The role of micro-credit in promoting

entrepreneurship and its effects on social inclusion

Maria Nowak, Co-founder andPresident of Adie (France) and of

the European Microfinance NetworkCo-founder and Member of the

Board of the Microfinance Centrefor Central and Eastern Europe

Open daysBrussels October 9, 2007

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Historical perspective

The development of capitalism created a separation between the economic and the social sector run by the Welfare State

This separation is one of the major causes of social exclusion

One of the solutions is to bring back together labour and capital at the bottom level of entrepreneurship

Microcredit provides an opportunity to socially excluded people to re enter the productive sector by creating their own job

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Access to credit

CapitallExcluded

The Welfare State takes care of excluded from the market economy

Creation of wealth Welfare

Labour

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Access to credit

CapitalExcluded

Access to capital allows the excluded to participate in the creation of wealth

Creation of wealth Welfare

Labour

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The Case of Adie :

NGO created in 1988 Mission: provide financial and non financial services to unemployed

and social aid beneficiaries creating microenterprises Coverage: all national territory ( 119 branches and 380 contact points)

Services provided: • Financial services : loans, quasi-equity loans • Non financial services : business and marketing advice, administrative

support, etc. Financing:• loans funds banks• non financial services government, local governments, ESF

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Results : microcredit

• Number of micro-loans disbursed since 1989 : 46 000

• Number of micro loans in 2006 : 7 500 (average : 3000 €)

in 2007 : 9 000

• Number of active clients : 15 000

• Default rate 2006 : 6,7%

• Loss rate 2006 : 3,2%

Target Population

Minimum Income

56%

Working Poor11%Employees

1%

Other Unemployed

15%

Long Term Unemployed

17%

Education's Level

Secondary School13%

Baccalaureat5%

Professional Diploma

20%

Illiterate4% Reading and

Writing17%

Vocational Training

41%

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Results : business development services

• Number of new enterprises created since 1989 : 40 000

• Number of enterprises to be created in 2007 : 7 500

• Survival rate after 2 years : 64%

• Inclusion rate : 75%

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Loans granted by Adie

34 91 159 278 388698 852

1276 14921929

28443563

46185349 5587

6740

7580

9000

050010001500200025003000350040004500500055006000650070007500800085009000950010000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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22 regional offices119 branches380 contact points

350 staff members

1100 volunteers

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Social performance indicators

• Target population

• Adaptation of the financial services to the needs of the clients

• Provision of business development services

• Improvement of social and political capital of the clients

• Social responsibility of the Microfinance Institution

• Financial sustainability consolidates social performance by providing permanent access to credit to deprived groups

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Impact of microcredit on social inclusion

• Contributes to growth by creating jobs, developping demand and reducing the burden of unemployment on economy

• Improves social cohesion and integration of ethnic minorities (Roma, immigrants) by economic inclusion

• Develops human capital by promoting self-confidence and entrepreneurship and creates a future for all segments of population

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The support of the European Social Fund

The role of ESF is most important for :

• Financing business training and support for the sel-employed

• Financing together with the Regional Development Fund, the EIB group and the banking sector the Microfinance Institutions

• Promoting the Action Plan for Development of Microcredit

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Thank you !

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www.adie.org