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MICROCREDIT AND ECONOMIC DEVELOPMENT:
ENTREPRENEURSHIP OR SELF-EMPLOYMENT?
Joana Vieira dos Reis Robalo
Master of Science in Business Administration
Supervisor:
Prof. Doutora Sofia Santos, Auxiliar Professor., ISCTE Business School, Departament of
Marketing, Operations and General Management
January 2015
Microcredit and Economic Development: Entrepreneurship or Self-employment?
III
Abstract
The present thesis aims to answer the central research question “Can microcredit be
considered as an entrepreneurial activity capable of creating innovative and value-added
businesses rather than a self-employment movement with few effects on economic
development?”. Considering the quantitative method, three hypothesis have been tested:
H1) The majority of microcredit applicants are unemployed individuals; H2) Microcredit
applicants tend to apply the money in businesses with innovative features and H3) Micro
entrepreneurs create only their own job and not for others. Regarding the qualitative
approach, two sub questions have been placed: SQ1) In what conditions and why do
people apply to microcredit programs and SQ2) In what sectors do the microcredit
applicants invest?
Although microcredit and microfinance industry is young in Europe and there is still a
long path to cover, the research conducted showed that microcredit is a promising sector
that is growing and evolving rapidly. If in previous years microcredit and microfinance
projects were mostly strict to promote self-employment through traditional activities,
nowadays this reality is changing and the type of business created is increasingly adopting
value-added features.
This research concludes that although microcredit does not nurture highly innovative
businesses, it can in fact be considered as an entrepreneurial activity capable of creating
value-added businesses that can have a role on job creation as well as in lessening of
social exclusion, positively affecting economic development.
Key words: Microcredit; Microfinance; Entrepreneurship; Economic Development
JEL Classification System: G210, O190
Microcredit and Economic Development: Entrepreneurship or Self-employment?
IV
Resumo
A presente tese tem como objectivo responder à questão “Pode o microcrédito ser
considerado como uma actividade empreendedora capaz de criar negócios inovadores e
de valor acrescentado em vez de um movimento de auto-emprego com poucos efeitos no
desenvolvimento económico?”. Considerando o método quantitativo, três hipóteses
foram testadas: H1) A maioria dos candidatos ao microcrédito são desempregados; H2)
Os candidatos ao microcrédito tendem a aplicar o dinheiro em negócios com
características pouco inovadoras e H3) Os microempreendedores criam apenas o seu
próprio posto de trabalho e não para outros. Relativamente ao método qualitativo, duas
sub-questões foram colocadas: SQ1) Em que condições e porque é que as pessoas
recorrem ao microcrédito? e SQ2) Em que sectores é que os candidatos ao microcrédito
investem?
Apesar da indústria do microcrédito e da microfinança ser relativamente recente na
Europa, a pesquisa conduzida mostrou que o microcrédito é um sector promissor que tem
vindo a evoluir rapidamente. Se anteriormente os projectos de microcrédito e a
microfinança eram quase restritos à promoção do auto-emprego através de criação de
actividades tradicionais, hoje em dia esta realidade está a mudar.
Esta pesquisa conclui que, apesar do microcrédito não fomentar negócios altamente
tecnológicos, pode de facto ser considerado uma activade empreendedora capaz de criar
negócios com valor acrescentado que podem desempenhar um papel na criação de
emprego bem como na diminuição da exclusão social, afectando positivamente o
desenvolvimento económico.
Palavras chave: Microcrédito; Microfinança; Empreendedorismo; Desenvolvimento
Económico
Classificações do JEL: G210, O190
Microcredit and Economic Development: Entrepreneurship or Self-employment?
V
Acknowledgements
“No duty is more urgent than that of returning thanks”
— James Allen
The development and conclusion of this thesis would not be possible without the support,
accessibility and contribution of some people. Sofia Santos - my supervisor, Ana
Mendonça and Sara Silva from ANDC, Amílcar Martins and António Curto from
CASES, António Oliveira from BES, Joana Lopes from AUDAX and lastly - but
defintely not the least, Tânia Sousa from Millennium BCP. To them, I would like to
express my deep gratitude and appreciation for their involvement.
At the same time, the encouragement and inspiration given by my family and friends
throughout this period was essential to the culmination of this thesis. Having them
accompanying the steps of this journey was of an incredible value and for that I am
grateful.
