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"Many unemployed people have a capacity of initiative and energy that enables them to create their own jobs, but they lack resources and support. Our aim is to give everyone the right to economic initiative, by opening access to capital and providing the technical support needed. Solidarity Credit can transform excluded people into creators of wealth. Trust rebuilds the social link"---- Maria Nowak, President of ADIE.
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ADIE which was set up in 1990, provides a valuable experience for microcredit practitioners in developed countries around the world. It shows how to build up microcredit programs and microfinance institutions on a more sustainable basis, even in the context of a restrictive regulatory regime that most European countries have to cope with. It now has 7500 active clients, with Euros 13 million as outstanding loans. ADIE has created around 15,000 new micro-enterprises and 20,000 new jobs. The cost of creating a microbusiness on the average is just 1800 Euros, which is only one tenth of the cost of providing benefits to the unemployed. The loan recovery rate is currently 94% and the program activity is growing at an astounding rate of 30% every year. Thus ADIE has directly demonstrated that investments for financing micro-enterprises is economically more cost effective than the cost of conventional social security practised in West European countries.
ADIE started its credit operations with its own mirage funds. Today a growing part of the loan fund comes from other banks. A counter guarantee by the government and the European Investment Fund helps to cover the loan risks. Personal guarantees from friends or family, cover upto 50% of the loans, which carry market interest rates, currently 7.07% per annum. Borrowers have to pay a solidarity fee equivalent to 2-3 percent of the loan amount. ADIE collaborated with local social aid and enterprise support networks. It benefits from the support of many voluntary workers, who provide sponsorship, advice or training. Business advice and training are financed by local communities, the State and the European Social Fund.
By the end of 2000, ADIE's network covered 20 regions and 80 departments within France, with a rapidly expanding program. It is receiving more than 10,000 applications every year and for whole of France the potential demand is estimated at 20 to 30 thousand projects annually. The potential for future growth of ADIE on a more sustainable basis is quite large, as microcredit can cater to the need for self employment generated by new information and communication based technologies. However, financial viability, which is the aim of most microcredit programs, cannot be reached in France within the current institutional framework, because the technical support costs are particularly high. Furthermore, in the partnership with banks, only the banks receive the interests. The aim of the Association is, therefore, in the short term to ensure the social and economic return, which means a job creation cost lower than one fourth of the annual cost of unemployment.
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Inspired by the experience of Grameen Bank in Bangladesh, microcredit has developed not only in Asia, Latin America, Africa, but also in industrialized countries such as the United States, Canada and Eastern Europe. It is based on the fact that poor people pay back as well as, or even better than the others and that the transaction costs can be limited, as long as the credit is based on appropriate methods.
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Under its three years plan for the period 2002-2004, ADIE in its ongoing program will concentrate on the poorest target population in the deprived areas of France. It expects to provide 8000 solidarity loans in the final year of the plan period and support further expansion of micro lending in Europe.
Extracted from Solidarity Credit Promoting Self Employment, a publication of ADIE.
Url: http://www.adie.org.
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