Roma entrepreneurship in Romania. Research and advocacy
for setting up a financial instrument facilitating access of
small Roma entrepreneurs and social businesses in
Romania to micro-credits
December, 5th, 2014
About the project
Main research tool:
-Field research– depth interviews with 100 small
Roma entrepreneurs who perform economic
activities, both individually and within social
economy enterprises
Objectives:
•
Cross section of Roma entrepreneurs from
various fields (from scrap metal collectors to
touristic activities and traditional Roma
crafts)
•
Assesing the situation of small Roma
entrepreneurs in terms of financial literacy,
access to capital and future financing
necessities forecast
•
Drafting public policies proposals that aim
to improve access to (micro) loans for
entrepreneurs belonging to these vulnerable
groups and economic inclusion
How we started. Preliminary findings
•
70% of the Roma population living in Romania are facing economic vulnerability,
according to World Bank. Economic inclusion goes hand in hand with the financial one.
•
Very few Roma are using general financial services such as Banks (they are “nonbankable”)
-are not legally registered, are not keeping formal records and can not provide
guarantees;
-low market competitiveness; Roma traditional craft require requires specialized
marketing and they need to be adapted to customer needs;
•
Majority of Roma entrepreneurs use as means of financing informal sources (family,
friends, individuals who offer loans at a very high interest rate)
•
Although in general data reports show that Roma are not making loans for business
purposes, but for personal reasons(unforeseen expenses, medical expenses, family
events, etc), the small entrepreneurs that we have interviewed so far are saying that
they would loan money to purchase durable goods that could help them expand their
activities (e.g solariums, greenhouses, machine tools, market stalls) and the amounts
would they borrow will be around 10.000-20.000 Euros.
European framework for SME financing– vulnerable
groups, social enterprises within the 2014-2020
framework (I)
I. Juncker’s investment plan (EU’s new deal)
The creation of a new European Fund for Strategic Investments (EFSI), guaranteed
by public money (315 billion EUR) for additional investments in the next 3 years
(2015-2017)The fund will also provide access to risk financing for SMEs and mid-cap
businesses across the EU.
European framework for SME financing– vulnerable
groups, social enterprises within the 2014-2020
framework(II)
Member states are already notifying EFSI’s joint working group the list of projects selected based on
three criteria:
•
•
•
Projects that reveal an EU added value and support EU objectives
Sustainability and economic value – it will be given priority to the projects with a high social
and economic return
Projects that can be launched at the latest in three years, meaning capital expenditures can be
expected in the framework of 2015-2017 period
II. The Employment and Social Innovation (EaSI) programme (EaSI) – 919 mil Euro
-Progress Axis(61% of the total EaSI budget)
- grants and programs dedicated to innovative social policy experiments aiming, inter alia, to
create jobs and social innovation, in line with Europe 2020 Agenda and the country specific
recommendations for poverty reduction
- Microfinance and Social entrepreneurship Axis (21% of the total EaSI budget)
- Increase access to, and the availability of, microfinance for vulnerable groups who want to
set up or develop their business and micro-enterprises, build up the institutional capacity of
microcredit providers, Support the development of social enterprises, in particular by
facilitating access to finance.
European framework for SME financing– vulnerable groups,
social enterprises within the 2014-2020 framework (III)
Progress Microfinance Facility – issues guarantees and provides funding to increase
microcredit lending in order to support groups with limited access to the conventional
credit market (e.g women entrepreneurs, young entrepreneurs, minority groups, people
with disabilities, etc.)
So far, 3 non financial institutions and Banca Transilvania managed to access Progress
financing: FAER, Patria Credit, Vitas Romania (Romania almost reached its maximum
allocation of 20 millions EUR on this program)
Percentage of Roma beneficiaries?
Jasmine Fund (technical assistance for microfinance institutions)
Jeremie Fund ( assists medium enterprises in using structural funds – SOP-IEC in Romania
within the 2007-2013 framework, creating revolving financial instruments – credit funds,
guarantee funds, risk capital funds to support SMEs. In Romania, Jeremie Fund was accessed by
the banking system in order to guarantee and configure a capital risk fund.