Thank you.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
VI
Contents
Abstract ........................................................................................................................... III
Resumo ............................................................................................................................. V
Acknowledgements .......................................................................................................... V
I. List of Tables ........................................................................................................ VIII
II. List of Figures ....................................................................................................... VIII
III. List of acronyms ................................................................................................ VIII
1. Introduction .............................................................................................................. 2
2. Literature Review ......................................................................................................... 4
2.1 Unemployment ...................................................................................................... 4
2.2 Economic development and Economic growth ..................................................... 6
2.2.1 Theory of Economic Development ................................................................ 6
2.3 Entrepreneurship & Self-employment ................................................................... 7
2.3.1 Entrepreneurship ................................................................................................. 7
2.3.2 Self-Employment ........................................................................................... 7
2.3.3 Motivations..................................................................................................... 8
2.4 Linking Entrepreneurship and Self-employment with Unemployment ................ 9
2.4.1 Casual Relation .............................................................................................. 9
2.4.2 Practical outcomes........................................................................................ 10
2.5 Social Entrepreneurship and Social Economy .................................................... 11
2.5.1 Social Economy Entities .............................................................................. 11
2.5.2 Social Economy in Europe ........................................................................... 12
2.6 Entrepreneurship Action Plan 2020 and European Microfinance Network ........ 13
2.7 Micro, Small and Medium-Sized Enterprises...................................................... 15
2.8 Microcredit and microfinance ............................................................................. 16
2.9 Summary .............................................................................................................. 20
2. Literature Review’s Conceptual Framework .......................................................... 22
Microcredit and Economic Development: Entrepreneurship or Self-employment?
VII
3. Microfinance Industry ............................................................................................ 24
4.1 Microfinance in Europe ....................................................................................... 25
4.2 Microfinance in Portugal ..................................................................................... 29
4. Conceptual Microfinance Industry Framework ...................................................... 31
6. Future Trends in Microfinance ................................................................................... 32
7. Methodology and Method .......................................................................................... 34
7.1 Methodology ........................................................................................................ 34
7.1.1 Inductive approach ............................................................................................ 34
7.2 Method ................................................................................................................. 35
7. 2.1 Mixed Methods Approach ............................................................................... 35
7.2.1.1 Qualitative Approach ..................................................................................... 36
7.2.1.2. Quantitative approach ................................................................................... 37
8. Data Analysis: Content and Results Analysis ............................................................ 41
8.1 Qualitative: Content Analysis .............................................................................. 41
8.2 Quantitative: Results Analysis ............................................................................ 44
8.3 Summary .............................................................................................................. 47
9. Discussion ................................................................................................................... 49
10. Conclusions .............................................................................................................. 56
10.1. Theoretical and Practical Implications ............................................................. 57
10.2. Practical Recommendations .............................................................................. 59
11. Further Research ....................................................................................................... 61
12. References ................................................................................................................ 62
Appendix ........................................................................................................................ 65
Appendix 1 – Inquiry to Microcredit and Microfinance Applicants .............................. 66
Appendix 2 – Results from the Inquiry .......................................................................... 69
Microcredit and Economic Development: Entrepreneurship or Self-employment?
VIII
I. List of Tables
Table 1 - Categorization of SME .................................................................................... 15
Table 2 – MICROINVEST and INVEST + main characteristics ................................... 30
Table 3 - Future relations between providers and clients ............................................... 32
Table 4 - Interaction with the microcredit and microfinance institutions ...................... 37
Table 5 - Interaction with the entrepreneurship institutions ........................................... 37
II. List of Figures
Figure 1-Unemployment rates seasonally adjusted, January 2000 - May 2014 ............... 5
Figure 2-Youth unemployment rates seasonally adjusted, January 2000 - May 2014 ..... 5
Figure 3 - Social Economy Sector Distribution ............................................................. 12
Figure 4 - Weight of the categories enterprises in EU25 ............................................... 16
Figure 5 - Evolution of the microcredit borrowings ....................................................... 24
Figure 6 - Evolution of the average loan per borrower in USD ..................................... 25
Figure 7 - Microfinance Institutions in Europe .............................................................. 26
Figure 8 - Microfinance Institutions in Europe .............................................................. 27
Figure 9 - Occupation of the applicants to microcredit and microfinance ..................... 45
Figure 10 - Innovation level in the businesses created ................................................... 45
Figure 11 - Number of employed persons on each business created ............................. 45
Microcredit and Economic Development: Entrepreneurship or Self-employment?
