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Employers' Group

Inclusive entrepreneurship Obstacles and opportunities for job creation

19 November 2012

European Economic and Social Committee

Brussels

Conference

Summary

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Opening speech

Koos Richelle, Director General, DG Employment, Social affairs and Inclusion, European

Commission

Koos Richelle stressed the importance of entrepreneurship for job creation, as was

recognised by the Commission in its Employment Package in April 2012.

He underlined that support for business creation by disadvantaged and underrepresented

groups thus deserved greater attention. The conference would be part of the

Commission's efforts to promote inclusive entrepreneurship. It focuses especially on

strengthening the legal framework, making access to finance easier and developing an

entrepreneurial culture.

The objectives of the conference are:

- To encourage Member States and regions to use ESF resources for the promotion of

inclusive entrepreneurship;

- To listen to problems of entrepreneurs and give them the occasion to present good

practices as an inspiration on how to promote inclusive entrepreneurship.

He invited the participants to listen to each other’s experiences, not only the good ones

but also the experiences of failure.

The complete text of Mr Richelle's speech is available on the conference webpage.

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Session 1 Obstacles for business creation: entrepreneurs' testimonies

Facilitator: Patrick Sapy, Director, microStart

Aida Ben Amara is a Tunisian woman who has lived in Italy since 1995. She arrived in

Rome to study and the early days were very hard. In order to make ends meet, she also

worked for an auto parts company – but the company went bankrupt. She was exhausted,

living in poverty, on the point to drop everything and leave. Instead, she decided to

become an entrepreneur, despite the difficulty in obtaining a loan ("Because I was a

young migrant, nobody listened to me"). In 2001, despite some difficulties to make male

workers accept that their boss is a woman, she took over her former company –and its

debts- and she still runs it successfully. Decision-makers should support youth

entrepreneurship and understand that the future belongs to youth!

Victor Navarro is from Spain, but spent a few

years in the USA. This experience taught him not

to be afraid of failure ("If you fail once, try again

and again"). He is now running his third business,

with 5 employees and 11 volunteers, getting

rebates (cash-back) for social causes and linking

in the process vendors, clients and social

enterprises/causes. 12 years ago it was quite

easy to find financing in Spain but today it's

extremely difficult to convince the banks, in addition to even more complex

administrative work. For him, the keys to success are: perseverance (especially in this

difficult period, which is also full of opportunities, "remember: bad things are never

forever!"), enthusiasm, a clear goal and having lots of different contacts. Steps for new

businesses: (1) mentoring & training; (2) building trust; (3) financing; (4) follow-up. The

main goal / dream of any entrepreneur is the freedom to make a change (in addition to

earning money).

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Horia Paraian is a Romanian entrepreneur who

started a small business back in 2000, in the field

of car maintenance and technical inspections.

Currently he has 3 employees and hopes to get to

5 in a few years. He still remembers fondly his

first micro-loan of USD 12 000, without which it

would have been impossible to open the

business. This credit was provided against real

estate guarantees. Currently the situation is

dramatic in Romania. Entrepreneurship is seen

as the only way out of the crisis for many people.

Marek Zabek is from Podkarpackie, a rural area

of Poland. Since 2002 he has worked as a financial

intermediary for micro-credit organisations,

helping small enterprises from Podkarpackie area.

The impulse for his business idea was to see that

a lot of money was coming into Poland in the final

pre-accession period to help entrepreneurship,

but most of that money was going into cities.

Therefore, he started a business to help small

entrepreneurs in rural areas get access to finance

(often micro-loans are the only financial help

start-up enterprises can get). Micro-credit generally helps improve economic

competitiveness of deprived regions. The most crucial issue today is trust: how to rebuild

it?

José Compagnon is a member of the French travellers'

community. A person with disabilities, he spent long

periods of time as unemployed. He underlined the

importance of the assistance from the micro-finance

institution ADIE, which provided him not only with

financial support to start his small business, but helped

also to sort out the necessary papers and provided

counselling and advice.

