrants. Speaking as an expert on enterprise creation by immigrants in Europe, Klaas Molenaar of FACET responded to the introductory remarks. Firstly, microcredit is not necessarily the best service for migrants. There are a wide range of migrants, and migrants should not be assimilated with micro. Secondly, the survey emphasises limits and obstacles whereas immigrants also have more resources for starting a business than non-immigrants. They have taken the decision to leave their homes to make their lives in a new country, which already indicates a certain level of initiative. They live in an intercultural environment that obliges them to develop their adaptive capacities. They benefit from important family and social networks. FACET has identified difficulties in reaching the Turkish community, for example, because Turkish individuals can also prefer to rely on their own resources. The community functions by a circular flow of money between the country of origin and the immigrant communities. These financial flows are significant with the result that immigrants are not interested in what microcredit groups are offering. Generally speaking, FACET noted that most immigrants prefer to rely on their own funds and do not wish to become indebted. On the other hand, they appreciate training and mentoring. For FACET, the main issue in working with immigrants was not whether my knowledge is appropriate to the needs of the target group but whether I understand my client group They are not small business people, they are business people. Therefore, we need to look at their concrete needs. Drawing on a sharing of experience from Norway, Spain and France, the second objective of this workshop consisted in identifying the characteristics and the specific needs of immigrants as microcredit clients. Unni Beate Sekkester from NCN presented several portraits of immigrant entrepreneurs to illustrate the kinds of actions undertaken. NCN has offered microcredit since 1996 and 90% of its clients are immigrants. NCN services were designed specifically for immigrants although services are open to all. In NCNs experience immigrants starting point for launching any economic activity is their family finance followed by assistance from relatives/friends from the country of origin. However, these resources are often inadequate and the immigrant entrepreneur may require a loan. Work with immigrants to date has thus been based on a group and individual approach. NCN usually begins with a survey of the particular individual situation of the immigrant. This takes into account his past experience, his needs and his professional project. NCN then provides specific training (60130 hours) covering preparation of the enterprise, budget planning, planning of activities, all of which is done through a series of documents, some available in 15 languages. The loan is then provided in partnership with the foundation Microinvest and Cultura bank. In addition to technical assistance, NCN assists its clients in dealing with economic concepts such as cash flow but also

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more general issues such as culture, ethnic difference, rules and regulations, expectations of the Norwegian community, etc. Contact with NCN as well as loan requests by immigrants are usually initiated by word of mouth which also helps explain the high proportion of immigrant clients. This was the case, for example, with a Pakistani immigrant who wanted to start a fashion business. She heard about the activities of NCN through another Muslim woman who had previously received a loan. The amount of the loan was only 1200. This was, nevertheless, a large sum for her plus she was also afraid that the government would cut her social welfare benefits. This example illustrates an often identified obstacle to starting microbusinesses, namely the absence of a social welfare system appropriate to the status of microentrepreneur resulting in an inactivity trap. NCN is also lobbying the government for introduction of a transition period for welfare benefits support which will be maintained during the start up phase of a business. In another example, an Iranian woman who had been a designer in her home country started out working in a fashion house after arriving in Norway as a refugee. She took out an NCN loan for 9000 to launch her own clothing line and to organise her first fashion show. She now receives orders from the Norwegian elite and even for dresses used in the royal castle. She also assists in training for new NCN clients. The most important thing, however, is the strong involvement of such people in the network. They play a very active role in awareness campaigns, as board members, in group work, in training and mentoring and thus contribute to the success of these activities. Speaking for the Spanish Red Cross, Maika Sanchez confirmed that self-employment and microcredit provide a major solution for integrating immigrants into the labour force because of the many barriers they face in becoming hired. Immigrants often have an entrepreneurial background and a spirit of initiative. Their previous professional experience is often not recognised in Spain, due to problems with degrees standardisation. And for those who have been employed in Spain for a long time, self-employment is a way out of precarious jobs that are unrelated with their qualifications or professional experience. The immigrant clients of the Spanish Red Cross represent a broad cross-section of the community but they nevertheless share a number of common features. They find themselves excluded from the financial system. They know little about the local market and face difficulties in managing an economic activity. They often have little knowledge of the financial and legal system. They have language difficulties. Sometimes they need to simultaneously keep a salaried job while running their business project. Because of that, they lack time to manage the project. They have difficulties fulfilling legislative requirements or obtaining necessary licenses. In addition, immigrant entrepreneurs also face the usual difficulties common to all microentreprises. First, the market is unpredictable and subject to strong competition. Secondly, there is no system of social welfare for self-employed people as it exists for salaried people. For example, unlike salaried workers, self-employed individuals have no right to unemployment benefits. More generally, administrative procedures are poorly adapted to micro business and these procedures are different from one Spanish region to another. The same legislative provisions apply to small businesses with 3 employees as to enterprises with 200 personnel. Public grants are very few and they usually are very slow. In addition to these difficulties, immigrants face discrimination. For instance, immigrant people frequently have problems renting business premises. The Spanish Red Crosss IMPULSA project promotes the integration of immigrant people into the labour market through self-employment and micro credit. The same approach is followed for all clients regardless of whether they are immigrants or not. The Red Cross provides various services under the IMPULSA framework. It assists immigrants in the preparation of their projects and in the management of microcredit. It acts as a mediator between financial and social organisations. It assists with followup of the business project. The overall objective is to give people enough time to develop their projects and to gain confidence. According to Maika Sanchez, this work should be considered as an apprenticeship into the path towards employment and integration in the society and the labour market, rather than as a way of compensating for difficulties to integrate. Similarly to the Spanish Red Cross and NCN, Adie pointed out that its classical approach enables it to reach a large number of immigrants. In 2004, 16% of its clients were foreigners (from outside

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the EU) while 24% were born overseas. This group (immigrants who have retained their original nationality and naturalised immigrants) is estimated to represent 19% of its contacts which implies that there is little discrimination based on immigration status. Adie confirmed several of the previously mentioned specific characteristics of this group: an often highly developed entrepreneurial spirit, discrimination in the job market and by the banks which is often worse than for other micro-entrepreneurs, difficulties linked to language, difficulties in obtaining recognition of qualifications, and a complex juridical environment. There are also a number of specific sectors of activity in which specific communities tend to concentrate, such as trading, construction, certain services All the same, the overall results are similar to those of other clients in terms of the overall rate of loan repayment and the sustainability of business. Nevertheless, since 2001 Adie has developed a specific approach targeting the African community in the Paris region - a group including people whom it may not have otherwise reached. Most of them are working poor, often with multiple sources of income, mainly with small trading activities (91%), usually in the informal sector (98%). There are many women (76%), often alone with children and with a high rate of illiteracy (65%). At the end of 2004, 275 persons had benefited from this program. The average loan was 1300 with a 96% repayment rate. The hallmark of this new approach is direct communication with the various communities and local associations through meetings organised in local neighbourhoods. Normal procedures were simplified in order to speed up access to credit. Instead of its usual individual loans, Adie offers collective loans which are granted to three entrepreneurs who each provide guarantee for the others. Furthermore, Adie established more pro-active follow up methods in order to support legal registration of these activities. Based on the lessons learned from this experience, Adie has identified four major elements for improving its work with immigrants: The best point of entry for reaching these communities is through the communities themselves and especially by word of mouth. Adie is presently developing a training course on intercultural issues for its loan officers. The objective is to eliminate all unconscious discrimination based on cultural misunderstandings. Mentoring tools developed for these populations are to be capitalised by preparing training modules appropriate for an illiterate public as well as a guide to administrative procedures for enterprise creation by non-French nationals. Lastly, this experience confirms the need for lobbying to obtain a status enabling the legalisation of activities small supplementary income-generating activities. Early discussion in the workshop focused on the Dutch assistance program for enterprise creation in the home countries of immigrants. FACET outlined the various stages of the mentoring approach it follows with such projects. The starting point is the dream, the concept that the immigrant has for the project. At this stage, FACETs work focuses primarily on raising the awareness of the immigrant of the complexity of the real world. It includes a mirror process in which the immigrant is required to think through the whole project in order to avoid later frustration. A work plan is then determined. Here again the emphasis is on self education since it is the immigrant who gathers the necessary information. Consultants are available to assist in this process. Following the analysis, the immigrant entrepreneur must make an objective assessment of his project in order to decide whether or not it is viable. He must then present and defend his project before an external committee who will make various recommendations. Finally and most importantly, the immigrant entrepreneur must find the finance required. FACET provides no financial resources but it does offer assistance during this process and in the various negotiations leading up to the grant of a loan. As an additional part of this process, FACET provides technical assistance for the implementation of the project in the country of origin. In the view of Inge Heetvelt (FACET), a distinction needs to be drawn between immigrant entrepreneurs and people who simply want to develop a small complementary economic activity. In this context, Klaas Molenaar illustrated several levels of economic activity with the following diagram. The immigrant community is characterised by a variety of situations and needs. The point is to identify those situations for which microcredit will be an appropriate tool for the development of economic activity. For its part, FACET locates its approach on levels micro to medium. Each

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level requires its own specific approach, independently of the immigrant origin or otherwise of the project holder.

NCN located its fields of action in the small and medium categories. Here the process requires adapting to the circumstances of each individual situation. NCN deals with people. A number of final remarks were also made concerning the need for lobbying, more particularly regarding measures to avoid the inactivity trap. In Ireland, for example, a measure was passed enabling micro-entrepreneurs to continue receiving unemployment benefits for up to four years after launching an enterprise. Reaching some conclusions based on these exchanges, in Western Europe it would appear that: Microcredit is an appropriate mechanism for at least some immigrant entrepreneurs, for projects ranging from small complementary income generation activities to enterprises generating sustainable revenue. While immigrants face a number of particular difficulties, they also have certain assets in relation to the rest of the population. Many of the difficulties confronting immigrant micro-enterprise creators in Western Europe are the same as those that confront micro-entrepreneurs in general (administrative burden, lack of management experience, abrupt cut off of social welfare). These problems are nevertheless exacerbated by additional difficulties including specific administrative contraints, mastering the language, cultural differences The products and methods for immigrants do not necessarily need to be different from those offered to other microcredit clients. Experience shows that supporting self-employment through advising, administrative changes and microcredit, promotes economic integration of immigrant people with a positive effect on their social and family situation. The various interventions also identified various particularities at different stages of the lending process: Upstream: Experience shows that it is possible to reach immigrants more effectively and to establish relations of confidence by working with communities and above all by relying on word of mouth (NCN, Adie). Mentoring in the preparation and planning stage of the project is much easier if entrepreneurs are able to speak their own language and if their compatriots are involved as trainers (NCN). Raising credit agents awareness with respect to intercultural issues could assist in eliminating conscious or unconscious discrimination and in facilitating communication with entrepreneurs (Adie project). The steps to be followed by foreign enterprise creators could be inventoried in an eventual manual (Adie project). For the process to be efficient, there must be close cooperation between organisations from the social and economic spheres supporting the microentrepreneurs, particularly when the

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social organisation providing the business and development services is different from the economical body giving the micro credit (CRE). A favourable environment for business creation, including legislation issues as well as all forms of support services, are a key and essential factor in order for the microentrepreneurs experience to be successful (CRE). The regulatory environment for enterprise creation is a major concern. Improvement in this field would have significant effects for this population group. Hence pressure on public authorities is needed.

