11 Ideas to promote job creation in Madrid

Citi Microfinance Report proposes 11 measures to create jobs by supporting micro and small businesses

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The 6th of November 2012 was presented in Madrid the report "Financial Inclusion to foster Job creation - A case study on Madrid", sponsored by Citi Microfinance, which proposes 11 concrete measures to promote job creation through supporting micro and small businesses.

The report was sponsored by Citi Microfinance and prepared by a group of researchers from the Foundation Nantik Lum based in Madrid. The ICO Foundation (Official Credit Institute ICO) also participated to this initiative which should contribute to the debate on the importance of small businesses for economic growth.

  • The event concluded with keynote from Ana Botella, Mayor of Madrid, on the path towards employment.
  • The report presents 11 ideas supporting self-employment, micro and small businesses in Madrid to promote job creation: For example, creating microfinance institutions specialised to serve these segments, promoting entrepreneurship in the financial education system, exploring government risk sharing mechanisms and new partnerships between banks and microfinance institutions to reach small businesses. Most of these models have been successfully implemented in other parts of the world, such as New York City and Germany.
  • The speakers also included the authors of the report (Silvia Rico and Maricruz Lacalle) as well as the institutions which made the report possible: Bill Van Dyke (Country Officer of Citi in Spain), Juna Riva de Aldama (President of Foundation Nantik Lum) and Roman Escolano (president of the Spanish Oficial Credit Institute ICO).

Madrid is home to 15% of the total number of Spanish companies. The vast majority of the Madrid businesses are micro and small companies and are further broken down as follows: 59.5% do not have any employees (self-employment) and 94.7% have less than 10 employees. Another trend emerging from the actual economic crisis and tied to the high Spanish unemployment rate is the significant increase in the willingness and intent to start a business, reaching 9.7% of the adult population in 2011. It is estimated that there are 420,223 potential entrepreneurs in Madrid.

"The entrepreneurs and small businesses in Madrid have access today to several quality initiatives designed by the government to support entrepreneurship, such as the Business Incubator Network Madrid Emprende for example. However access to finance remains one of the largest challenges for these small businesses." Stated Juan Riva de Aldama, President of Foundation Nantik Lum.

The challenges faced by micro and small businesses have been addressed in New York through the development of a financial system targeting micro and small businesses to promote employment opportunities. One of the main agents focused on providing inclusive financial services are Community Development Financial Institutions (CDFIs). These entities ensure the provision of financial services and business support to thousands of micro and small businesses which are not appropriately served as of today by the banking system. The work of these semi-private institutions is catalyzed by the implementation of a series of innovative partnerships between the Public sector (i.e. federal, state and local levels), private banking and non-profit institutions. Small businesses also benefit from resources provided by the City's Small Business Solution Centers and specific financing and guarantee programs of the US Small Business Administration administered by Banks.

The proposal of this report is to take the successful elements of the New York model and adapt them to Madrid to consolidate a financial system which creates employment opportunities through the financial and business support of entrepreneurs and small businesses.

"To support entrepreneurs and small businesses in Madrid, we recommend encouraging the creation of specialised accredited institutions as it is organised for the CDFIs in the US, institutions that are able to provide microloans, assessment and business training to thousands of micro and small businesses that have no access to funding today through the banking sector." mentioned Silvia Rico, one of the authors of the report. " The work of these institutions needs to be supported by public-private funding, which involves not only resources from the local government but also from the commercial banks and private companies" added Maricruz Lacalle co-author of the report."

"Supporting a wide spectrum of potential entrepreneurs, micro and small business owners through training and access to finance or tax incentives for example is key to stimulate economic growth and employment since Government and large corporations are unlikely to be a net source of incremental employment for some time. What is needed today, and not just in Spain, is that we are able to facilitate the access to services and finance, not just for the traditional 'microfinance' client, often identified as immigrants, rural communities and very low income entrepreneurs, but to the large and dramatic number of unemployed generated by the actual deep economic crisis." stated Bob Annibale, Global Head of Citi Microfinance and Citi Community Development.

Ana Botella, Mayor of Madrid, concluded the event ""We know that micro entrepreneurs are fundamental to help our economy getting out of the crisis. Our role as Public Administration is to facilitate the growth of these micro entrepreneurs, limit the unnecessary hurdles they face and promote the value of entrepreneurship. Initiatives like this report are positive news. It indicates that we are moving in the right direction and gives us good ideas to keep improving our practices".

