Conference on: “Rural Community Development”

And plenary meeting

Exeter, Devon (UK)

19-20 October 2005

Rural Organization for Community Activities,

Banska Bystrica, Slovakia Zuzana Drímajová, Katarína Kubiňáková

VOKA – RURAL ORGANIZATION FOR COMMUNITY ACTIVITIES

VOKA - a civic association, established in 1998

MISSION:

activate local potential and to support, through technical assistance, the sustainable and democratic development of communities for the improvement of quality of life of rural people

VOKA - GOALS encourage and support local democracy and the right to equal opportunities, free expression and tolerance of other’s opinions,to activate citizens and their participation in planning and decision-making processes, improve volunteerism in community activities, and develop advocacy initiatives on the local and national level

promote sustainable community and economic development by activating local resources and accessing appropriate outside resources. Community and economic development includes meeting basic human needs, leadership development, organizational development, and support for activities such as SME in rural areas

built a strong network of individuals,organizations and communities for active co-operation related to rural development activities. To create and maintain relationship with international organizations and institutions with similar goals

 

VOKA TARGET GROUPS

Rural villages with population up to 5.000 inhabitants

Rural leaders and activists (community development)

Small businesses operating in rural areas (micro loans, training, advisory services) Local governments officials

Rural NGO s (involved in rural development projects)

VOKA’ s Programme Structure Rural Capacity Building

Networking and exchange of experience Rural Women’s Leadership Network/gender equality

Social-economic Development Socio-economic strategies Entrepreneur Communities-development of business environment Employment Development

Educational Programme Business Development in Rural Tourism and Agrotourism Community Organizer Basic English for Entrepreneurs in Tourism How to Start Your Own Business Rural Career Guidance Local Action Groups LEADER-Development and Implementation of Strategies for Socio- Economic Development of Rural Areas

BANSKA BYSTRICA Self-governing Region

VOKA has 2 micro credit funds: A) Micro credit program (MCP)

establishment: 1999 in cooperation with USAID initial portfolio: 10,000 USD current portfolio: € 62,845 (2,419,523 Skk) territory: nationwide # of allocated micro credits from April 1999: 326 MC source of front money: USAID, Tatra banka, Open Society Foundation, TRUST programme

B) Micro credit fund under the project „Rural Employment Services for Youth Professional Trainings and Micro loans“(MCF UNIDEA) donor of the project: Unidea - UniCredit Foundation, Milan, Italy initial portfolio: € 49.997 (1,945.678 Skk) first micro credits allocated in April 2005 territory: Self-governing region of Banska Bystrica (BB) expected # of MC: 35 # of allocated MC: 20

Rural Employment Services for Youth - Professional Training and Micro loans

Donor: UNIDEA UniCredit Foundation, ItalyDuration: April 2005 – April 2006Territory: Banska Bystrica Self Governing RegionOverall objective: Improvement of conditions for employability of rural youth in Banska Bystrica region by networking with other relevant institution on regional and national levels promoting self-employment services and vocational trainingSpecific objective: 1. Support self-employment of rural youth, improve their entrepreneurial skills and provide access to financial sources (micro loans) 2. Improvement of employment services of rural youth (individual guidance)Target groups:

Young people 18-35 living in rural areas Over high school graduates Long term unemployed Being on welfare Young entrepreneurs

MICRO CREDIT PROGRAM (MCP) Fund`s history

Although the fund works on national wide territory, most of MC clients come from region of BB

Original goal of the program: make credits available for “starting” rural entrepreneurs, promote cooperation among them and create conditions for development of rural enterprises

Type of MC: group MC with 3 to 5 membersDuring the first 6 months of program existence 30 MC were allocated (= € 17,532)2003 – modification of some criteria for MC beneficiaries, shift from group to

individual MC2004 – MCP evaluation 2005 – change of MCP, transformation of MCP according to current state of MC

market in Slovakia, target group of clients was extended by NGOUp to the present 326 MC were allocated from MCP

MCP – current setting:Goal: make credits available for small entrepreneurs and organizations who are involved in rural development Type of MC: Individual MCTarget group of clients: 1. small rural entrepreneurs