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Workshop 4: How can international MFIs reach a balance between their social and financial objectives?
(27 October 2005 2.30 pm to 4.30 pm at Cosmo Caixa)
The objective of this workshop was to understand and reflect on the different experiences of microcredit in countries outside the European Union. The panellists presented the examples of AMSSF Morocco and Prizma from Bosnia Herzegovina to illustrate how each institution has succeeded both in reaching out to the poorest and in ensuring their long term viability. Facilitator: Bernd Balkenhol, (ILO Switzerland) Panelists: Khaddouj Gharbi, (AMSSFMC Morocco); Herzegovina)

Jure

Zigo,

(Prizma

-Bosnia

The workshop began with presentations by AMSSF and Prizma. The panellists then discussed these experiences with workshop participants. AMSSF/MC was founded in 1994 and quickly began to specialise in microcredit. Its objective is to enable urban and rural entrepreneurs from economically disadvantaged communities who are excluded from the classical banking system to gain access to structured finance in order to be able to develop or stabilise their activ ities. Its social and financial objectives are as follows: To contribute to poverty reduction To contribute to the integration of women in development. Thus, women represent 86% of AMSSF/MC clients. Moreover, 56% of association employees are women. To contribute towards job creation (AMSSF/MC has 96 employees). To achieve social viability by reaching out more to women and to isolated areas, Morocco being a highly rural country. To achieve financial sustainability and profitability. This requires the association to be self-sufficient within the terms of the Law of April 1999 (a law that regulates microcredit in Morocco), namely to achieve viability in 5 years. The financial viability rating of AMSSF/MC is 104 and its operating viability is 134. The performance of AMSSF/MC has already been evaluated twice in 2003 and 2004 by the Moroccan government. It was ranked 3rd (of associations supported by the Moroccan government) among Moroccan microcredit associations that are responsible for developing effective action to combat poverty. The key success factors for AMSSF/MC that are responsible for its good performance are service quality and product range as well as the development of consumer loyalty and proximity to clients. Target population and services provided: Micro-entrepreneur craftspeople or traders exercising small sale professions and lacking easy access to classical financing comprise the main target group. AMSSF/MC clients are distributed as

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follows: 35% in crafts, 40% in trade, 15% in services, 10% in rural activities (animal husbandry). There were 9,000 women comprising 76% of its 12,935 active clients in 2005. The range of services proposed is very broad with the four principal types of loan as follows: The Solidarity Loan is essentially financial in nature. It is granted without any material or formal guarantee to groups of 5-12 people who know each other and guarantee each other mutually. The loans are repayable on a fixed schedule and range from 50 to 800 euros. However, they may reach 3,000 euros (the limit fixed by Law 18-97). The loan period may be 3, 9 or 12 months. The Housing Loan is a personal loan product launched in May 2005 following an amendment to the microcredit law which now allows loans to be made for housing, electrification and water installation in urban and rural areas. The Rural Tourism Loan was launched in 1994 following a grant from USAID. This is a promising strategic activity. The Young Graduates Loan, developed by AMSSF/MC in collaboration with the FNAM, aims to provide loans to young unemployed graduates or young beginner entrepreneurs who have been trained in management.

Developing loyalty and proximity Loyalty and proximity are clearly the second success factor for AMSS/FC. Since the population is largely illiterate, AMSSF has many field agencies which maximise contact with the clients, a factor that distinguishes AMSSF from the banks. This policy together with the AMSSF policy of promoting client responsibility mean that loan beneficiaries feel a sense of belonging to the association and consider themselves as clients rather than as persons receiving assistance. Finally, an impact study in 2004 commissioned by the FNAM (a federation of 12 Moroccan microcredit association including AMSSF) illustrates the positive results achieved by microcredit in Morocco. For example, a microcredit loan of 100 euros results in a 6% increase in household income. Moreover, 70% of women estimate that microcredit has enabled them to become autonomous as well as to achieve a certain tranquillity of spirit in their everyday lives (56%) (See The horizons of their lives). Prizma is an association created in 1997 with the objective of fighting poverty. It has been registered as a Microfinance Institution since 2001 and since then it has granted 80,000 loans. It now has 70 employees from very diverse backgrounds and it has successfully built a network of 37 offices all over Bosnia. It now has a presence in more than 80 municipalities. These offices enable it to meet the needs of 14,000 clients. The agency also has strong partnerships with USAID, KFW, UN, IFAD Its financial resources amount to 142% of its capital and its good results have led to it being awarded the UNDP prize for transparency and best practice. It was also rated by Planet Rating and classified A- which means excellent with a trend towards stability. Its mission and objectives are to improve the well-being of the most disadvantaged (women and their families above all) by facilitating long term access to quality financial services. The social objective thus forms an integral part of its mission. Its social objectives are: To improve the well-being of clients by reducing their poverty level and vulnerability To meet the needs of a large number of disadvantaged women and their families To provide clients with a broader range of services and products (by proposing new products and services) Prizma ensures its financial self-sufficiency by: Continual improvement of its productivity and efficiency Continual improvement of the quality of services provided Building respectful long-term relationships with its clients. Its range of products consists mainly of capital investment products, loan services including three main kinds of loans: enterprise and agricultural loans (which have a long repayment period and lower rate of interest), housing loans (for restoration and reconstruction), and loans for basic needs. Its activities focus mainly on maintaining its social performance by reaching the most disadvantaged populations. To achieve this, an evaluation of the conditions of poverty and more

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generally of the target populations is necessary. Different indicators enable the measurement of social performance. These include education, employment conditions, family size or consumption levels (meat, transport, etc.). More generally, the poverty scorecard shows the poverty level of the actors concerned and enables them to be categorised (4 categories of poverty exist). The collection of this information enables Prizma to achieve its social objectives and to contribute to the drafting of economic reports, marketing policies or to improving communication techniques within the institution. Management of the output and social performance is also ensured within the MFI by providing strong leadership as well as an important system of premiums and bonuses for staff.

Before opening up the debate, the moderator Bernd Balkenhol, summed up the salient features of these two MFIs, their strong and weaker points. Both are good performers in terms of poverty outreach and financial results. They can capture more scale economies than most European MFIs, thus they are more able to contain and control costs. In the Q and A period that followed, Antoine Marot (IFBC France) raised the issue of achieving a balance between the financial and social aspects. How can the social aspects such as education (literacy training, professional training, school) and/or health (eradication of illness, vaccination) be taken into account? What financing is possible? Is a global investment based on a supplementary line of credit required? According to Khaddouj Gharbi, the main areas of impact of AMSSF are autonomy for women, employment, security Microcredit is very recent in Morocco. Health and education problems are enormous. This has led other organisations to join the SSF to advocate on behalf of its causes. However, AMSSF was unable to achieve its objectives as a result of the 1997 law which requires microcredit associations to restrict their activities to microcredit and technical assistance to clients. In fact, the government wants to closely control microcredit associations because of the fear that money may be used to buy and control populations. Sylvia Rico (Foro Nantiklum de Microfinanzas) then asked the two speakers about the viability of their institutions. The answer was that both institutions have achieved viability. Prizma is totally self-sufficient from the financial point of view (which is progress compared to the past) and AMSSF is also self-sufficient and financially viable. Five years were needed to achieve financial and operational viability. Before this, AMSSF/MC depended on grants from the UNDP and USAID. However, given the size of the demand, the organisation now relies on commercial loans. (The association limits its running costs as much as possible.) Thus, it may be strategic for microcredit institutions to develop commercial activities (question of Maria Doiciu Microfinance Coalition Romania). According to Jure Zigo, a new law is expected in Bosnia which will enable Prizma to establish a division between its commercial and noncommercial activities. The challenge is to meet the social objective. The banking conditions are economic performance and profitability but the social objectives are even more important. According to Bernd Balkenhol, there is nothing wrong with having a diversity of external donor partners as long as a MFI can manage it; what was intriguing in both cases was the role the legal framework: did it enhance or stifle the MFI development? According to Jure Zigo, the fact of not being able to mobilise savings is a brake on development for microfinance organisations. At the beginning of its activity in Bosnia, Prizma received many donations. Now, however, commercial activities provide the main source of financing. Thus, it is necessary to become self-sufficient and to focus on efficiency (up to 150 commercial clients are required for each loan offered with a target efficiency objective of 300 clients). With the new legislation, Prizma will be able to implement its microcredit operations from savings which will be better and more efficient. According to Khaddouj Gharbi, the Moroccan Law N 18-97 has served to regulate the microfinance sector and to closely control it. As a result, it is no longer possible to save with AMSSF/MC. However, AMSSF/MC is a founder member of the FNAM (National Federation of Microcredit Associations), a federation with 12 microcredit association members. Lobbying by the FNAM federation thus led to the introduction of an amendment to the 1999 law with respect to housing loans for access to water and electricity. According to Bernd Balkenhol, it may be necessary to strengthen this lobbying activity.