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Aida Ben Amara also stressed the importance of the help she received from "Risorsa

Donna" Foundation. Not only did the Foundation act as guarantor for her EUR 20,000

micro-credit, but it also provided her with moral support and training. Ms Ben Amara paid

her loan back in 2 ½ years instead of 5, in order to help other women entrepreneurs take

advantage of the help given by "Risorsa Donna". Other entrepreneurs were also in

agreement about the difficulty to obtain funding in the current economic climate and

Victor Navarro provided an example of best practices from Spain: an unemployed person

can request the payment of unemployment benefits in a lump sum (instead of receiving it

in monthly instalments) if he/she opens a business.

Despite the difficulties, all panellists were in agreement – they would start again as

entrepreneurs, because of the satisfaction to run their own businesses, to have control of

their working lives, to create something. The advice given to potential young

entrepreneurs was: be courageous, it's a long and winding road, but it can bring great

satisfaction. It is important to have patience, to have a clear vision of what you want to

achieve and to gain customer trust through hard work and honesty. In addition to

financial help, training and networking are also important – and local associations of

entrepreneurs can often provide a mentor for the younger colleagues.

Session 2 Systemic views on obstacles and enablers of inclusive entrepreneurship

Facilitator: Martin Jung, Director, Evers & Jung

Martin Jung introduced the debate on obstacles and enablers of inclusive

entrepreneurship as a multi-dimensional issue, together with the appropriate funding

requirement:

- The client support (high funding requirement): clients need various types of support

(access to finance or business development support);

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- The legal framework (low funding requirement): we do not always have suitable legal

forms, administrative and tax requirements must be simplified, and social security

schemes adapted to especially new types of entrepreneurs and self-employment.

- The entrepreneurial culture (medium funding requirement) raises the issue of

entrepreneurship awareness (not only for inclusive entrepreneurship but also for

intrapreneurship), entrepreneurship education and the diversity of entrepreneurs profiles

(including the promotion of role models). In a mid and long term perspective this may

have the biggest impact to make Europe more entrepreneurial.

An integrated strategy is needed, especially while preparing the new EU funding period

(2014-2020). It is particularly relevant to analyse whether instruments for targeted groups

are necessary and how ‘mainstream’ instruments can address the diversity in a better

way.

Jonathan Potter presented the OECD draft annual

report. The OECD objective is to produce a report

which would be used as a reference in the area of

inclusive entrepreneurship. It is a part of the

cooperation agreement between the OECD and the

European Commission on inclusive entrepreneurship,

which also includes the publishing of policy briefs on

specific topics (such as youth entrepreneurship) and

of capacity building seminars for the managing

authorities of the European Social Fund in this area.

Promoting inclusive entrepreneurship has a crucial

role to play to reach the Europe 2020 target of an

employment rate of 75%. The report identifies the barriers to business creation (in

particular access to finance and skills).

Young people face well-known obstacles, such as little savings and difficulty accessing

finance, lack of entrepreneurship education and training, lack of prior work and

entrepreneurship experience, lack of role models and business networks.

Women are generally less comfortable in finding financial support and they lack prior

entrepreneurship and management experiences. They suffer from traditional gender

norms and some taxation systems which support traditional family models, and their

network of contacts is usually narrower that men's one.

Finally, about 50 % of Europeans think they do not have the skills to become

entrepreneurs. For this reason, training programmes for skills development must be

developed.

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Marcella Corsi raised the European problem with

tapping the potential of female entrepreneurs. Few

start-up businesses are created by women, and when

they do it, they tend to focus on segregated areas, and

not engage in high-tech companies.

Three measures need to be tackled:

Promote an entrepreneurial culture among

women, to fight stereotypes;

Support (financial and training oriented);

Provide incubators for women: in Europe, the

EuroChambres women’s network gave a strong

impetus in this direction.

Many public projects exist, such as the agency for female entrepreneurs in Germany.

Women still suffer from a triple burden (job, childcare and housework), which they often

find difficult to reconcile with entrepreneurial activities.

Diana Filip from JA-YE Europe

highlighted the essential role of

entrepreneurship education to give

young people the enthusiasm to create

a job. An important policy development

is the support from business to bring

mentorship to the classroom. The

partnership between teachers and the

business world works as a powerful

enabler for young entrepreneurs. It is

now acknowledged that young people

who receive an entrepreneurial education at school are performing better in their future

career, whether they work as self-employed or employee. Experiences in Canada showed

that pupils who received an entrepreneurial education better understand the risk of

failure. Europe needs an entrepreneurial ecosystem which fosters young people to create

fast growing innovative companies. Europe should also support cross-border joint

ventures, creating more synergies between groups of young people from different

countries.

