Microloans create lasting jobs and lead to savings
Research by Vlerick Business School shows that 60% of those who have benefited from a microStart microloan still run a business. What is more, another 21% of them have started up a business again or are now employees. For the government this means savings of 1.09 million euros in various benefit payments and 1.12 million euros of profit from tax income. microStart is a micro-financing organisation that finances and coaches potential entrepreneurs who have no access to bank credit but who want to start up or develop a small-scale freelance activity.
To be able to evaluate the results of the first two years, microStart and microcredit partner BNP Paribas Fortis got a team of full-time MBA students at Vlerick Business School, supervised by Professor Veroniek Collewaert, to carry out research into the socio-economic impact of this type of credit. This research was undertaken within the scope of a wider, multidisciplinary BNP Paribas Fortis academic chair dedicated primarily to the technological evolution of the banking profession. Although microStart has already granted almost 1200 microloans, the research project only looks at the first 315, which were granted between 2011 and 2012. The intention is to get an objective picture of the situation and evaluate the progress of the micro-businesses in the study over several years.
Promising tool with major social impact
The figures show that - over a period of 1.5 to 3.5 years - 60% of the respondents are still leading their business. What is more, 21% of those who stopped their activity have found work again with another employer or started up a new business. The percentage of new employment resulting from microStart loans is therefore over 80%.
Among those who started up their activity or found a job thanks to microStart, 34% did not have a stable job or had no job at all. Almost 100% of clients still have a relationship with their bank and many have regained access to financing through traditional banking channels.
Furthermore, microStart’s activities have resulted in considerable advantages for the government. On the one hand, there are savings of 1.09 million euros in various forms of benefits and, on the other hand, the microloans have also led to 1.12 million euros of new income in the form of social security contributions and taxes.
Supporting entrepreneurs together with BNP Paribas Fortis
microStart was set up in 2010 on the initiative of the French organisation ADIE (Association pour le Droit à l'Initiative Economique – Association for the Right to Economic Initiative) and BNP Paribas Fortis as a pilot programme with the aim of offering an innovative response to people who start up companies.
“A bank’s most important role is to finance the real economy. By supporting microStart, BNP Paribas Fortis clearly meets new economic needs and accesses a group of entrepreneurs that used to be difficult to reach. We are pleased by this development because the study shows that microloans have a significant impact. We are therefore also very happy to be able to continue supporting microStart’s projects”, Alex Houtart, CSR Director of BNP Paribas Fortis, confirms.
BNP Paribas Fortis not only provides microStart with economic support, but also plays a very active part in supporting and coaching micro-entrepreneurs with about fifty volunteers it has made available to microStart. “Our employees are highly motivated to take part in this. They are particularly proud of being able to get involved with this project. It makes them feel highly valued”, Alex Houtart is pleased to note.
A positive circle
The research by Vlerick has shown that microStart is an engine for wealth creation. Each entrepreneur who sets up an activity simultaneously creates a cascade of positive effects on the whole of society: the creation of lasting jobs, the stabilisation of previously precarious situations, a reduction in social security benefits, an increase in tax contributions, access to credit and so on.
“These effects mean that microStart contributes to a genuinely positive circle that benefits the whole of society. But we need the government to help us, specifically by removing the obstacles that stand in the way of creating micro-businesses. They could also offer stimulation to start-up companies, for example by gradually reducing the benefits to which candidates no longer have a right after launching their project”, suggests Philippe Maystadt, the president of microStart, an economist and former government minister.
“In the space of four years, microStart has granted 1200 microloans. In the long term we aim to reach 1250 loans per year. The opening of our agencies in Charleroi and Antwerp should lead to a turnaround in microStart’s expansion policy. Since the most important cities in the country are now covered, we will continue our development in other places by setting up a permanent presence in social welfare centres, community centres etc. to find micro-entrepreneurs,” declared Maystadt.