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The next issue raised concerned mentoring activities within the microcredit framework. According to Jure Zigo, Prizma officially does not offer non-financial services to clients although the organisation did so in the past. However, it was not a major activity for Prizma. According to Khaddouj Gharbi, AMSSF/MC has no separately existing non-financial products. However, it does have field agents (each of whom is required to handle around 300 clients) who are sometimes able to raise peoples awareness of other microcredit related products. To conclude, the presentations by the two organisations made it possible to pinpoint the principal success factors for a microfinance institution. Belonging to a global microfinance network is a clearly important aspect of success for an MFI. In effect, this favours the capitalisation of knowledge, an increase in the number of microcredit projects, the sustainability of these MFIs and has an influence (as was the case in Morocco) on the legislative framework for microcredit. However, it is difficult to define a single and simple model for success. It is necessary to be attentive and to learn from other experiences.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Plenary Session: Policy measures to promote micro credit in Europe for social inclusion, what can we learn from each other?
(28 October 2005 9.00 am to 11.00 am at Caixa Catalunya)
Based on a research conducted by Facet, nef, EVERS & JUNG in collaboration with MFC EMN, this plenary session presented the main findings in 8 European countries (France, Spain, Sweden, Poland, Romania, Czech Republic, and Germany). It also discussed various barriers and bridges identified in the three main systems (employment, financial social welfare) and how these can be overcome in the fight for social inclusion. and UK, the and

Facilitator: Inge Heetvelt, (FACET The Netherlands) Panelists: Maria Doiciu, (Microfinance Coalition Romania Romania), Hugues Feltesse, (European Union), Bob Brennan, (UK Government)

The study on which this panel was based deals with policy measures promoting microcredit that form part of the European Unions Community Action Programme to combat social exclusion. It is based on transnational comparisons between seven European Union member states, namely the Czech Republic, France, Germany, Poland, Spain and Sweden as well as one state, Romania, which is in the process of accession. It involves identifying and analysing the most effective policy measures for promoting access to microcredit and to mentoring services for self-employment projects or micro-enterprises. These measures particularly target marginalised, vulnerable people who experience great insecurity. The aim is to make the regulatory regime more favourable to self-employment and to the creation of micro-enterprises. This study identifies the linkages and the obstacles between the different social, entrepreneurial, legal and financial elements that comprise the social economy. The study concludes that microcredit appears to be a valuable tool for facilitating social inclusion through self-employment, which has been assisted by various policy measures that have been implemented. The objectives of the plenary session were: To present the main results of this study. To understand the linkages and the obstacles that exist between the different elements of the economy. To identify the most effective or promising policy measures that have been implemented in various countries. To capitalise the experiences of the various participants and to identify the lessons that can be drawn. To draft recommendations favouring the future development of the sector. Session moderator, Inge Heetvelt, began by outlining the main conclusions of the study. Six factors determine the existence of a legal regime favourable to self-employment in each country: The entrepreneurial environment.

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The political context for micro-enterprises: Do measures exist which encourage selfemployment particularly for excluded populations? The social context: Do social linkages exist that could enable unemployed people to gain employment? The existence of a legal framework regulating the microfinance sector The financial environment: Do specialised financial products exist for excluded and selfemployed people? Financing and support for MFIs: Are the sources of finance for microcredit direct and sustainable? Do they provide sustainability for the system?

Each country participating in the study was evaluated on the basis of these factors and the results are presented below in the form of a radar graph.

Inge Heetvelt felt that the study has also enabled a number of aspects to be identified: 1. The groups of socially excluded: The persons at risk who are the same in all countries. They include young unemployed people from 16 to 24 years of age with no qualifications, the unemployed in general, immigrants, gypsies, handicapped people, the elderly, single parent or large families, the homeless and drug addicts. In Romania beside the above mentioned persons at risk a particular group is formed by young entrepreneurs at start and non bankable micro enterprises. 2. The different obstacles that confront each group: Individual obstacles such as entrepreneurial capacity and aptitude, culture, sense of responsibility, lack of collateral and credit history.

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The obstacles inherent in the different sectors of the economy. The various sectors pursue different objectives and the lack of coordination between them makes administrative procedures complex. Information for persons desiring to launch their own businesses is thus often incomplete.

3. Channels and good practices: In order to promote an entrepreneurial environment, policy measures need to favour self-employment and the diffusion of an entrepreneurial culture in the economy and the universities (as in Poland, for example). Social measures: It is always difficult to launch a project without the benefit of social welfare. In Ireland, every new micro-entrepreneur receives assistance for the first four years? The micro-entrepreneur receives 100% of social welfare in the first year, then 75%, 50% and 25% in the following years. This greatly facilitates the transition to selfemployment. Financial measures: The most important financial measure is the establishment of partnerships between MFIs and commercial banks. MFI clients thus become ordinary bank clients and are no longer stigmatised. Legal framework: The implementation of specialised laws encourages selfemployment and the creation of micro-enterprises as well as a coherent legal framework for the micro-crediting activity (as in the Romanian and British examples). Bob Brennan began his presentation by mentioning that there are four million Small to Medium sized Enterprises (SMEs) both profit and non-profit in the United Kingdom. Bob represents the Access to Finance directorate of the Small Business Service (SBS), created five years ago as an agency of the UK Department of Trade and Industry. The agency has a highly relevant slogan, namely to make the United Kingdom the best place to start and grow a business. Improvement in the regulation and promotion of entrepreneurial activity are the two main poles of action of this agency, which aims to improve access to finance and business support services. In November 1999, the Phoenix Fund was launched in response to the report Enterprise and Social Exclusion report published by one of the UK Treasury Policy Action Teams. This Fund, managed by the SBS, is limited in time and will expire in 2006, and has enabled people in a situation of disadvantage or exclusion to gain better access to enterprise finance and relevant business support services, with the objective of increasing the performance and quality of enterprises in the more disadvantaged communities (both geographic and thematic) of the UK economy. Better access to financial services, in collaboration with the private sector, enables gaps in the market to be filled and to strengthen competition. The Phoenix Fund was based on the principle of using entrepreneurship as one of the tools to tackle social exclusion, and had three main parts: A Phoenix Challenge Fund mainly to provide capital finance to Community Development Finance Institutions (CDFIs) for on lending to people starting up or running existing enterprises in disadvantaged communities. Usually provided alongside other business support services. The Phoenix Challenge Fund also enabled a number of CDFIs, working in partnership with local job centres, to set up six Advanced Test Trading pilots to provide finance and support for a self-employment option to people who have been on social benefits or unemployed, many for a long time. These people have often been considered as unemployable or never had the confidence to think about creating their own business but nevertheless found to have the potential. A Phoenix Development Fund to provide business development finance to organisations seeking to develop innovative business approaches in hard to reach communities. For example, ethnic minorities, women (single mothers) and people with disabilities. It has helped launch over 90 projects to promote entrepreneurial growth. Investment, on an 50/50 basis with private sector investors, in a Community Development Venture Fund (the Bridges Fund), to provide smaller amounts of equity finance to viable SMEs, with high growth potential, in the 25% most disadvantaged areas of England. From April 2006 the nine Regional Development Agencies in England will have the devolved responsibility for provision of public sector business support to SMEs. According to Maria Doiciu, it is essential to establish a legal framework to regulate the microfinance sector. She began by recalling the context in which this sector developed in Romania. Ten years ago, international funding agencies created a microfinance market by developing

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projects by providing start-up capital and knowledge. There was no real regulation of the market but it began to organise itself. In Romania the socially excluded are referred to as the working poor. There are around 350,000 businesses in the country of which 90% are micro-enterprises. Among these, 70% have no access to traditional banking services. According to a study carried out by the Enterprise Development Strengthening project and Shorebank Advisory Services, 500 million euros is needed to meet the demand for finance. Maria Doiciu explained that from the moment that funding agencies withdrew from the market, the implementation of a regulatory legal framework became necessary to respond to the growing demand for microcredit and to protect clients. Therefore, the microcredit sector is required to meet many challenges including the need to increase financing capacity, to ensure viability, to diversify portfolios as well as to establish an appropriate legal framework In the view of Maria Doiciu, there have been two significant recent advances. First, during the summer of 2005, the Parliament adopted a new law that recognised the status of microfinance institutions. Since then, a number of partnerships have emerged between the formal sector and the microfinance sector. The financial sector in Romania has become more conscious of the potential demand that microcredit represents and its social and economic impact. The bank and social investment funds should provide more funds and the MFIs take charge of selecting the dossiers, disbursing the micro-credits and collecting repayments. The transfer of MFI clients that become bankable to commercial banks is much more natural. The clients retention rate for the MFI sector is 70% which means that seven out of ten clients return to MFIs to obtain a second loan. 22,000 microcredits granted in 2005, were offered to micro-entrepreneurs, covering no more then 30% of the estimated demand. Maria Doiciu concluded her presentation expressing the desire for the MFIs to continue to support entrepreneurial activity on a commercial basis and therefore the decrease of the economic migration after EU accession in 2007, there is no need to worry about the Romanian carpenter because there are already Polish plumbers! In the view of Hugues Feltesse of the European Commission, microfinance remains a useful tool in the fight against poverty. It enables individuals to break away from social welfare, from the informal sector or from unemployment by means of self-employment and entrepreneurial activity. It can contribute to making work pay and activating welfare state approaches. Micro-credit can also help to increase poor people's participation in the economic and political processes of society. Microcredit is not a new activity. What is new is the attention given to the promotion of microcredit both at local and regional level in Europe. There are two ways of developing the microfinance sector, namely either by entrepreneurial activity and economic growth or by way of social integration including the creation of a job for all. Hugues Feltesse defined the profile of microcredit clients as follows. They are disadvantaged people exposed to social exclusion and facing poverty. They are unemployed, inactive, lacking job security or work quality, and therefore risk social exclusion, but see an opportunity to generate a more stable income by becoming self-employed, or by developing a part-time (informal) business into a registered full-time business: 1. They tend to be excluded from the banking system as they are not seen as "bank worthy", and their business proposals are regarded as not "investment-ready" 2. Often they seek initial loans much lower than 25,000 (average around only 5,000). For individuals, the only alternative may often be the use of credit cards (at high rates of interest) or a personal loan or guarantee from relatives or friends, or black market money lenders. 3. They have inadequate access to business services (including financial) and often lack both collateral and experience (or a business track record). A tailored approach is thus necessary with each case being different.