A question was raised on the possibility to integrate the informal sector in the OECD

report. Figures are by definition difficult to gather for undeclared work, yet schemes such

as freelance work are a reality for many Europeans.

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Another suggestion was for the OECD to consider hybrid forms of enterprise such as the

phenomenon of part-time self-employed and of similar forms of work arrangement.

Statistics have difficulties to reflect this situation.

The issue of policies for previously excluded people could be addressed from two

different angles: the economic objective of creating growth, and the social inclusion

objective of assisting people to move off from unemployment. It is in line with the

objectives of the cooperatives, which are currently more concerned to maintain jobs than

to create new jobs, and to address the issue of senior entrepreneurship for redundant

workers. The Commission-OECD policy brief to be issued is focused on senior

entrepreneurship.

Session 3 Sharing good practice – parallel workshops

A) Access to finance and business development services

Facilitator: Klaas Molenaar, Professor in Financial Inclusion and New Entrepreneurship,

The Hague University of Applied Sciences (The Netherlands)

The workshop consisted of three presentations,

focussing on the effectiveness, difficulties and successes

of programmes in France, Belgium and Estonia as well as

Italy, Lithuania and Germany. In his introduction, Klaas

Molenaar noted that the issue of access to finance

affects segments with rather different characteristics and

objectives, ranging from unemployed persons just

seeking additional ‘survival’ income to medium

entrepreneurs. He stressed the need to have a clear idea

on whether the objectives of the programme focus on

entrepreneurship itself or more broadly on social

inclusion objectives, as there are trade-offs between the

two objectives and important implications for

programme design. He also noted the substantial increase in diversity in society in recent

years, driven notably by globalisation, which results not only in the existence of a varied

range of actors with different personal characteristics, but also in a much faster evolution

in the labour market, leading to much more frequent changes in status

(employed/unemployed/self-employed etc.) and to the emergence of hybrid figures (e.g.

intermittent, part-time or combined entrepreneurs). He also noted the importance of

drawing the necessary [policy] conclusions from the distinction between being ‘credit-

worthy’, ‘bank worthy’ and ‘grant-worthy’.

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The presentations by Safia Tami and Astrid de Visscher examined the experience of

Créajeunes in France, a substantial programme supported through the European Social

Fund which provided inspiration and experience also for the DreamStart programme

being launched by MicroStart in Belgium (the first Dreamstart session is to begin in April

2013). The Créajeunes programme was launched by ADIE in 2008 on 6 sites and now

includes sites in 19 cities, including the overseas territories of France. The target group is

young people aged 18-32 and having a business project requiring financing of up to 25

000 euros. Reasons for launching the programme were, among others, that a study had

revealed that more than 50% of young people would like to start their own business,

while another aim of the project was also to provide a societal answer to the riots that

had involved some suburbs in France.

Safia Tami insisted on the importance of training and personal coaching as success factors

and on the need for individualised mentoring. She also stressed the educational value, in

a broader sense, of features of the programme such as the need to present a draft

business plan/ idea before a jury. The composition of the jury was also very important and

often resulted in considerable help and knowledge transfer to the young people, as jury

members frequently became involved on a personal basis. The skills gained in the

programme are very useful even if the business launched proves unsuccessful, as it

increases employability.

Since the beginning of the programme in 2008, 3 700 young individuals from 18 to 32

years old have participated in Creajeunes, among which more than 1 000 in 2012. Most of

them stem from a precarious or disadvantaged background (70% unemployed, and almost

55% have either qualifications below baccalaureate level or no qualifications at all).

Almost half of participants (47%) were women.

As for the success rate, 10 months after having benefitted from the programme, 31% of

beneficiaries had created their business and among them 38% had obtained a micro loan

from ADIE. Among those who did not eventually create a business, 21% found

employment.