2. NGO sCurrent # of allocated MC: 58 (56 SE + 2 NGO s)

 Criteria for MC Entrepreneurs NGO

Min. amount of MC € 779

Max. amount of MC € 5 195

Interest rate 10 - 12 % 8 - 10 %

Maturity of MC 3 - 24 months

Postponement of instalments 1 month 1 - 6 months

Late payment penalty 0,10 %

Loan warranty Notary record, 1 - 2 guarantors

MICRO CREDIT FUND UNDER THE PROJECT „Rural Employment Services for Youth ProfessionalTrainings and Micro Loans“ (MCF UNIDEA) A part of one line of the project „R E S f Y P E a M L“ Goal: Support self-employment of rural youth, improve their entrepreneurial skills and provide access to MC Territory: Self-governing region of BB Target group of clients: starting businessmen - less than 2 years after establishing their company, age: 18 – 35 (40) years Type of MC: individual MC Current # of allocated MC: 20

 Criteria for MC beneficieries Entrepreneurs

Min. amount of MC € 260

Max. amount of MC € 2 597

Interest rate 6 %

Maturity of MC 12 – 24 months

Postponement of instalments 3 - 6 months

Late payments penalty 0,10 %

Loan warranty Notary record, 1 - 2 guarantors

MCF UNIDEA – current setting:

MCF UNIDEA – structure of clients

Gender distribution of MC

Men50%

Women50%

MCF UNIDEA – structure of clients

Age distribution of MC clients

15%

55%30%

18-30 years 31-40 years >40 years

MCF UNIDEA – structure of clients

Business field distribution of MC

Education5%

Services40%

Retail trade40%

IT15%

MCF UNIDEA – structure of clients

Former business experience of MC clients

45%

5%

35%

15%Unemployed - starting businessman

Employed - starting businessmanBusinessman less than 1 year

Businessman more than 1 year, starting new business field

INDICATOR

MCF UNIDEA MCP

Entrepreneurs Entrepreneurs NGO

Portfolio size € 49 997 € 62 845

First MC allocation April 2005 April 1999

Fund territory Region of BB Slovak republic

Target group of clients Starting entrepreneurs <2 years after establishing

business , age: 18 – 35 (40) years

Rural entrepreneurs

NGO s involved in rural

development

Use of MC Starting business Development of rural business

Rural development

projects

Type of MC Individual

MCP and MCF Unidea Comparison

MCP and MCF Unidea Comparison

INDICATOR

MCF UNIDEA MCP

Entrepreneurs Entrepreneurs NGO

Amount allocated MC 36 364 € € 63 351 € 10 390

Assessed interest from MC 4 751 € € 10 287 € 710

# of allocated MC 20 324 2

Average amount allocated MC € 1 818 € 1 131 € 5 195

Min. amount of MC € 260 € 779

Max. amount of MC € 2,597 € 5,195

Interest rate 6% 10 - 12 % 8 - 10 %

MC date due 12 - 24 months 3 - 24 months

Postponement of instalments 3 - 6 months 1 month 1 - 6 months

Late payments penalty 0,10 %

Credit warranty Notary record, 1 - 2 guarantors

After closing the project

„Rural Employment Services for Youth

Professional Training and Micro Loans“ we plan to merge both of VOKA`s funds into one

what would make VOKA`s MCP more effective.

PROBLEMS and OBSTACLES Low share of reliable MC clients, usually MC applicants belong to the most risky group of businessmen Entrepreneurs` fear from taking the credits, Slovak public has aversion towards credits Most applicants are often not able to submit a business plan meeting the requirements of MC institution A lot of entrepreneurs do not have a sensible and deliberate strategy of their business A lot of MC applicants have a problem to guarantee for the received MC MC institutions do not have sufficient financial resources to allocate higher MC which are requested by majority of MC beneficiaries Average amount of MC which VOKA is able to allocate to clients is not sufficient for majority of entrepreneurs

PROBLEMS and OBSTACLES Effort to minimize the number of MC allocated to potential deptors (by requiring business plans, explanation of business plans in front of MC committee) spins MC distribution process out Importance to control instalments from “delayed”clients and deptors Problems with group MC – reasons:

i. some clients speculate to raise higher credit by combining a number of smaller MC from other members of MC group; ii. scepticism or unwillingness to cooperate with other entrepreneurs

A change of condition on MC market in Slovakia (2005) i. Benefits from Labour office (ESF) are a competitor within the group of starting entrepreneursii. MC from banks are a competitor among the group of businessmen who set up their business 1 – 2 years ago

Thank you for your attention!