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The obstacles to be overcome by future micro-entrepreneurs are of three kinds: Financial: When people are dependent on social welfare, risks are very high if financial objectives are not achieved (and these risks are even greater in the event of failure). Economic: There is a significant risk in case of bankruptcy (negative perception). Social: The size of the risk depends on the capacity of the person. It is important to combine the different dimensions (social, economic, legal, financial) mentioned in the study referred to in the introduction to this session. For example, the system of social protection works in Ireland, financial regulation is effective in Germany, and the significant integration of the banking system in Spain and Poland shows that there is a great capacity to develop the entrepreneurial approach: Each country can learn from the others in a kind of peer evaluation. This European combination needs to be mobilised to provide support for the microfinance sector on a national scale. It is necessary to measure the impact of microfinance on employment by using precise performance indicators while taking account of cultural specificities. The approach should not be standardised. Hugues Feltesse concluded by emphasising three points to be considered: 1. Creation of the right balance between income from work against income in unemployment or inactivity, by generating a supportive environment encouraging (but not forcing) disadvantaged individuals who see self-employment as a way out of social exclusion, unemployment, inactivity, or informal economy (pull rather than push effect). 2. Putting entrepreneurial support and access to micro-finance as an instrument to contribute to social inclusion and job creation through self-employment on an equal footing with support to enhance business creation, private sector development and growth2 3. A better use and efficiency of structural fund and notably of ESF. For him, the bridge from welfare to self-employment can be difficult to achieve and requires a broad and fine-tuned package of complementary actions that address all barriers listed above, if it is to be achieved for disadvantaged groups. Additional questions: What are the future trends for the European microfinance sector: sustainable or subsidised? How important is the rate of renewal? Will it ensure the viability and sustainability of the MFIs? Is it the ultimate goal of an MFI to become a bank? How will the new law adopted by the Romanian parliament exclude other organisations which could also assist the socially excluded? The need for additional information on intermediary funds in the United Kingdom Bob Brennan explained that financial institutions in the United Kingdom play an intermediary role in the allocation of funds. In order to analyse the viability of microcredit funding, it is necessary to look at the management of these funds and particularly at their origin. What are the funding sources for MFIs? With respect to the future of the sector, Maria Doiciu explained that microfinance has revived entrepreneurial culture in Romania. Thus, the microfinance sector needs to become more commercially oriented in order to be able to respond effectively to continuously growing demand. Some MFIs have developed partnerships with banks in order to penetrate this new market while avoiding the trap of partnerships with State banks. Thus, they develop their own market while continuing to finance microentrepreneurs which enables the latter to also have access to the banks.

According to the Eurobarometer survey (flash 160 Entrepreneurship, June 2004), 45% (55% of young people) of European citizens (EU25) would be in favour of being self-employed compared to 50% who would prefer to be an employee.

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Moreover, the new law recently adopted by Parliament enables NGOs to set up and operate as MFIs on a commercial basis. Maria Nowak concluded the session with the words: Everyone can become an entrepreneur! No more social exclusion! Bob Brennan raised the stakes even further indicating that entrepreneurship is accessible to everyone and that it is necessary to simplify procedures and to adopt common standards. He underlined the importance of social enterprises in providing services to individuals. Clearly the Romanian microfinance sector is not at the same stage of development as the British sector, but is very dynamic. However, Maria Doiciu remains optimistic and is convinced that MFIs will be able to diversify their financing sources and that micro-enterprises will create many jobs in the future.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Workshop 5: Informal sector: Threat or opportunity?


(28 October 2005 11.30 am to 1.30 pm at Caixa Catalunya)
Most microfinance organisations in Western Europe work with micro-enterprises which first began in the informal sector. However, a growing number of MFIs also assist activities within the informal sector. Thus, a major challenge that has emerged in this field is the integration of such activities as micro-enterprises operating in the formal sector. Drawing on British, Spanish and French experience, the objective of this workshop was to look at various ways of providing appropriate assistance and to examine the legal framework that is required to achieve this. Moderator : Peter Ramsden, (Freiss Ltd UK) Speakers: Brice Mounier, (Adie France), Dennis Katungi, (Community Links UK), Nria Isanda, (Fundaci Un Sl Mn de Caixa Catalunya Spain)

Peter Ramsden emphasised that the informal sector accounts for 10 to 20% of the economy. It can be defined as the range of goods and services that escape fiscal regulation. More broadly, the informal sector also includes the non-declared component of salaried employment. The informal sector thus comprises a broad spectrum of activities and actors. For this reason, the subject matter of the workshop was initially confined to the informal sector itself. Soon, however, it became clear that it was also important to consider the barriers encountered by informal sector workers in integrating into an appropriate legal framework. Finally, the workshop opened up reflection on a number of issues concerning the role of MFIs in legalising informal activities.

1.

Defining the public.

It was felt that it is important first to identify the kinds of people who work in the informal sector. Here, workshop participants referred to travellers (gypsies), undocumented immigrants, marginalised groups who have difficulty in accessing qualified employment, individuals on minimum incomes who turn towards the informal sector to complement their meagre resources, and the working poor. The next task was to identify the kinds of activity involved in the informal sector. Workshop discussion generated a list of informal activities including private coaching, rental of apartments, gardening, pirate taxis, sessions with a psychologist, handyman work, removals, painting and decorating, building renovation, repairs (electricians, plumbers), computer maintenance, domestic care, agriculture This is not an exhaustive list but it does highlight the variety of activities involved. It also illustrates the importance of the informal sector in economic life and in general day to day activities. Although

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it is often shielded from view, the informal sector is a reality that is often very close to us. It was also noted that it could be useful by way of contrast to reflect on the kinds of activities that are not involved the informal sector. However, the workshop failed to answer this question.

2.

What are the obstacles?

The workshop looked next at the reasons that lead people to turn towards the informal sector. In the view of Dennis Katungi, there are several factors that tend to push people in this direction. These include lack of qualifications or lack of flexibility in employment contracts. Moreover, the status of asylum seeker may forbid formal work. There may be difficulties in obtaining recognition for foreign qualifications or professional experience. There is a 20 hour per week work limit for foreign students. Regulations may also tend to distort workers behaviour since low paid full time employment which is subject to taxes and charges leaves people in poverty. Thus, low paid jobs fail to attract job seekers. Meanwhile, social welfare beneficiaries are able to obtain a secure income just above the poverty line by working in the informal sector. Drawing on French experience, Adie considers that the main obstacles are administrative. The complexity of registration processes and the tax system form a barrier for people who are unfamiliar with the administrative system. In addition to difficulties mentioned earlier such as the non-recognition of informal experience, Adie also emphasised social barriers. The lack of appropriate social welfare procedures in such situations means that people who wish to launch their own economic activity fear the loss of access to social welfare benefits. As things stand at present, these regulatory obstacles make it difficult to enter into a legal framework. Un Sl Mn Foundation emphasised several difficulties that are common to informal sector workers including first a lack of capacity and of commercial savoir-faire and secondly a lack of training in how to operate a business. The Catalonian foundation felt that the main obstacle for these workers to transfer into a formal framework was a lack of access to social protection. Thus, formal sector self-employment could be very expensive for an informal sector worker who may lose his social welfare benefits. The lack of flexibility in the labour market was another reason that led many immigrant workers to work in the informal sector.

3.

How to legalise this sector? A possible solution: Microcredit ?


One of the main challenges for the informal sector is to find ways for evaluating and validating qualifications. In the view of Dennis Katungi, MFIs should launch training and awareness raising activities targeting young people in order to emphasise the need to obtain recognised qualifications. Secondly, he added, the role of MFIs is to lobby for more labour market flexibility in enterprise creation as well as to simultaneously set up appropriate support mechanisms.

Brice Mounier also emphasised the importance of easing formal sector restrictions on trades (for example, by promoting part time work). Concerning administrative procedures, Adie provides a mentoring service on the processes for business registration and exoneration of social charges. In France, it is possible to benefit from an exoneration of social charges and to continue to receive minimum income (RMI) unemployment benefits while in the process of regularising a business. Several advances have been achieved in the tax regime governing micro-enterprises (abolition of VAT, more flexible accounting requirements) that reduce the tax burden on budding entrepreneurs. Similarly, another new French law simplifies the administrative provisions governing capital requirements. The newly created status of micro-enterprise is particularly appropriate. During the 1990s, fixed charges and accounting requirements were also reduced.

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According to Nuria Isanda, informal sector workers would have more opportunity to integrate into the formal economy if they organised themselves in cooperative structures. Here the objective is to create groups who will support individuals in management and in the commercialisation of their products. For the informal sector, multi-service centres that offer supplementary training in business management are also required. More generally, initiatives are needed to provide mentoring services for workers moving towards the formal sector. The role of MFIs can therefore be situated at three levels: Recognising the professional situation of informal sector workers Improving the legislative framework Ensuring the promotion of entrepreneurial initiatives To achieve these tasks, MFIs need to work with community associations in order to improve the quality of life of informal sector workers.

4.

Importance of the social dimension

The fact that the community perceives the informal sector so negatively gives rise to an important challenge. In fact, this negative perception of the informal sector by the formal sector is undoubtedly the main barrier that we face. It leads informal sector workers to feel excluded and to think that they cannot influence the wider community. This creates a very powerful psychological feeling of exclusion among informal sector workers. According to Nuria Isanda, this is why the main challenge is to raise social awareness and to obtain recognition for work in the informal sector. The second challenge is to provide assistance for those people who find themselves in an illegal situation. This implies that to some extent MFIs would be cooperating with these illegal activities. On this point, Brice Mounier added that MFIs have an important role in showing that this lack of knowledge about the informal sector is unacceptable. Adie faces more communication difficulties with travellers (gypsies). In order to bridge the gap between this group and the broader community, Adie has launched actions to raise awareness as well as to provide information and assistance. In Brice Mouniers view, it is necessary to modify MFI tools in order to emphasise confidence building rather than sustainability. Training in commercial practices and business management should come later. Thus, the focus should be on working hard to raise confidence levels and to maintain social welfare income levels. The contribution of MFIs in the informal sector is therefore very significant. However, adaptability is required in order to meet various needs. Most of all, this work needs to be seen as part of an ongoing lobbying campaign against various obstacles.

Conclusion
In conclusion, MFIs can play a very useful role when they provide assistance as well as credit services. According to Maria Nowak, MFIs must struggle for recognition of the informal sector (which is particularly difficult in an industrialised country like France). Assisting people who find themselves trapped in illegality is necessary because we believe that it is possible for these people to escape from this situation. MFIs must also work hard to develop proposals to change laws both to lower social taxes and charges and to provide legal recognition for small income generating activities. In order for microcredit to become a channel of entry into the formal sector, MFIs need to first raise awareness among informal sector workers of possible legal frameworks. According to Nuria Isanda, mentoring is vital in facilitating the passage from the informal sector to the formal sector. Finally, Brice Mounier emphasised that these processes of support and mentoring can have a powerful social impact enabling people to integrate better into society and to raise their profiles.

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Workshop 6: Transparency: Agreement on basic benchmarks in Europe?