IX
III. List of acronyms
ANDC - Associação Nacional de Direito ao Crédito
ANJE – Associação Nacional de Jovens Empresários
APE – Associação Portuguesa de Empreendedores
BES – Banco Espírito Santo
CASES - Cooperativa António Sérgio para a Economia Social
CGAP - Consultative Group to Assist the Poor
CIP - Competitiveness and Innovation Programme
EIB- European Investment Bank
EIF – European Investment Fund
EMN - European Microfinance Network
EPMF - European Progress Microfinance Facility
EPPA - European Parliament Preparatory Action
ICT - Information and Communication Technologies
INPI – Instituto Nacional da Propriedade Industrial
IEFP - Instituto do Emprego e Formação Profssional
IFDEP - Instituto para o Fomento e Desenvolvimento do Empreendedorismo em Portugal
JASMINE - Joint Action to Support Microfinance Institutions
JEREMIE – Joint European Resources for Micro and Medium Enterprises
MFI – Microfinance Institution
MAP - Multi-Annual Programme for the promotion of enterprise and entrepreneurship
UNEP – United Nations Environment Program
Microcredit and Economic Development: Entrepreneurship or Self-employment?
1
“If opportunity doesn't knock, build a door”
— Milton Berle
Microcredit and Economic Development: Entrepreneurship or Self-employment?
2
1. Introduction
According to the European Commission, in 2008, Europe entered in the worst crisis of
the last half a century. Since then, most of the countries in the European Union have been
struggling with unemployment rates, facing a serious handicap to both economic and
social development (European Commission, 2013). A possible identified solution to
overcome this problem consists in the development of entrepreneurship, namely through
the support of microfinance and microcredit associations. To the European Commission,
microcredit is an important key to growth, employment and social cohesion (European
Progress Microfinance Facility, 2010). Despite this optimistic position, several authors
doubt microcredit contributions in developed countries. Congregado (2010), Shane
(2009) and Baumol (2008) defend that self-employment only has temporary effects on
the unemployment level and does not nurture firms that generate innovation and wealth.
C.Ahlin (2011) goes further and questions the entire system of microcredit in developed
countries. As one can see, there are controversial opinions regarding microcredit and its
impacts, and although there are some authors that talk about the effects of
entrepreneurship and self-employment in the unemployment levels, the literature fails in
making the direct connection between microcredit and economic development.
The knowledge of the real effects of microfinance in developed countries is important
since it has numerous implications at economic, social and political levels. By
understanding if microcredit can contribute to economic development and to a broad
creation of jobs, entities such as the European Commission can develop action plans with
the proper measures to foster economy and achieve the goals of reducing unemployment
and consequently diminishing the social exclusion.
The present thesis aims not only to explore the concepts of entrepreneurship and
microcredit, but mostly understand their real contributions to reduce unemployment and
boost growth in the European Union, more particularly in Portugal. Considering this, the
research question is related with the extent to which microcredit can be considered an
entrepreneurial activity capable of creating innovative and value-added businesses
rather than a self-employment movement with few effects on economic development.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
3
“Microfinance is an idea whose time has come”
— Koffi Annan
Microcredit and Economic Development: Entrepreneurship or Self-employment?
4
2. Literature Review
This section will begin by defining the notions of unemployment, economic development
and economic growth. Based on Schumpeter’s Theory of Economic Development, it will
explore in what extend the previous concepts of unemployment, economic development
and economic growth may be related to entrepreneurship and to self-employment and
how can they influence each other. The theories of entrepreneurship and self-employment
will therefore be explained and the connection between them and unemployment will be
explored, emphasizing the causality of this relation and its practical outcomes. The
concepts of social entrepreneurship and social economy will also be analised, together
with the activities developed in the entrepreneurship area by the European Commission,
namely the development of the Entrepreneurship Action Plan 2020 and the creation of
the European Microfinance Network, centring on the importance of Micro, Small and
Medium Enterprises. Next, the focus will be given to the microcredit and microfinance
sector, on its roots and its evolution, as well as the development of the microfinance sector
in Europe. Finally, a brief summary will be presented.