Financial Instruments deriving from structural and
national funds
Within the 2014-2020 framework, all the Management Authorities can configure their financial
instruments:
•
•
•
Romania has a total budget allocation of 420 million EUR
Operational Programme Human Capital– 120 million EUR credit fund available with improved interest
EAFDR – 90 million EUR guarantee and credit fund with shared risk
The Department for SMEs prepares for 2015 a programme aiming to stimulate the establishment and
development of social micro enterprises.
-minimum PFA(Authorized Physical Person), II *amendments proposed by ES– defining vulnerable
persons?
A maximum period of two years since their registration in the Commercial Register??
Microfinance for Roma entrepreneurs- good practice
models in Europe(I)
Kiutprogram, Polgar Foundation (Hungary(
-based on the model of Muhammad Yunus, Grameen Bank: group loans (5 members), one
year long, weekly reimbursements;
-the loans have officially granted by Raiffeisen Bank and the foundation (through a specially
created NGO) administered the loans; trained field agents, trained the clients, prepared
the documentation and submitted it to the financial institution, was responsible for
monitoring and evaluating the program
- The average micro credit was around 1800 EUR, a total of 138 loans being granted.
-success rate 75%
Partneri Shqiptar në Mikrokredi (PSHM) (Albania)
- Granted to the Roma entrepreneurs loans worth between 100$ and 50.000$ for their
businesses. PSHM grants loans based on the Identification Documents. In order to be
eligible, the business does not require formal registration, but to prove a source of
income.
-11% of the loans granted by PSHM (870 loans) were granted to Roma entrepreneurs with a
total value of 400.000$.
-PSHM offered bonuses to their employees willing to work with Roma entrepreneurs.
Microfinance for Roma entrepreneurs- good practice
models in Europe(II)
Integro (Bulgaria)
- Works in 5 Roma communities from the rural areas and grants loans for families with
small sheep or horse farms;
Creating Effective Grassroots Allternatives Foundation – CEGA (Bulgaria)
- Over a period of two years, 21 families purchased 14.5 ha of land. The loan amount
varied between $500 and $2500 , all the families reimbursed their loans
IFN Horizonti (Macedonia) g
- grants loans to the women working in commerce, small scale production, services and
family businesses. Horizonti granted 9,703 loans, from which 5000 were directed
towards Roma women.
Microfinance vehicles in Romania
Potential sources of micro finance in Romania:
•
Non Bank Financial Institutions(NBFI)– combines in various proportions commercial and
social purposes(e.g Patria Credit, Opportunity Microfinance Romania (OMRO),
ROMCOM, LAM, FAER , Good Bee, Agricover IFN)
•
Credit Unions. Credit Unions are an important alternative to formal financial institutions
in many developed countries. Nevertheless, in Romania, they do no represent a credit
source for Roma entrepreneurs.
Why?
•
NGOs – associations and foundations – can provide only grants
What is the optimal proportion between grants and loans offered to small businesses
in Romania run by Roma entrepreneurs?
•
”The gradual maturation from grants to loans is a common element of all successful
projects targeting Roma communities.” (Andrey Ivanov and Sanjar Tursaliev
Microlending to the Roma in Central and Southeastern Europe: Mixed Results, New
Approaches)
Public policies and financial instruments in Romania.
Possible solutions
• Mixed grant + loan scheme,
financial instruments to finance
NGOs who are willing to provide
seed funding for Roma start ups,
trainings for business
development and business plans,
“financial literacy” etc, and linked
with credit funds for non bank
financial institutions (from OPHU, SOP-HRD)
ONG- uri,
economie
socială
IFN-uri
Afacere
romi
Instrument Financiar POCU
Topics to be discussed
• The development of Roma social enterprises – Enough to discuss the
issues of investments/the need for capital?
• Ex ante analysis on the financial instrument provided by OP-HC?
• To what extent do the non bank financial institutions have Roma clients?
• Piloting the Kiut Model in Romania- financed trough Progress Axis for
social experiments?
• Risk capital fund for the projects dedicated to Roma entrepreneurs?
• Synergies with the law of social economy?
• Correlation with the legislation concerning crafts?
• The opportunity to create a public-private work platform- NGOs, non bank
financial institutions, Management Authorities, etc.
Thank you!