(28 October 2005 11.30 am to 1.30 pm at Caixa Catalunya)
Measuring the performance of microfinance institutions is increasingly necessary in Europe as the sector continues to grow with the consequent need to provide accurate information and to be more and more professional. Several initiatives have emerged recently in France, in the UK, in Germany and a working group on this issue has been created by EMN. The workshop raised this issue with the objective of putting it in the agenda of all European microfinance providers. Facilitator: Ellen Ledermann, (Shorebank UK) Panelists: Benoit Granger, (Mcfin France), Jean Franois Aguinaga, (European Commission), Birgitt Maas, (DMI Germany), Pratul Ahuja, (Cdfa UK)

As the microfinance sector in Europe is growing, there is a need for MFIs to provide basic information about their performance in order to do a picture of the sector in Europe and in the UK. Even when provided, information is difficult to compare because of the diversity and the heterogeneity of the sector, and also because the indicators measured are not the same in the different institutions. Benchmarking process would strongly contribute to drive up standards and professionalise the sector as well as providing transparency to donors facilitating ongoing fund raising and support. There is also some other challenges for benchmarking in European MFIs showing that indicators are positive and necessary: To improve capacity building, fundraising, capacity of risk bearing capital To maintain portfolio at risk (and to anticipate on payments delays over 15 days) To develop accountancy (costs, benefits) for each MFIs with reports (two evaluation reports will be done at the end of 2005 and at the end of 2006). For MFI governance : staff, members To get information on microfinance products To collect information on non-financial services A few MFIs will present their experiences in different countries about providing a set of indicators for benchmarking. Ellen Lederman is presenting Shorebank as the UK experience. ShoreBank was founded in 1973 to maintain banking services and arrest decline in a deprived Chicago Community that underwent rapid racial change. This large American community finance institution has grown considerably in assets and has benefited from public policy supporting development of US CDFIs. Its main bank has been able to out-perform banks of comparable size that do not have a community banking focus. Moreover, ShoreBank has managed the triple bottom line of development impacts, conservation and profitability. This institution is competent in financing residential real estate rehabilitation, in lending to small businesses and in promoting wealth accumulation for lower-income families.

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In terms of data collection on rating and evaluation, ShoreBank has worked with its major funders, such as the Ford Foundation, and promotes CGAPs Donor Guideline which focuses on five main points: Outreach: how many clients are being served? Depth of outreach: how poor are the clients? Portfolio quality: how well is the financial institution collecting its loans? Financial sustainability: is the institution able to maintain and expand without continued subsidised donor funds? Efficiency: is the financial institution providing services at the lowest cost to client? Ellen Lederman underlines the fact that international donors as well as European consultants and investors require performance indicators based on reporting in order to link further funding to assessments. It is taking a long time for trade associations to get their members to report according to indicators, often because of the member based orientation that means all members must be comfortable with providing such performance indicators. Ellen Lederman is suggesting a road map to benchmarking. First of all, the funders and donors must require transparency with a report from the MFI they are financing. This report has to be coupled with capacity building and information used by MFIs to improve operations. In the UK, people are willing to pay for assessments but have not been as ready to pay for the intensive and CDFI/MFI specific capacity building often highlighted by assessments. Donors need to make sure that MFIs do both. Then, the information collected becomes a tool for fundraising and marketing. Performance indicators then become a must have for all MFIs and this will drive the feasibility and development of benchmarking. There is a lot of mistrust in the sector. Capacity building can become a tool to improve dialogue between donors and develop other tools to improve marketing and fundraising. In that case benchmarking will be feasible. But some systems are still inadequate to analyse benchmarks and management teams can be very small (in the UK, MFIs average employees is five). Benot Granger, working for MicFin presents two evaluation and rating tools developed in France in 2002 to rate MFIs, or more widely SFIs (Solidarity Finance Institutions). Those two tools were developed by two working groups called PlaNet Rating and CERISE and were named, respectively, GIRAFE-S (S standing for Solidaire) and CERISESPI (meaning Social Performance Information tool on MFI). Benot Granger works with the two working groups as an independent consultant to develop the northern part of the tools. He defines three types of clients interested in SFI evaluation and rating : public authorities and donors (who want to make sure that public money is usefully invested) shareholders (who want to know if savings are invested in safe ways) mutual funds (to justify to investors that their investments in SFI are safe). In his presentation, M Granger develops each of the two evaluation tools according to their aim, domains of evaluation and gives a list of relevant indicators which can be measured to rate SFIs. The results of GIRAFE-S and CERISESPI can be a starting point to define common indicators on organisational performance of SFI and to use the same ratios in impact evaluation including social performance. These studies are also supposed to answer three main questions based on the orientation of the SFI (solidarity oriented?), the quality of assets management (is equity safe?) and on the efficiency and productivity of its team. GIRAFE-S is used to rate MFIs in the Southern countries (more than five years rating experience across four continents and more than a hundred reports provided to donors and public agencies). GIRAFE-S was tested in France on a set of 6 agencies belonging to three French networks called FIR (France Initiative Rseau), Adie and France Active, delivering loans and guaranties for business start-ups and development. Seven domains of evaluation and rating are taken into account by GIRAFE-S: G: Governance and Decision-Making I: Information and Management tools R: Risk Management A: Activities based on Products and Services F: Funding (Debt and Equity) E: Efficiency and Profitability S: Solidarity 36

European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

But is this model adequate to rate and evaluate all SFIs? Benot Granger says that because of the differences noticed between all the SFIs, it is difficult to get useful information to compare them. In fact, it has been noticed differences in rules and in the selection of impact measures reported to donors (which also depend on SFImission). For Benot Granger, there is a real need for SFIs to adopt common terminology, rules and indicators and to coordinate actors ideas towards local councils and donors concerning impact, costs and others indicators. Experts even say that the sector is now too young to get into rating process. But a first step would be to have a minimum of very limited set of indicators with agreed definitions. Benot Granger gives now some examples of relevant indicators of the GIRAFE-S method to measure the scale and outreach, risk and productivity/efficiency of the SFI. To measure the scale and outreach of the SFI, indicators could be: average loan size, average loan duration, number of disbursed loans in the year, number of outstanding loans, outstanding loan balance, number of active clients. To scale efficiency we could measure operational self-sufficiency because this indicator is linked with team productivity. Risk can be measured by indicators on portfolio at risk, write-off ratio and loan-loss provisions. These indicators need to be calculated in the same ways and over a defined period to be coordinate. Productivity and efficiency could be scaled on the number of loan officers and the number of staff which is an issue in itself since it is difficult to identify how much time each staff is spending on financial activities (and the ratio must include separately the contribution of volunteers). Thus, SFIs, which deliver both financial and non-financial services, are included in large organisations; that makes efficiency really difficult to measure. To conclude on GIRAFE-S, Benot Granger thinks that this method is applicable in the main European countries. On the other hand, CERISE (standing for Comit dEchanges, de Rflexion et dInformations sur les Systmes dEpargne et de credit and created by the association of CIDR, CIRAD, GRET, IRAM) considers that we cant reduce social performance to social impact and suggest to create indicators to measure elements of social performance. This method was tested on two networks in France : FIR (France Initiative Rseau) and Adie. CERISE set up a questionnaire considering four dimensions: Outreach to the poor and excluded Adaptation of the services and products to the target clients Social improvement and political capital of clients (including empowerment). Institution social responsibility (human resources policy, etc.)

transparency

and

As a result of CERISE-SFI test, some adaptations were identified (criteria of success and local culture need to be adapted) but the global framework remains useful. Jean-Franois Aguinaga, working for the European Commission (Enterprise Directorate-General in the SME finance policy unit) introduced his speech by reminding that if all butterflies are different across the world, they generally have in common four wings to fly. He oriented his presentation on why performance indicators for MFIs matters?. To that question, the first statement is based on the way to attract private investments and to raise funds for a MFI. There are private investment funds, commercially-driven, invested in some southern MFIs with an

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acceptable return rate (14%): some investors have a commercial attitude and could give funds to western European MFIs. Those need to be attractive. There is also a European public support through different programmes: MAP (multi annual program for enterprise and entrepreneurship, in particular SMEs) which proposes a financial support : partial guarantee for micro-loans European Social Fund: support to operating costs of MFIs The new plateforme: JEREMIE (2007-2013) which objective is to improve access to finance for SMEs and microcredit. With JEREMIE, MFIs need to prove their ability to manage funds and to show their performance (past; target). In this evaluation method, main indicators are based on: monitoring the evolution of the microlending activity (active clients, outstanding portfolio, disbursed loans) assessing the quality of the portfolio (at risk and write-off) improving the profitability over time (indicators on staff and profitability/sustainability). Jean-Franois Aguinaga notices that it is important to adopt common definitions and standards despite the fact that diversity exists and the butterflies are not all the same across Europe. This must be done rapidly by EMN members otherwise those standards will be imposed by outsiders. He also points out that indicators of performance will need to be reported at least once a year so as to encourage the dialogue with public institutions, access financial support and let the butterfly fly Pratul Ahuja is working for Community Development Finance Association (cdfa) which was created in 2002 as the national trade association for CDFIs (Community Development Finance Institutions) in the UK. According to him, the need for indicators and benchmarking in the microcredit sector has emerged because there is no reliable data to identify strengths and weaknesses within the sector. Also, stakeholders are unable to commit funding if they cannot judge the relative performance of organisations. It is these factors coupled with the desire to develop a selfregulatory framework that is driving the indicators and benchmarking initiative. But the setting up of this framework faces some challenges because CDFI activities and missions are diverse; models, structures, products offered and market served are different. Thus, benefits of indicators and benchmarking appear to be difficult to illustrate in the initial stages to members. Cdfa publishes an annual member survey including many information and datas such as: distribution of Cdfis, their structure and markets products and services offered money hold by Cdfi and its sources portfolio performance staff structure and governance what the future holds Cdfa also has an indicators and benchmarks project based on the development of a selfregulatory performance framework. The objectives of this project are to develop transparency to be able to measure performance of each institution and to compare results through the use of a common framework. The project is expecting to improve the effectiveness and efficiency of Cdfis in UK so as to give better information for investors and Cdfi stakeholders. Cdfas Performance Framework is organised into 5 key areas: Financial (sustainability/profitability, portfolio quality, etc.) Organisational performance (human resources, leadership, etc.) Operational Market Impact (present and future)

But this project is just beginning (started in April 2005). It will last till March 2007. The annual year report 2006 will highlight the progress of members in developing indicators and what improvements have been made into setting benchmarks. A common framework will be used by

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Cdfa to analyse performance: this will improve effectiveness and efficiency of members and nonmembers. DMI is a German MFI which started in April 2004 on the basis of pilot projects inspired by Cdfa. It is composed of 56 members of various institution supporting small business creation and development (like business services, research institutes, etc.). In Germany, the task of DMI is capacity building, fundraising to improve microfinance sector. DMI started a benchmarking process to develop microfinance sector in Germany into combining the functions of an apex organisation and a funding institution and to provide information for institutional building. DMI benchmarking process has five different approaches: to maintain portfolio at risk to comply with terms of funds (i.e., repayment delays>15 days and loans written-off>180 days) cost accounting (time and money, revenues and public funding) MFI governance (staff, target groups, quality management, strategic partnership, etc.) Product information (design and conditions of loans) Non-financial services Brigitte Maas underlines that this process has to face some challenges with regional MFIs during the agreement process about indicators (musts, goods, nice-to-haves) and about work sharing (sources and processing data). There is also a challenge in faith in confidential handling of data. Developing indicators for social microlending is also a challenge for institutional building in Western Europe. At the moment, Brigitte Maas think that German MFIs need more time to collect data and need more information about institutional building. Brigitte Maas is asking some questions about how to determine social indicators for social MFIs and how to evaluate social impacts from microlending? As a conclusion of this workshop, some comments and elements of discussion have been added to the presentations. Some questions have been asked concerning the type of indicators, how to use them, and what are the challenges faced in reporting and tracking those indicators. It has been noticed that while setting up the benchmarking process, we have to take into account the social side of MFIs because it is really difficult to compare organisations which have different missions. We have to pay attention to who makes the report, who are the donors (who can have different objectives with their funding). When evaluating an organisation we need to be aware if there is training or not, if the institution is social or not. There is a need to measure MFIs by their own goals.