2.1 Unemployment
Europe entered in 2008 in a severe crisis and since then several countries of the European
Union have been passing through a severe period, struggling with unemployment rates
(European Commission, 2011). Unemployment, as defined by Eurostat considering the
guidelines of the International Labour Organization, refers to someone aged between 15
or 16 years to 74, without working during the reference week but actively searching for
employment during the last four weeks, being available to start working within the next
two weeks (or has already found a job to start within the next three months). The
unemployment rate translates the number of unemployed people as percentage of the
labour force (Eurostat Glossary). The labour force, also known as the active population,
includes both employed and unemployed people and excludes the economically inactive
(such as pre-school children, school children, students and pensioners) (Eurostat
Glossary). Another important concept is youth unemployment, defined by Eurostat as the
people between the ages of 15 and 24, inclusive, who are unemployed.
According to data from Eurostat1 concerning the year of 2013, although there are still
some member states with low unemployment rates, such as Austria (4,8%) or Germany
1 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics
Microcredit and Economic Development: Entrepreneurship or Self-employment?
5
(5,3%), there are countries with alarming rates, such as Greece (27,6%) and Spain
(27,2%). In July, the Euro area (EA18) unemployment rate was 12,1%, corresponding to
26.654 million unemployed people. The following graphics illustrate the evolution of
unemployment and youth unemployment in Europe:
Figure 1-Unemployment rates seasonally adjusted, January 2000 - May 2014
Source: Eurostat, 2014
Figure 2-Youth unemployment rates seasonally adjusted, January 2000 - May 2014
Source: Eurostat, 2014
Microcredit and Economic Development: Entrepreneurship or Self-employment?
6
2.2 Economic development and Economic growth
The high levels of unemployment are a barrier to the economic development and to
economic growth (Quintana, 2012). Economic development can be defined as the
quantitative and qualitative changes in an existing economy, and involves the sustained
and resolute actions of communities and policymakers that intend to improve the
standards of living and the general welfare of the citizens as well as the economic health
of a specific region2. A similar but more restrict concept is economic growth, which can
be perceived as a sub category of economic development and respects to the general
increase in a country’s products and services output (Carruthers, 2010).
2.2.1 Theory of Economic Development
According to Schumpeter’s Theory of Economic Development (1934), economic
development has three pillars: the technological innovation, the credit for new
investments and the entrepreneur. To Schumpeter (1934), economic development is
endogenous, spontaneous and discontinuous. The entrepreneur is an agent of change and
the main carrier of economic development, and through his creative destruction, he is able
to break vicious economic cycles and create new paradigms, boosting competitiveness
and creating opportunities. Beyond the figure of the entrepreneur and the importance of
the bank credit for the economic development, the truly pioneering feature of
Schumpeter’s theory was the idea of creative destruction trough innovations and the
notion that bank credit was a prerequisite to innovation and to the foundation of new
enterprises (Hagemann, 2013). This happens since the entrepreneurs need financial means
to invest in their activities, which is given to them in form of credit by banking systems.
As it was said, the entrepreneur is an agent of change. Through the access to financing
sources, in which microcredit is included, the entrepreneur is capable of contributing to
the inversion of vicious economic cycles and ultimately create new opportunities and
stimulate economic development.
2 http://www.whatiseconomics.org/economic-development
Microcredit and Economic Development: Entrepreneurship or Self-employment?
7
2.3 Entrepreneurship & Self-employment
2.3.1 Entrepreneurship
The origin of the term entrepreneur comes from France in the 17th century and it was used
to describe someone who undertakes a significant project or activity. In fact, in a
minimalist sense, an entrepreneur is purely an individual who starts and/or runs a small
business (McLean, 2006) or someone who is self-employed (Hamilton, 2000). However,
considering a business approach, an entrepreneur is more than that. The concept has been
evolving throughout time: Jean-Baptiste Say (1803) defined an entrepreneur as an
economic agent who unites all means of production to create a product, and by selling it,
he is able to pay rents, wages and interests and remain with a profit. To Schumpeter
(1934:168), entrepreneurs are “innovators who use a process of shattering the status quo
of the existing products and services to set up new products and services”. Peter Drucker
(1964:28) defines an entrepreneur as someone who “searches for change, responds to it
and exploits opportunities”. According to Dees (1998:2), the term identifies the
“venturesome individuals who stimulated economic progress by finding new and better
ways of doing things”. Looking further into the literature, one can identify some attributes
repeated in several definitions of entrepreneur, such as the fact of being risk-taker,
innovator and creator of economic value. Despite these broader definitions of
entrepreneurship, if considering the minimalist sense defined by McLean (2006) or
Hamilton (2000), it can be difficult to distinguish between an entrepreneur and a self-
employed individual.