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While the experience from Créajeunes was

considered successful under most respects,

the presentation by Anne Jürgensson, based

on a 2010 evaluation study, provided a more

mixed assessment of an entrepreneurship

programme in Estonia offering a business

start-up subsidy for the unemployed. The

programme is run by the unemployment

Insurance Fund and consists of three

elements:

Entrepreneurship training (if experience is not sufficient);

A subsidy of up to 4 474 euros;

Mentoring services (6 meetings of a mentor club) for a limited number of start-up

entrepreneurs.

While the evaluation is a mid-term one and therefore final results will be coming later, it

is expected that 70% of beneficiaries are still running an entrepreneurial activity two years

after receiving the support. However, so far very few entrepreneurs who had started their

companies since 2008 earned enough to pay themselves a full salary. In other words,

beneficiaries are out of unemployment but not out of poverty. Part of the grantees

already accepted a paid job while still trying to continue with their business.

Success in entrepreneurship was found to have been hindered by excessive optimism,

unrealistic plans, lack of financial resources, and insufficient knowledge in marketing. It

was found that the programme was highly relevant, in particular since the start of the

crisis, but that the practical organisation of the programme could be improved. Given the

positive impact of business training, the provision of support services should be

enhanced. The target group should remain limited. The results also highlighted the

important non-material benefits of entrepreneurship, but contrary to the Créajeunes

experience, there are some doubts about the improvement in employability as many

Estonian employers seem to be wary of employees with an entrepreneurship record.

Stefanie Lämmermann from DMI (Deutsches

Mikrofinanz Institut) presented the COPIE manual

on "Designing microfinance operations under the

European Social Fund". She recalled some basic

principles of effective microcredit operations –

low loan amounts, easy accessibility, a personal

relationship with borrowers, and quick and

simple disbursement mechanisms and the

different types/objectives of microcredit (social

microcredit, individual microcredit, and business

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microcredit). She then compared the experience of programmes supported by the ESF

and run in three different areas – Lithuania, Germany, and Calabria (Southern Italy) with

unemployment rates respectively of 16%, 6% and 20%. As of November 2012 the

programme disbursed respectively 350, 10 000 and 1 000 microloans. Overall, success

factors were found to be thorough ex-ante evaluation, policy change (from a logic of

grants to one on revolving funds), a proper setting of amounts and terms, a good link

between financial and non-financial services, and a favourable general environment for

enterprise (for example, avoiding excessive bureaucracy, including rules that, as in

Lithuania, result in beneficiaries losing access to benefits when accessing the programme).

Policy responsiveness required effective cooperation between all actors and effective

evaluation was a key success factor. As for the crucial question of the proper amount and

interest rates, the best results seem to derive from median interest rates as rates that are

too low reduce the amounts that can be financed, risk distorting the market and generate

bad incentives, but high rates undermine sustainability of the borrowers’ businesses.

Interest rates charged varied between 0% (Calabria) and 9.49 % (top of the range in

Lithuania).

B) Legal and institutional framework

Facilitator: Maria Nowak, ADIE International (France)

Iain Willox presented a communication on "Getting the institutional framework right:

the COPIE tool kit".

COPIE (the Community of Practice on Inclusive

Entrepreneurship) is a learning network whose goal is the

transformation of the policy environment so that

"entrepreneurship becomes a natural choice for people from

all walks of life".

The COPIE toolkit for inclusive entrepreneurship (more

information on www.cop-ie.eu) is a ready-for-use toolbox to

help policy makers and regional and national ESF/ERDF

Managing Authorities to develop and deliver useful inclusive

entrepreneurship support.

The toolkit helps figure out the variety of support resources that are needed to create an

integrated system rather than individual projects. It can be applied in three stages: (1) a

diagnostic tool to map the strengths and weaknesses of existing regional or national

entrepreneurship structures; (2) the design of inclusive entrepreneurship policies by using

a joint action planning methodology which promotes active stakeholder engagement and

(3) implementation of effective support interventions in key priority areas of

entrepreneurship support.

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Jenny Charlier (ESF Agency in Wallonia) provided a

practical example about the application of the COPIE tool

kit. It was a new methodology for her agency, challenging,

requiring a good preparation of the COPIE sessions and

meetings. To answer the questions proposed by COPIE's

questionnaire, the first need was to set up a network of

stakeholders. For her agency, it was a very useful

experience, leading to an exchange of ideas, validation of

some of their practices, fruitful meetings, etc. Overall,

COPIE provided an excellent approach to confront

methods and to find out more about best practices.