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Workshop 7: Closing the lending gap: are special programmes needed for Europes female entrepreneurs?
(28 October 2005 11.30 am to 1.30 pm at Caixa Catalunya)
In Europe women represent 38% of microcredit beneficiaries. By contrast, in the rest of the world 60% to 70% of microloans are made to women. Drawing on a recent EMN study, speakers from Spain, the UK and Finland will discuss whether special programmes are needed to increase the number of European women accessing microloans. Experiences of targeting women entrepreneurs will be shared. Moderator : Tamara Underwood, (EMN France) Speakers: Inger Berggren, (Banco Mundial de la Mujer Spain), Anneli Soppi, (Finnvera Finland), Joanne Ludbrook, (WEETU UK)

This session was organised into three parts. During the first part, the session moderator presented the preliminary results of a study being carried out by EMN on womens participation in microloan programmes in Western Europe. In the second part, 3 practitioners presented their view on whether special programmes are needed for Europes female entrepreneurs. In the third part of the session, participants asked questions and worked together to develop recommendations to be shared during the plenary session in the afternoon.

1. Moderator Presentation
Women in Europe tend to launch their businesses with fewer financial resources than men do. They often rely on informal financing sources such as family or friends. This is particularly true for immigrant women and for women from ethnic minorities. As a result, womens businesses are often under-resourced which on its own can be a principal of business failure. As studies by some European universities have shown, the banking sector appears to have no reason to discriminate against women since the repayment rate is the same for both men and women. However, women tend to requestion smaller loans than men do. Small loans are linked to higher administrative costs for banks. Moreover, lacking collateral, women often find it difficult to provide banks with guarantees. Thus, microcredit programmes appear to offer a potential solution for women entrepreneurs who are excluded from the traditional financial system. In industrialised countries, these programmes provide entrepreneurs with access to small loans, alternative guarantee mechanisms and more attractive repayment options. This workshop is based on the preliminary results of an ongoing survey carried out in 2005 by Tamara Underwood of the European Microcredit Network (EMN). Twenty-two Western European microfinance institutions (MFIs) had participated in the survey as of October, 2005. The situation in the West seems to differ markedly from that in Eastern countries. With the exception of

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Spain where the female participation rate in microcredit programmes about 65%, the rest of Western Europe appears to lag behind with a 38% average rate for womens participation in microcredit programmes. This is low compared to OECD countries such as the United States and Canada where the rate is 50% and developing countries where the rates are as high as 70%. The EMN study thus aimed to determine the reasons for the low rate of womens participation in Western Europe. The objectives of this workshop are: To share the findings of the EMNs recent survey on womens participation in microcredit programmes in Western Europe To analyse the reasons for the lower rate of to women when compared to other regions To discuss whether there is a need for specialised actions targeting women to reduce this gap To propose possible strategies for reaching women entrepreneurs Tamara Underwood began by highlighting the main preliminary findings of the EMN survey. She outlined the standard profile of the female entrepreneur in Western Europe as follows: Runs a microenterprise (87%). Completed secondary school (39%) or university (43%) Married or in a relationship, with children Less than 35 years old when she started her business Receives no assistance with domestic tasks Started her business in a part-time capacity and works an average of more than 48 hours a week. Findings from the study indicate that the low rate of participation by women in Western European microcredit programmes is due to a combination of factors on both the demand and supply sides. On the demand side, the status of the woman in society and in the family seems to affect the demand for microcredit. In reality, the challenge of managing the triple burden of household chores, family responsibilities and a microenterprise discourages many women. It also seems that women are relatively wary of risk and entrepreneurship is perceived as risky. The fear of failure and bankruptcy are also factors that explain the reticence of women to become entrepreneurs. In the view of the MFIs, women have difficulty accessing loans from microlenders because they lack professional training and experience in the start-up and management of enterprises; they lack collateral and guarantees as well as self-confidence. The survey results indicate that initiatives specifically targeting women seem necessary particularly in the period leading up to the disbursal of a microcredit. Measures are recommended to assist with the development of business plans, management and financial products appropriate to a feminine clientele. The majority of MFIs surveyed believe that it is also important to have female staff to provide this kind of assistance to women. Although most MFIs appear to be conscious of the constraints that affect women in particular, the majority do not have policies or programmes that target women. For example, 75% of the organisations surveyed said that they had no specific policies to guide their work with women entrepreneurs. 65% did not have products appropriate to this client group while 55% failed to offer adequate training or technical assistance for women launching new businesses. Moreover, while women comprise 54% of MFI staff, they hold only 3% of management positions. If women around the world face similar demand-side constraint, is the difference in lending rates due to a lack of programmes that take account of womens specific needs? Are specialised microcredit programmes for women entrepreneurs therefore needed in order to improve the participation rate?

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2. Practitioner Presentations
Inger Berggren works for the Banco Mundial de la Mujer, the Spanish affiliate of Womens World Banking (WWB). This international organisation, which has its headquarters in New York, was founded in Spain in 1998 and works exclusively with women. It offers four kinds of mentoring services for assisting the start-up of micro-enterprises, namely information, training, financing and business services. These financial activities are facilitated by three financial organisations, namely la Caixa, Caja Madrid and Banco Popular. Microcredits of up to 15,000 euros are granted in partnership with Fundaci Un Sl Mn de Caixa Catalunya. Inger Berggren began by outlining the situation of women in Spain. Although they comprise half of the population, womens salaries represent only 1/10 of the total salary mass and only 1/100 of the wealth generated. As at the end of 2004, only 31% of women were self-employed. Women entrepreneurs face many difficulties in launching their own businesses including lack of information on the business world, lack of vocational training, lack of contacts and networks as well as difficulties in reconciling work and family life. 85% of loan requests from women are refused by the traditional banking system. What are the reasons? According to Inger Berggren, banks aim to ensure their growth by increasing staff numbers and developing their range of activities. The main problem is that banks have preconceived notions of how a business needs to be launched and managed. The initial interview with the bank usually covers the personal situation of the woman (married, children, single) as well as the activity of the future enterprise. Since women tend to be more modest in their ambitions than men, banks interpret this as a lack of profit potential and thus shy away from financing such projects. There are also too many loan conditions to fulfil including guarantees, mortgages etc. Banking jargon is also difficult for these women to master. Inger Berggren therefore believes that specialised assistance is necessary for women wanting to start their own business. This may include help in developing negotiation plans, specialised financing (microcredit), training, follow-up of their new activity, meetings to exchange and share their new experiences. Other proposals could also be considered such as preparation of training manuals, seminars on banking negotiation, holding meetings with the banking sector. All these proposals aim to familiarise women with the legal and banking frameworks for the start-up of a microenterprise. The mentoring activities of the Womens World Banking in Spain have been extremely successful. As a result, 10,000 women have been assisted in launching their projects leading to the creation of 2910 new enterprises generating more than 5,000 new jobs. The banks have also supported this initiative by entering 860 partnership agreements with the WWB. Womens World Banking emphasises that microcredit should not be perceived as social dumping. It needs to be seen primarily as a tool that values the status of women in society. It is also a solution that enables women to integrate into the labour market and to escape from precarious employment or unemployment. Inger Berggren concluded by emphasising that, although 70% of women believe that their level of life has improved, the majority of them work seven days and more than 80 hours a week. Jo Ludbrook represents Womens Employment, Entreprise and Training Unit (WEETU), a non-profit organisation started in 1987 in Norfolk in the United Kingdom. Jo Ludbrook explained that the WEETU training programme, Full Circle, is primarily designed to target women and to address their specific needs for more access to financial resources, more training and the need to boost self confidence after being isolated from the business world. It is a programme of personalised loans comprising a complete package including training, advice, loan and long term mentoring for the projects of women entrepreneurs. Women borrowers are required to form Lending Circles. Loan amounts vary from 2,200 euros repayable over 20 months

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to 3,600 euros over 24 months with an interest rate of 9.25%. WEETU may also assist women in opening bank accounts. The programme has been highly successful. More than 500 women entrepreneurs have been trained since the launch of the programme, with 50 Lending Circles created and more than 150 loans granted. The rate of survival of enterprises created by women is 70% and the repayment rate has reached 94%. Jo Ludbrook believes that the evaluation of the programme demonstrates that it has a highly beneficial social impact. Based on comparisons before and after access to training, significant changes are observed in the personal behaviour of clients (increased self-confidence), as well as in their community and civic behaviour (better integration in society) and professionally (in their choice of support network and better access to financial services). Finally, Jo Ludbrook presented the Prowess association founded in 2002 to promote mentoring services for female entrepreneurs and to lobby government authorities. Every year, over 100,000 women benefit from mentoring for the launch or management of their businesses. The initiatives of this association enable an additional 1.5 billion pounds of income to be generated within the UK Anneli Soppi represents Finnvera, a Finnish state owned specialised financing company, public limited company, whose objective is to correct gaps in the market. Finnvera has 27 100 clients and with a network of 16 regional offices Finnvera offers specialised loans for women entrepreneurs as part of its wide range of financing activities. These loans vary from 3,000 to 35,000 euros. As well as financing, which totalled 57 million euros in 5,500 loans by the end of 2004, these programmes offer a range of counselling, training and mentoring services for business start-ups. The non-financial component of these programmes comprises a service chain together with finance instrument and is important part of Finnveras pre-credit risk management strategy. Working through a network of government agencies enables Finnvera to pre-select clients and to improve the survival rate of the enterprises created. Finnvera has learnt much in working with women entrepreneurs. According to Anneli Soppi, the rate of self employment of clients is 70% of whom 2% are from ethnic minorities. The threat of unemployment and the opportunity for self-fulfilment are the two main factors motivating women to launch their own business. More than 70% tend towards the tertiary sector which has a very high potential for development. Moreover, the five-year survival rate for start-ups managed by women is 76% compared with 79% for all start-up enterprises over the same period. Most enterprises which fail nevertheless manage to repay their loans. Women entrepreneurs in Finland want to keep their risk levels manageable. This is why the majority of them gravitate towards the less prestigious sectors. In one sense, the growth of these enterprises is still limited. However, women also have to face up to the important challenge of combining family and professional life. Anneli Soppi sees a number of challenges that Finnvera will face in the near future in order to better support women in launching their businesses. Finnvera will need to meet growing demand, simplify loan approval procedures, develop electronic commerce and manage loan defaults. At the end of the day, it boils down to focusing more on the non-financial aspects involved in all the support services. Finnvera considers that it is important to implement best practices in order to better target women. The company benefited from an excellent media image in 2005 as a result of the International Year of Microcredit, which helped in raising awareness in Finland, a country with a reputation for providing equal opportunities for men and women.