2.3.2 Self-Employment
A concept that is often connected to entrepreneurship is self-employment. A self-
employed person is defined by European Migration Network s an individual who is “the
sole or joint owner of an unincorporated enterprise (one that has not been incorporated,
i.e. formed into a legal corporation) in which he/she works, unless they are also in paid
employment which is their main activity” (European Migration Network, 2014:4).
Despite the similarities between the two concepts of entrepreneurship and self-
employment, a criticism pointed to self-employment is that most of the people that
become self-employed are not entrepreneurs in the sense of people creating businesses
that generate innovative businesses (Baumol, 2008; Shane, 2009). This leads to a key
Microcredit and Economic Development: Entrepreneurship or Self-employment?
8
aspect of the entrepreneurial activity that often lacks to self-employment by itself: value
added features. According to the Business Dictionary (2010), this refers to “extra features
of a business that go beyond the ordinary expectations and provide competitive edges”.
As it was stated before, through the offer of new products and services and the continual
improvements in the existing ones, entrepreneurs positively contribute to economic
growth and development. To do so, entrepreneurs rely on innovation, defined by the
European Commission on its Green Paper on Innovation (1996:54) as “the commercially
successful exploitation of new technologies, ideas or methods through the introduction of
new products or processes3, or through the improvement of existing ones.” According to
Simmie (2002), innovation is a result of an interactive learning process that involves often
several actors from inside and outside the companies. To Schumpeter (1911), it may
consist on the introduction of a new product, a new method of production, the opening of
a new market, a new source of supply or new forms of organization.
In order to better understand both entrepreneurship and self-employment, it is important
to go through the motivations that lead to the entrepreneurial activity.
2.3.3 Motivations
The motivations to entrepreneurial activity can be seen through three different angles:
economic, psychological and social. The first one underlines economic and
environmental factors that stimulate entrepreneurial activity, such as the dimension of the
markets, the rhythm of technological changes, the structure of the market or the industrial
dynamic (Tushman and Anderson, 1986). Economic incentives to entrepreneurial activity
include taxation policy, sources of financing and raw materials, easy access to
information and market opportunities, among others. The second one (psychological)
focuses on the individual traits of the entrepreneur, which means that the entrepreneurial
action relies on personal human attributes, such as the willingness to face uncertainty, the
propensity to accept risks and the need for achievement of the individuals. (McClelland,
1961). Lastly, the third prism (social) defends that entrepreneurship depends on cultural
factors and societal values, such as religious beliefs, customs or the functioning of the
institutions. Although each perspective gives special emphasis to different factors, these
3 The innovation process comprises the organizational business practices, new management systems, new
methods of labour organization and new methods of organizing external relations.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
9
approaches are not exclusive and even complement each other, since there are several
dimensions that influence entrepreneurship (Eckhardt and Shane, 2003). More recently,
new studies have also shown that besides the factors previously mentioned, genetic
features may also influence the likelihood that people will be self-employed (Nicolaou
and Shane, 2009).
2.4 Linking Entrepreneurship and Self-employment with Unemployment
Connecting unemployment with self-employment and entrepreneurship comes from
Oxenfeldt (1943), who defends that unemployed individuals with low prospects for wage-
employment will find in self-employment a feasible alternative. Mandelman (2009)
completed this theory and stated that the nature of self-employment has two perspectives.