Maria Nowak (ADIE - Association pour le

Droit à l'Initiative Economique) presented

her association's proposals on overcoming

legal barriers for business creation out of

unemployment in France. There are two

different visions about the situation of

small businesses in France: (1) politicians

and media say "there is a lack of

entrepreneurial spirit"; (2) self-employed

say "I don't know how to register, it's too

complicated, I need support…"

The importance of creating enterprises in

France can hardly be overestimated, as it is one of the main avenues for job creation. In

2009, small-scale projects initiated by unemployed persons accounted for 135 000 start-

ups, involving most vulnerable group. However, self-employment still did not exist in the

labour code and the administration has so far not conducted a survey on the informal

sector. The French parliament adopted the law for modernisation of the economy (2008),

which regulates also self-employment. The auto-entrepreneur regime aims to: (1) simplify

registration; (2) alleviate charges (payment of social charges only when turnover); (3)

promote the extension to part-time work

As a result, since 2009 the number of auto-entrepreneurs has risen by 1.2 million,

accounting for roughly half of the total number of entrepreneurs in France. It has become

a major mode of integration, while solving part of the unemployment issue. The auto-

entrepreneur regime should continue to be supported and extended to other categories

of enterprise.

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Bertil Lidfeldt (Swedish Public Employment Service)

presented how the Swedish social security reform is

seeking to reduce the risks of moving to self-

employment. In Sweden, main responsibility for social

services lies in municipal councils (e.g. health and

parental insurance). The cooperation between

authorities (Public Employment Service, tax agency,

social insurance agency, SE business registration office,

customs, etc.) is essential to facilitate the starting of

companies. A special website, www.verksamt.se

provides advice to would-be entrepreneurs, addressing

the whole business cycle, from creation to closure.

The Public Employment Service support for unemployed persons when starting a

company is consistent and covers a large number of areas: labour market information,

personal counselling with business experts, financial support to start a business

corresponding to unemployment benefits during 6 months (extra support for disabled

people), education and training, etc. New target groups for the Public Employment

Service are long-term sick persons (with possibilities to return to the labour market) and

newly arrived immigrants.

A lively Q&A session followed. On the question of having statutory versus voluntary

approach towards education and training of business starters a number of discussants

intervened. In Belgium, statistics suggest that those who have followed management &

accounting courses are more successful than others in their business. The debate on the

convenience of requesting obligatory diplomas (or knowledge) to start a business

generally leads to the conclusion that more information (and examples of best practices)

should be exchanged among MS and among actors in the field.

C) Entrepreneurship culture

Facilitator: Christian Vintergaard, Director, Foundation for Entrepreneurship

(Denmark)

Christian Vintergaard considers that raising the

entrepreneurial spirit of Europeans is pending upon:

The institutional side: how can authorities

promote a more entrepreneurial culture?

An individual side: how to convince more

people to become entrepreneurs?

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Ivan Diego Rodriguez presented the result of the

Community of Practice on Inclusive Entrepreneurship

(COPIE) thematic group on Entrepreneurship education1.

Conceived as a guide for the new ESF programming

period, the COPIE Toolkit for Inclusive Entrepreneurship

encompasses an entrepreneurship education diagnostic

tool. It proposes a methodology to establish a matrix of

results. These latter would be used as a basis to spot

some areas for improvement and to establish an action

plan.

Questions such as “What would you have liked to have

learned at school?” were addressed. To be yourself, to

play business games were among the answers proposed to promote entrepreneurship at

school through various pathways.

It is important to see entrepreneurship as a methodology to add value to others. It does

not concern only financial value, but also social return on investment. Entrepreneurship

education should then be promoted at University in educational science as a new way of

teaching.

Anca Otilia Dodescu presented the AntrES

project promoting women entrepreneurship in

Western Romania by providing training for

Business start-up, Business development and

financing facilities. An important part of the

training programme is the participation of role

models that are successful women entrepreneurs

from the local area.