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3. Questions and recommendations


Comments
Womens Institute of Spain- This representative believes it is important to promote and train women and men in entrepreneurship starting in secondary school. Believes mainstreaming of women is important. Based on the experience of Network Credit of Norway (NCN), it is also necessary to involve men in the process. Excluded individuals in any society face the same obstacles to credit as women. Unni Beate Sekkesaeter noted that in Bangladesh a microcredit programme for women was launched that involved men in the whole process. As a result of working together, women were able to gain their freedom. Implementing specialised programmes for women may also present some real dangers. In the end they may stigmatise women and thus become another factor of exclusion. Center for Alternative Initiatives It is important to differentiate assistance but also to mainstream women at the same time. A Basque representative felt that there are both men and women who have difficulty in starting their businesses and it is important to work with both groups.

Questions
What is the impact of WWBs programme ? Response: WWB is undertaking a study and so far the results indicate that 70% of women say their lives have improved thanks to the assistance provided by WWB and the launch of their businesses. What is the legal status of microlenders? Response: most are registered as non-profit organisations. In some countries, however, they have a different status in between that of a non-profit and a profit making bank.

Conclusion
Participants, with facilitation from Tamara Underwood, made a number of recommendations on the need to develop specialised programmes for women: It is necessary to focus on clients needs. Microlenders need to adopt an approach appropriate to the specific needs of all clients: women, immigrants, ethnic minorities, Roma etc. Loan products and non-loan services offered need to be tailored to the specific needs of different client groups. It is important for MFIs to raise adequate funds to support training and technical assistance activities for all clients. Including women in the business world could change and influence the entrepreneurial culture. MFIs should consider developing benchmarks regarding womens participation in microloan programmes.

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Participants list
Listed by Country

Albania
Mr Benet Beci ASC Union - Albania Ms Zana Konini ASC Union - Albania Mr Quemal Lashi ASC Union - Albania Mr Perparim Merjemaj BESA Foundation - Albania Ms Irma Mitrushi BESA Foundation - Albania Mr Bajram Mucaj BESA Foundation - Albania

Mr Nicolas Pirotte Sowalfin - Belgium Mr Daniel Sorrosal PlanetFinance - Belgium Mr Zoltan Valcsicsak Levi Strauss Foundation - Belgium

Bosnia and Herzegovina


Mr Tarik Barakovic Partner Microcredit Organisation Bosnia and Herzegovina Mr Zlatko Bars Banking Agency of the Federation of Bosnia and Herzegovina Bosnia and Herzegovina Mr Denan Bogdanic MCO LOKmicro Sarajevo - Bosnia and Herzegovina Mr Sanin Campara Microcredit Organisation "Mikra" Bosnia and Herzegovina Ms Almedina Causevic-Esko MCO LOKmicro Sarajevo - Bosnia and Herzegovina Ms Tamara Glusac Foundation for Sustainable Development Microfinance Unit - Bosnia and Herzegovina Ms Belma Halimic Microcredit Organisation "Mikra" Bosnia and Herzegovina Mrs Belma Izmirlija Federal Ministry of Finance Bosnia and Herzegovina Mrs Dzenita Kulovac MCO LOKmicro Sarajevo - Bosnia and Herzegovina

Austria
Ms Sandra Leitner Joanneum Research Austria Austria Mr Horst Maunz OSB Consulting GmbH - Austria Mr Bernd Niegelhell Styrian Business Promotion Agency (SFG) Austria Mrs Claudia Schallauer Vondi Consulting - Austria

Belgium
Mr Jean Franois Aguinaga European Commission - Belgium Ms Julie Bouchat Fonds de Participation - Belgium Mr Hugues Feltesse European Commission - Belgium

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Ms Ljiljana Marjanovic Central Bank of Bosnia and Herzegovina Bosnia and Herzegovina Mr Mirsad Milavic Microcredit Organisation SUNRISE Bosnia and Herzegovina Mrs Dusanka Novakovic Banking Agency of Republika SRPSKA Bosnia and Herzegovina Ms Ivona Planinic Prizma - Bosnia and Herzegovina Mr Mirzet Ribic Foundation for Sustainable Development Microfinance Unit - Bosnia and Herzegovina Ms Snjezana Rudic Ministry of Finance of Republika SRPSKA Bosnia and Herzegovina Ms Seida Saric MCO - Women for Women International Bosnia and Herzegovina Mr Milan Seselj Microcredit Organisation SUNRISE Bosnia and Herzegovina Ms Brankica Starcevic Microcredit Organisation "Mikra" Bosnia and Herzegovina Mr Simeun Vilendecic Sinergija Plus - Bosnia and Herzegovina Mr Jure Zigo Prizma - Bosnia and Herzegovina

Croatia
Mr Josip Borzic DEMOS - Croatia

Denmark
Ms Dina Kesic EVU - Denmark Mrs Irena Novotny EVU - Denmark Ms Shahriar Shams Ili EVU - Denmark

Finland
Mr Ilpo Jokinen Finnvera Plc - Finland Ms Anneli Soppi Finnvera Plc - Finland

France
Mr Roger Abehassera Microsoft France - France Ms Michala Audrin Universit de Rennes 1 - France Ms Amlie Bnais Adie - France Ms Charlotte Bouguet Adie - France Ms Pauline Chancellee Universit de Rennes 1 - France Ms Catherine Chaze Adie - France Mr Christophe Forsinetti EMN - France Ms Maria Franco EMN France Mr Benoit Granger MicFin - France Mr Philippe Guichandut EMN - France Ms Jacqueline Guillin Ministre Franais des Affaires Etrangres France

Cameroun
Mr Hyacinthe Founsie Firingvest - Cameroun Ms Marie Louise Secke Pouka Ministre des PME, de l'Economie Sociale et de l'Artisanat du Cameroun - Cameroun

Congo (Democratic Republic)


Mr Alphonse Kisolokele RIFIDEC Rpublique Dmocratique du Congo Mr Ramazani Musongo PAIDEK Rpublique Dmocratique du Congo

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Ms Miriam Guzy EMN - France Ms Mline Hardy Universit de Rennes 1 - France Mr Geoffroy Lefort ADIE France Ms Isabelle Leung-Tack Microsoft France France Ms Rene Madrolle Universit de Rennes 1 - France Mr Antoine Marot IFBC - France Ms Estelle Mille Adie - France Mr Brice Mounier Adie - France Mr Alain Mundinger ANPE - Direction Gnrale - France Ms Maria Nowak EMN - France Ms Eva Schwebel Council of Europea Development Bank - France Ms Caroline Tsilikounas MFC - France Ms Tamara Underwood EMN France Ms Yael Zlotowski Crdit Coopratif - France

Hungary
Mr Tibor Beres Mikrohitel Rt. - Hungary Mrs Jolan Borbely Fejer Enterprise Agency - Hungary Mr Gyrgy Lukacs Autonomia Foundation - Hungary Mr Tibor Szekfu Fejer Enterprise Agency - Hungary Mr Gabor Winkler Mikrohitel Rt. - Hungary

Ireland
Ms Lorna Coleman First Step Microfinance - Ireland

Kosovo
Ms Mirjeta Betjullahu Kosovo Enterprise Program - KEP - Kosovo UNMIK Ms Gazmore Cena Kosovo Enterprise Program - KEP - Kosovo UNMIK Ms Leslie Enright International Centre for Community and Enterprise Development - ICCED - Kosovo UNMIK Mr Luftar Gashi Kosovo Enterprise Program - KEP - Kosovo UNMIK Ms Merita Hoxha Kosovo Enterprise Program - KEP - Kosovo UNMIK Mr Menduh Lluka Kosovo Enterprise Program - KEP - Kosovo UNMIK Mr Lulzim Shala Kosovo Enterprise Program - KEP - Kosovo UNMIK

Germany
Mr Jan Evers EVERS & JUNG - Germany Mr Christophe Guene DMI - Germany Mr Marco Habschick EVERS & JUNG - Germany Ms Dagmar Hayen EVERS & JUNG - Germany Mr Christoph Hofmann KFW Bankengruppe Germany Ms Brigitte Maas Deutsches Mikrofinanz Institute e.V. Germany

Italy Mr Luciano Bonomo Giordano Dell'Amore Foundation - Italy Ms Luisa Brunoni Micro-bo Italy

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Mr Simone Di Castri Universita di Bologna Italy Mr Andrea Nardone Fondazione Risorsa Donna - Italy

Mrs Annika Saanio Nettverkskreditt Norge - Norway Mrs Elin Mary Sabbasen Innovation Norway - Norway Ms Unni Beate Sekkesaeter Network Credit Norway - Norway Ms Asa Sildnes Network Credit Norway - Norway

Lithuania
Mr Gintautas Vilkas Investiciju ir verslo garantijos, Ltd. (INVEGA) Lithuania Ms Janina Zostautiene Investiciju ir verslo garantijos, Ltd. (INVEGA) Lithuania

Poland
Ms Izabela Norek Inicjatywa Mikro - Poland

Macedonia
Ms Snezana Andova Savings House Moznosti - Macedonia Mr Darko Nedelkovski Savings House Moznosti - Macedonia Ms Sandra Stojanovska Savings House Moznosti - Macedonia

