July 2008 - An Evaluation of Finance Mechanisms for Micro-enterprises was conducted by the Ministry of Employment, in collaboration with a group of young professionals, the Tunisian Solidarity Bank (BTS) and technical support from the World Bank. The mission of the BTS consists of participating in the development of micro-enterprises by financing small projects initiated by individuals from disadvantaged population groups. Main objectives of the Evaluation
- Evaluation of the results of the BTS’ financing mechanisms (creation of small businesses, jobs and income streams, participation in regional development and integration in specific groups and categories),
- Identify strengths and weaknesses of these financing mechanisms as well as gaps,
- Determine challenges as well as micro entrepreneurs expectations,
- Formulate recommendations to improve the efficiency of the financing mechanisms for micro-enterprises, strengthen the role of support structures and training ; and encourage the development of innovative projects as well as the integration of young university graduates into the labor market.
The Evaluation main findings Among the 3,000 projects that benefited from BTS financing in the years of 2000, 2002 and 2004: - 62% of the total projects are still active (14,000 projects),
- The success rate is 73% for those projects that have been extended while it is only 60% for new projects,
- Of the 8678 projects surveyed that are not active, at least 2300 are in a temporary state of inactivity and expect to resume their activity.
The failure rate is clearly much higher during the first two years of the project regardless of which year the loans were disbursed. The activity sector of the project is a determining factor in project follow up: The projects initiated in the artisanal sectors and the mechanical and metallic industries have a better success rate than those financed in the agriculture sector. The promoter’s qualifications are a gauge of longevity: when the project manager has a professional background that directly relates to the project activity, the average lifespan of a project will increase by 33.7%. In the newly created projects, nearly 27,000 jobs (including those of the entrepreneurs) were created, mainly in the mechanical and metallic industries sectors, construction and services linked to artisanal products. Difficulties Encountered by Project Entrepreneurs The majority of the entrepreneurs who answered the questionnaire (85%) experienced difficulties from the beginning of the project or when it was extended. The most frequent difficulties reported are related to:
- Operating funds: Among the 14,000 projects in activity at the time of the survey and for nearly 6200 entrepreneurs, the difficulty that is often mentioned is that of insufficient revolving fund,
- Competition: Is more intense in urban areas where similar activities are already existing,
- Lack of clients: In nearly 4800 closed projects (55%) cited the lack of clients as a serious difficulty,
- Expensive rents,
- High prices of raw materials.
Most of the projects financed by the BTS that are still in progress demonstrate that the mechanisms of financing put in place are relevant and actively contribute in the promotion of the small businesses. It seems however, that the initiated projects are affected by the low volume of investment, their lack of innovation and the fact that they are not providing a unique service and thus face strong competition from existing businesses. Areas of Possible Improvement - Higher level of investment
- Targeting and encouraging promoters who have a qualification as well as professional experience
- Priority to the financing schemes including more support for staff
- Operating costs better adapted to project specificities
- Less projects with the same activity in the same geographic area especially in highly competitive sectors because of high fixed costs
- Develop targeted information for young university graduates within universities and provide support through training programs/workshops to create small businesses.
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