Financed by the ESF this programme has been

selected by the Commission as a success story. She

highlighted the strong support received by the

programme by municipalities and the peer learning aspect which strongly contributed to

the success of AntrES.

Thanks to this scheme, 1 800 women were trained, 209 new business start-ups have been

launched, and 72 new jobs for trainers were created.

1 http://www.cop-ie.eu/thematic-groups-entrepreneurship-education

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Dennis Hoenig-Ohnsorg from Ashoka focuses on

young social entrepreneurs. He wants to

demonstrate that youth is often seen as a problem

and that they should be seen as a solution. He tries

to identify young people with a strong

entrepreneurial spirit which could also play a

multiplier effect by convincing other young people

to become entrepreneurs. This whole process can

be seen as a cultural change. Activating the

entrepreneurial spirit among youth will create a

community of change-makers, which are able to

bring forward a European vision as part of the

European identity.

Questions were raised on the necessity to promote entrepreneurship not only as a goal in

itself but as behaviour at work, even for employees. It could be done through the

promotion of role models, though it could have a negative effect as it could discourage

potential entrepreneurs who do not identify themselves with these role models. For this

reason, Dennis pleads for a broader perspective of the entrepreneur as a change-maker of

the reality for more than one person but for the whole community.

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Cost-effectiveness of inclusive entrepreneurship support

Alexander Kritikos, Research Director, German Institute for Economic Research

Alexander KRITIKOS presented an analysis of the effectiveness of 2 business support

schemes targeting starters out of unemployment: the bridging allowance

(Überbrückungsgeld) and the start-up subsidy (Ich-AG).

The bridging Allowance (1986-2006) gave a six-month financial support to unemployed

individuals. The Start-Up Subsidy programme (2003-2006) gave a monthly allowance to

unemployed who want to start a business plus for a maximum of 3 years (reduced to 9

months in 2006 and further reform in 2012).

Both programmes led to positive results: survival rates, even after 56 months, were high,

with a difference of 20% between those who benefitted from the bridging allowance and

those who did not. For the start-up subsidy, the difference was 15%. As a result,

participants were less likely to be subsequently registered as unemployed, they were

more likely to be integrated into the labour market (self-employed or employed). In

addition, businesses started under the two schemes had a strong job creation record:

between 2.6 and 5.1 jobs on average for the bridging allowance2 and between 1.7 and 2.6

jobs for the start-up subsidy3 after 56 months. Participants in the programme were also

likely to earn more than what they had earned previously in salaried employment. Both

programmes were effective in comparison to alternatives. The start-up subsidy is

particularly interesting with regard to inclusive entrepreneurship as it attracted

entrepreneurs from underrepresented and disadvantaged groups, such as women (47% of

beneficiaries), young people and the low-skilled.

As far as the cost-effectiveness of the programmes is concerned, the Federal Employment

Agency saved money with the bridging allowance as successful beneficiaries who started

their business went away from unemployment. The start-up subsidy, on the contrary, was

more expensive than it would have been to give unemployment benefits to the same

beneficiaries.

2 Depending on the gender of the founder and the region where the business was created.

3 Depending on the gender of the founder and the region where the business was created.

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Closing speech

Madi Sharma, Member of the Employer's Group, European Economic and Social

Committee

In her closing speech, Madi Sharma stressed that the ideas of entrepreneurs matter, in

particular in the context of the current crisis. This is why action should be taken to create

a favourable environment for entrepreneurship.

Mentoring and training for starters are essential to help people transform their ideas

into action, even though entrepreneurship is a lot about learning by doing.

Speaking also from her own experience as an entrepreneur, she underlined that

getting rid of stereotypes (e.g. about women's capacity to run a business), is

important if we want to foster entrepreneurial spirit. Origin, sex or age should not

prevent anyone from becoming an entrepreneur.

In addition, we should learn to accept failure. While in Silicon Valley, an

entrepreneur's credibility increases with failure, in Europe entrepreneurs often do not

get a second chance.

Moreover, as undercapitalised businesses tend to fail, easing access to finance is a key

factor to success.

Finally, she highlighted the Single Market as an opportunity for entrepreneurs, which

should be taken into consideration when designing policies in the fields of

employment, education, training and poverty alleviation.