ADIE:Changing

Adverse Environment

France counts now three million unemployed. The new socialist government makes a big effort to promote employment, creating subsidized jobs for young people, for whom the rate of unemployment is reaching 20%. We are still far from a market economy approach. The priority of the trade unions is to defend the social safety net, rather than alleviate unemployment.
As regards microcredit, our major problems are :

Changing public opinion

• recognition of self-employment as a major way of creating employment (wage employment and especially public employment are still preferred).
• recognition of the capacity of unemployed to create their own jobs.

Changing legal environment

• the legal environment of microenterprises makes it impossible to start progressively a business as it is the case in the US. The social contributions represent more than 50% of the microentrepreneur’s income. A social contributions holiday is possible in the first year under certain conditions.

• the banking law makes it impossible for an NGO to be a financial intermediary. We can either lend from our own funds (which are limited) or in partnership with the banks (70% of our activity).
  

Financing

In this very complicated legal environment, creating a formal sector microenterprise requires not only credit but also start-up equity, training and business advice. We cover these costs with the support of the government, local governments, European Union, private donations. Sustainability is not possible in the present environment.

Since all public subsidies are paid with an average delay of 12 months, the extension of the program requires an increase of our own equity to solve cash flow problems. We are planning to make a public campaign to collect funds in December.

In spite of all the obstacles, we are progressing. Last year we financed 900 enterprises created by the unemployed. This year we will finance about 1500 and next year our projections are 2000.

We made a big effort to train our staff and improve the repayment rate : it is now under 90%. We test again a solidarity group approach in the poor communities. ADIE counts now 14 regional delegations (each of them having several outlets), 40 permanent staff and 200 volunteers, not including volunteers making their military service. Although there is no way to make the "solidarity credit" (credit + training + business advice) sustainable, our main financial argument is that creating self-employment costs the government less than 50% of the annual cost of unemployment.