Portugal
Mr Manuel Brandao Alves ANDC - Portugal Ms Ana Campos ANDC - Portugal Mr Pedro Flix ANDC - Portugal Mr Rui Gonalves ANDC - Portugal Ms Marta Mucha ANDC - Portugal Ms Isabelle Neto ANDC - Portugal Mr Luis Vasconcelos ANDC - Portugal Mr Jorge Wemans ANDC - Portugal

Moldova (Republic of)


Mr Igor Gudumac Microinvest - Republic of Moldova

Montenegro
Mr Sasa Popovic University of Montenegro - School of Economics Montenegro - S&MN

Morocco
Mrs Khaddouj Gharbi AMSSF/MC - Morocco Mrs Amina Magdoud AMSSF/MC - Morocco

Romania
Mr Attila Antal-Bacso National Agency for Unemployment - Romania Ms Maria Doiciu Microfinance Coalition Romania Eurom Consultancy and Studies - Romania Mr Radu Dan Iacob National Agency for Development of Mining Regions - Romania

Norway
Mr Oyvind Holmboe Basmo Kompetansesenteret for id og forretningsutvikling as - Norway Mr Morten Eid Naeringssenteret I Vestfold AS Norway

Mr Luis Almaraz

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Russia
Mr Vladimir Bykov Chamber of Commerce and Industry of he Russian Federation - Russia

BBK - Bilbao Bizkaia Kutxa - Spain Mr Antoni Angerri Feu Associacion de Mentores y Emprendedores Spain Ms Beatriz Araneta MITA Spain Ms Mercedes Asenjo Alvarez Fundaci Un Sol Mon - Spain Ms Concha Barranco AD Molinos de Viento EQUAL Factoria de Empresas Spain Ms Montserrat Basora Farr Barcelona Activa, SA SPM - Spain Ms Idoia Belasko Behargintza Getxo - Centro de Empleo y Desarrollo Economico - Spain Ms Inger Berggren Fundacion Laboral WWB en Espaa Banco Mundial de la Mujer Spain Ms Ana Bernal Pichardo Obra Social Caja San Fernando - Spain Ms Maria Jos Blanco Gutierrez Barcelona Activa, SA SPM - Spain Ms Margarita Calafell Martinez Federacin Sindical TRADE Spain Mr Albert Camps Obra Social la Caixa Spain Ms Victoria Caadas Vazquez Promocion Economica de Sabadell - Spain Ms Cristina Carballal Obra Social la Caixa Spain Ms Susana Chamorro Prieto Grameimpuls S.A. - Spain Mr Fernando Del Barrio APLA - Spain

Senegal
Ms Fatou Binetou Ba Mutuelle d'Epargne et de Crdit OMART Senegal Mr Mayacine Dioum Mutuelle d'Epargne et de Crdit OMART Senegal Ms Ndiande Gueye Mutuelle d'Epargne et de Crdit OMART Senegal Mr Omar Gueye Mutuelle d'Epargne et de Crdit OMART Senegal Mr Bounama Male Mutuelle d'Epargne et de Crdit OMART Senegal Mr Pape Touty Male Mutuelle d'Epargne et de Crdit OMART Senegal Mr Cheikhou Oumar Mbaye Mutuelle d'Epargne et de Crdit OMART Senegal

Serbia and Montenegro


Ms Olivera Bjekic Micro Development Fund - Serbia and Montenegro Ms Milena Gojkovic Micro Development Fund - Serbia and Montenegro

Slovakia
Mr Allan Bussard Integra Foundation - Slovakia Ms Milena Uhlikova Integra Foundation - Slovakia

Mr Javier Del Barrio APLA - Spain Ms Monica Delgado Obra Social la Caixa Spain Mr Xavier Dumont Fundacio CP'AC - Spain

Spain
Mr Marcel Abbad Sort Obra Social "la Caixa" - Spain

Ms Mar Echenique Cruz Roja Espaola - Spain

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Ms Mercedes Farr Obra Social la Caixa Spain Mrs Rosario Fernandez Fundacion Tomillo - Spain Ms Lorena Florez Salgado Cruz Roja Espaola - Spain Mr Angel Font Vidal Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Anna Francs Mogas Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Mariana Gallo Fundaci Un Sol Mon Caixa Catalunya Spain Ms Maria Aranzazu Gandariasbeitia Ugalde BBK - Bilbao Bizkaia Kutxa - Spain Mr Oriol Garcs Bonet European Institute of the Mediterranean Spain Mr Albert Gasch EMFO Spain Ms Marta Gay Borrel Fundaci un Sol Mon Caixa Catalunya - Spain Ms Maria Elena Gil Bartolom Unin de Cooperativas Madrileas de Trabajo Asociado UCMTA - Spain Ms Ana Gorostegui Transformando - Spain Ms Laia Grabulosa Descals Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Montse Grau Gaspa Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Silvia Grau i Parramon Interarts Spain Ms Nuria Isanda Capell Fundacio Un Sol Mon - Caixa Catalunya - Spain Mr Sebastian Jodar Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Encarna Jodar Fernandez de Piar Ayuntamiento de Calella - Spain Mr Jesus Lens Asociacion Internacional de Entidades de crdito Prendario y Social - Spain Ms Asuncion Luzan Fernandez Agrupacion de Desarrollo Corredor Siderurgico Spain

Ms Sara Male Unin de Trabajadores Autnomos de Catalunya Spain Mr Jon Mancisidor BBK - Bilbao Bizkaia Kutxa - Spain Mrs Rosa Maria Marina Moneo Instituto de la Mujer - Ministerio de Trabajo y Asuntos Sociales - Spain Ms Maria Inmaculada Martin Servei Solidari - Spain Mr Eduard Mateus Fundacio Metis - Spain Ms Piroska Matos Agrupacion de Desarrollo Corredor Siderurgico Spain Mr Jose Luis Mejias Transformando - Spain Ms Elena Mochales EMFO - Spain Mr Oscar Morales Comisin Catalana de Ayuda a los Refugiados Spain Ms Montserrat Moreto Accio Solidaria contra lAtur Spain Mr Armando Muriel NODUS Consultores S.L. Spain Ms Isabel Olivares Ponce Ayuntamiento de Cerdanyola - Spain Mr Bernard Ornilla Cruz Roja Barcelona - Spain Ms Helena Pascual Franquesa Spain Mr Lorena Melania Pazmio Lemos SURT - Asociacion de Mujeres para la Insercion Laboral - Spain Ms Mara Jess Prez Fernndez Centro de apoyo a la Microempresa Fundacin CODESPA Spain Mr Roger Pumares Carceller Diputacin de Barcelona - Spain Ms Carmen Rodriguez Gil Asociacion Sociocultural IBN Batuta (ASCIB) Spain Ms Agustina Rodriguez Sancho Ayuntamiento del Prat de llobregat - Spain

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Ms Isabel Roman Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Nuria Ruiz Ayuntamiento de Girona - Spain Ms Maika Sanchez Martinez Cruz Roja - Spain Ms Belen Sanchez-Rubio Garcia Fundacion Secretariado Gitano (FSG) - Spain Ms Claudia Sanguinetti Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Belen Secades Mochales Agrupacion de Desarrollo Corredor Siderurgico Spain Ms Juli Silvestre Fundacio Un Sol Mon - Caixa Catalunya Spain Ms Llucia Torras Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Marta Torras Fundacio Un Sol Mon - Caixa Catalunya - Spain Mr Josep Maria Trullas Fundacio Un Sol Mon - Caixa Catalunya Spain Mr Jon Ugalde BBK - Bilbao Bizkaia Kutxa - Spain Mr Augusto Uriarte Durangaldeko Behargintza - Spain Ms Paula Veciana Botet Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Milena Verri Biosca Fundacio Un Sol Mon - Caixa Catalunya - Spain Mr Rafael Vidal Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Dolores Villodas Castro Agrupacion de Desarrollo Corredor Siderurgico Spain Ms Anna Vives Fundacio Un Sol Mon - Caixa Catalunya - Spain Ms Cecilia Yaez Microrate - Spain Ms Patricia Yaez Prez Spain Mr Aitor Zuazo Inguralde - Spain

The Netherlands
Ms Inge Heetvelt Facet Bv - The Netherlands Mr Klaas Molenaar Facet and IntEnt - The Netherlands Mrs Mira Stol-Trip Dutch Ministry of Economic Affairs The Netherlands

Ukraine
Ms Tetyana Cheptsova Project Monitoring Unit of International Credit Lines of National Bank of Ukraine - Ukraine Ms Oksana Geyets Project Monitoring Unit of International Credit Lines of National Bank of Ukraine - Ukraine Ms Anna Yuzvenko Project Monitoring Unit of International Credit Lines of National Bank of Ukraine - Ukraine

Switzerland
Mr Bernd Balkenhol International Labour Orgnanisation Switzerland

United Kingdom
Mr Pratul Ahuja CDFA - United Kingdom Mr Bob Brennan DTI Small Business Service - United Kingdom Ms Jessica Brown nef (new economics foundation) - United Kingdom Mr Dean Caire Bannock Consulting - United Kingdom Ms Sumita Dutta Sied Project - ITN - United Kingdom Mrs Julie Earnshaw Goole Development Trust - United Kingdom Mr Oncu Gocebe Sied Project United Kingdom Ms Niamh Goggin Aspire - United Kingdom

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

Mr Mohamed Ibrahim Sied Project - Kentish Town Somali Workers Association United Kingdom Ms Olayinka Jacobs-Bonnick Sied Project - IEA - United Kingdom Mr Dennis Katungi Community Links - United Kingdom Ms Ellen Lederman Shorebank Advisory Services - United Kingdom Ms Joanne Ludbrook WEETU - United Kingdom Ms Isebail MacKinnon Quaker Social Action Sreet Cred - United Kingdom Mrs Stacey Mellish Goole Development Trust - United Kingdom Mr Faisel Rahman Fair Finance - United Kingdom Mr Peter Ramsden Freiss Ltd - United Kingdom Ms Whitni Thomas nef (new economics foundation) - United Kingdom Mrs Ysobel Thompson Goole Development Trust - United Kingdom

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European Microcredit Conference 26-28 October 2005 / Barcelona - Spain

European Microfinance Network


4, boulevard Poissonnire 75009 Paris Tel : +33 (0)1 56 03 59 68 Fax : +33 (0)1 56 03 59 77 Web : www.european-microfinance.org e-mail: emn@european-microfinance.org
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