11 recommendations to create employment in Madrid through supporting micro and small businesses

A -Foster political support to promote entrepreneurship and access to finance for micro and small enterprises: 1. Create a solid institutional framework to support entrepreneurship and access to finance and business support for micro and small enterprises: final approval of the new Entrepeneur Law (or Plan). 2. Include specific aspects in the new Entrepreneur Law (or Plan). For example, reduce administrative procedures to launch a new business, establish minimum quotas for public outsourcing and procurement to micro and small businesses, provide tax incentives for companies with public contracts to hire micro and small businesses. 3. Create a specific department within the public administration to develop small businesses. This department will provide business services through small businesses support centres (for example, the incubator network of Madrid Emprende), and/or through partnerships with law offices to provide pro-bono advice or a network o mentors and business advisers through corporate volunteering. 4. Encourage commitment and responsibility towards the community. Develop an awareness campaign, or promote the creation of commercial districts in depressed areas of the city.

B -Increase the availability of private and public financial resources: 5. Inject financial resources through private initiative: create specialized microfinance institutions with the support of a public-private fund involving the government, commercial bank institutions and private companies. 6. Review the financing mechanisms and the use of financial resources by the Public Administration. For example, allocate public resources to create a fund providing loans and guarantees to banks and microfinance institutions to ensure distribution of unsecured loans to entrepreneurs, micro and small businesses.

C -Encourage entrepreneurial initiative among populations that are most affected by unemployment: middle class, university students, unemployed workforce: 7. Raise awareness in Spanish society about the potential of entrepreneurship. Build bridges between unemployment, self employment, micro and small businesses. 8. Promote entrepreneurship in the educational system, from primary school to universities. Encourage technical professional training. 9. Strengthen financial education programs targeting the middle class, university students, and the unemployed.

D -Provide leadership to the sector with coordination from the public administration: 10. Develop an agenda for the coordinated promotion of financial inclusion between regional and local governments, universities, financial institutions, companies and microfinance institutions. 11. Encourage cooperation between financial institutions to ensure the provision of financial services to micro and small enterprises. For example, create a network or a Microfinance Institute responsible for providing management systems to institutions, defining an accreditation system for microfinance institutions, developing codes of conduct, promoting best practices, etc.

Citi

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About Citi Microfinance

Working across Citi's businesses, product groups and geographies, Citi Microfinance serves more than 100 microfinance institutions (MFIs), networks and investors as clients and partners in over 40 countries with products and services spanning the financial spectrum - from financing, access to capital markets, transaction services and hedging of foreign exchange risk, to credit, savings, remittances and insurance products - to expand access to financial services for the underserved.

Additional information may be found at www.citi.com/citi/microfinance

About the Foundation ICO:

Created in 1993, the Foundation ICO is a permanent nationwide non-profit foundation of the public state sector working with autonomous resources since 2003. One of the aims of the Foundation in the last few years has been to support the development of inclusive financial services in Spain through the support of the microfinance sector in the Spain and the creation of an innovative inhouse microcredit program at the base of the pyramid. The Foundation ICO also supported some catalyzing initiatives for the sector, such as the Foundation Nantik Lum, The Foro de Micro finanzas as well as research and academic training centers (Universidad Autnoma de Madrid and Universidad Pontificia Comillas).

Additional information may be found at: www.fundacionico.es

About the Foundation Nantik Lum:

Founded in 2003 in Madrid, Foundation Nantik Lum is a pioneering and innovative non-profit organization in both development of projects and research in the field of microfinance. Nantik Lum promotes microfinance programmes in depressed regions of the following countries: Chiapas -Mexico, Dominican Republic and Haiti. In 2003, Nantik Lum created Foro Nantik Lum de Microfinanzas jointly with Universidad Pontificia Comillas and Universidad Autónoma de Madrid, and with the support of Fundacin ICO. It is the first and only "think tank" on microfinance in Spain. In 2011, Nantik Lum launched the Spanish Microfinance Platform (www.esmicrofinanzas.com), the first and only one-stop shop for microfinance in Spain. This platform also counts with the support of Fundación ICO. Nantik Lum is also an active member of the main international microfinance networks: European Microfinance Network (www.european-microfinance.org) and Microcredit Summit Campaign (www.microcreditsummit.org).

Additional information may be found at: www.nantiklum.org