Youth financial inclusion in the MENA region Policy Workshop CGAP, Silatech 12 march 2013 Financing youth start-ups: achievements & challenges enda inter-arabe Essma Ben Hamida Executive Director Co-founder
Enda: Historic Figures Introduction of micro-credit in urban low income areas Economic and social development programmes Suburbs of Tunis Inception: ecological activities «Bidaya» for youth start-ups Launched Serving rural areas, agri-lending, Mawsem Official permission from Ministry of finance under 1999 Law Operational and financial self-sufficiency Focus on support to micro-entrepreneurs 2011 2007-2010 2005 2003 2001 1995 1993 1990
Cumulative figures 1995 - January 2013 - Amount disbursed : TND 864 million - Total borrowers : 400 000 -# Loans disbursed : 1.2 million -PAR 30 days: 2,7% (post revolution) 211 000 active clients Youth segment: - 40% < 35 years disbursed 63 million - Including 37 000 < 25 years Portfolio TND 135 million enda has accumulated broad experience dealing with youth up to the revolution. But no lending to start-ups considered very risky
Revolution in Tunisia (2011) - Revolution motivated by : 1- Absence of democracy and freedom 2- Unemployment 3- Unbalanced opportunities between regions - 800 000 unemployed (of which youth: 95%) - Unemployment rate: 18% - Graduates: 26.1% (men :15.8% / women: 40.2%) -137 000 jobs lost between May 2010 - May 2011
Major problem in financing SMEs in Tunisia More than 50% of applications rejected by the banking system WHY - Insufficient equity - Lack of collateral - Lack of skills to evaluate innovative businesses - Banks prefer to finance businesses with higher and immediate profitability (offshore compagnies, real estate ) Reference BFPME
Developing products for start ups: a real challenge for microfinance 1. Goal: Finance and accompany start-ups: Young micro-entrepreneurs and small farmers Low-income entrepreneurs (informal sector) Women wishing to start up own business 2. Expectations: Sustainable businesses Job creation Promotion of entrepreneurship culture among youth Reduction of rural exodus and youth migration 3. Challenges: Institution sustainability (risky products) Very little experience around (need TA & exposure visits to MFIs) High risk of failure
"Bidaya : start-up businesses for unemployed youth -- After Revolution: grant from the Swiss Confederation (4.5 million TND) - - Decision to contribute to youth employment -- Product design based on enda market study for youth segment and on past experience -- Partnership/exchanges with other actors -- Pilot in 2102, roll out in 2013 - (focus on clients children and family).
Characteristics of Bidaya product Pre-loan training/aid with Business Plan Post-loan coaching and support Maximum amount: TND 5 000 Maximum loan duration: 36 months Grace period: up to 6 months Line of credit First loan disbursed within 20 days Renewal: 48 h Application Selection Interview Social and economic study Assistance BP Decision by Committee 8
Bidaya: Key findings as of February 28 th - Businesses financed: 1 857 15% < 25 years 71% < 40 years - Women: 50% - Unemployed: 50% - Graduates: 16% -Trained for Business Plan: 524 clients (others trained by government programmes) - Co-financing: 25% (BTS, BFPME, family) -Jobs created in 14 months: 3 000 -Examples set for others, demand all over
Key findings (2) - Amount disbursed: TND 4.1 million - Average loan size: TND 2 200 - Outstanding portfolio: TND 3.8 million - PAR > 30 days : 0.35% - Bidaya disbursed through 30 branches/68-60 enda employees have been trained, including 20 loan officers (specialized) - Total budget: capital: 4.5 million for lending capital+ Running costs - Product estimated cost per loan: 700 TND (the most expensive product so far)
Main lessons learned Need for careful selection to manage risks - Entrepreneurial skills - Experience and background - Time spent unemployed - Age - Amount and length must be adapted Staff & organisation - Well trained specialized staff - Sound organization - Testing & rolling out - Partnerships - Funding
Challenges: reduce cost, share risk, innovate - Outsource pre- & post- lending training & support - Share risk through public/private partnerships (banks, insurance companies, guarantee funds ) - Develop market connections - Study market risks & niches - Treat youth as clients and not beneficiaries - seek original types of collateral - Use new technologies (tablets, mobile banking, social media ) - strengthen support for clients post creation (Business advice, mentoring, networking) Evaluation & monitoring
Success stories Hana: 24, living in Kef (north-west of Tunisia). Middle income family, father a day worker. With her friend Amani, she graduated from university in physiotherapy. 2 years experience as salaried practioners. Then back home where they requested a loan from the BTS, the government micro-finance programme. No answer, so they decided to start their business with their own funding. They developed a network of patients, made deals with doctors Then they came across enda where they were accompagnied by Amor, the local «bidaya» loan officer. He helped them set up their practice, write up their business plan, get a training course in business management from the Ministry of Labour. The total cost of their micro-entreprise was around 10 000 TND of which enda-ia contributed with a 5 000 TND loan. Today, xx years on, their business is thriving/beginning to thrive.
M naouar Mnasria, 28, comes from Sidi Bouzid, in one of the poorest governorates in Tunisia and with the highest unemployment rates. He lives w Successful stories M naouar Mnasria, 28, comes from Sidi Bouzid, in one of the poorest governorats in Tunisia and with the highest unemployment rates. He lives with his wife, a factory worker, and their young daughter. He did not go to University but worked briefly with a car wash company. This experience gave him the idea of setting up his own business in the same field. He vainly applied for a loan from the Tunisian Solidarity Bank, the government micro-credit programme. When Enda-ia opened up its bidaya programme at its Sidi Bouzid branch in March 2012, he was provided with aid to develop his business plan and learned how to keep his accounts and analyse his business. Enda also helped M naouar to take advantage of various government programmes that he did not know about such as payment of social security contributions, grants for training, and various subsidies. Enda-ia gave him a 4 000 TND loan to co-finance his project the total cost of which was 12 000 TND. His business is developing. He has hired 3 full-time workers and has recently added a new product: lubricants, which has increased his profitability
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