In the first one, the unemployed and those with less schooling and lower wages are more
likely to become self-employed, since in a segmented labour market they would be worse
positioned for finding good salaried and appellative opportunities. In the same line, older,
better-educated and well-paid workers with experience in the salaried sector would be
less likely to enter the self-employment sector once they already have comfortable
positions in the labour market. A second perspective takes in account liquidity constraints,
and thereby the experienced and best-salaried workers should be more likely to start their
own business, since they have accumulated the required capital and have easy access to
good business opportunities and financing sources. The unemployed, on the other hand,
tend to hold inferior endowments of human capital and entrepreneurial skills required to
start and sustain a new firm. This theory therefore suggests that high unemployment rates
may imply lower levels of personal wealth and so high unemployment may be associated
with a low degree of self-employment.
2.4.1 Casual Relation
Regarding the casual relation between self-employment and entrepreneurship with
unemployment, authors such as Blau (1987), Evans and Jovanovic (1989) defined the
refugee effect and the entrepreneurial effect. In the refugee effect, high unemployment
rates induce people to become self-employed since the opportunity cost of creating a start-
up firm has decreased. On the other hand, in the entrepreneurial effect, entrepreneurship
and self-employment contribute to the reduction of unemployment by creating new
ventures and new jobs. As one can see, the casual link between entrepreneurship and
Microcredit and Economic Development: Entrepreneurship or Self-employment?
10
employment is opposite in the two theories: while in the first one is the high
unemployment that encourages self-employment, the second suggests that is the decision
people make voluntarily to become entrepreneurs that will reduce unemployment at a
macro-economic level (Thurik et al., 2008). The two perspectives represent a virtuous
cycle, since unemployment promotes self-employment and self-employment reduces
unemployment. Although both theories are widely accepted, studies have showed that the
entrepreneurial effects are stronger than the refugee effects (Thurik et al., 2008).
2.4.2 Practical outcomes
Despite the theoretical positive effects of self-employment, several authors doubt its
practical outcomes. Some of the literature focusing on the decision to become an
entrepreneur suggests that public policy can reduce unemployment by providing
instruments to promote entrepreneurship, but does not necessarily stimulate economic
growth. To Thurik (2008), it is not clear that high rates of self-employment automatically
lead to improved performance. According to Millán & Román (2010), self-employment
is a tool for fighting unemployment that will only have temporary effects: Firstly, self-
employed show a low probability of survival and, in most cases, only a small number of
them will remain as self-employed once the economy recovers. Secondly, only a minority
of self-employed will hire other workers. In fact, in the EU-15 33,5% of self-employed
are job creators (Eurostat, 2009). There are even those who state that self-employment
rates may be inefficiently high (Carree et al., 2008) and that too much self-employment
can be characteristic of poor economies of scale in production and R&D rather than a
signal of vibrant entrepreneurial activity (Thurik et. at., 2008).
Finally, to Gries & Naudé (2010), technological innovation, improvements in
productivity and even economic growth do not automatically imply human development.
To them, although entrepreneurship is a determinant of economic growth, it does not
imply that it directly contributes to human development.
Understanding the casual relationship between self-employment and unemployment and
what are their real contributions to economic growth and development is of extreme
importance so that the policy makers can have the right basis to fruitfully develop
measures that promote entrepreneurship and self-employment and fight unemployment.
Taking into consideration these growing concerns, the concepts of social
entrepreneurship and social economy are emerging.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
11
2.5 Social Entrepreneurship and Social Economy
Apart from entrepreneurship and self-employment, an evolving concept is social
entrepreneurship. To Reis (1999), social entrepreneurship is purely the application of
sound business practices to the operation of non-profit organizations. Some authors go
further and describe it as an “innovative approach for dealing with complex social needs”
(Johnson, 2000:2). To Anderson and Dees (2002:192), social entrepreneurship translates
the pursuit of “new and better ways to create and sustain value”. In this line, social
entrepreneurs are driven by social goals and aim to increase social value, contributing to
the welfare or well-being on a given community. This originates a new sector among
economies between the private (business) and public sectors (government): the social
economy sector. This sector includes organizations such as cooperatives, mutual
societies, non-profit associations, foundations and social enterprises (European
Commission, 2013). It can be defined as the dynamic created by a set of organizations
whose activity and existence is based on people and on its social utility (Curto & Martins,
2013).
2.5.1 Social Economy Entities
Social economy entities are mostly small and medium sized enterprises, and therefore
they are included in the Commission’s policy aiming at promoting enterprises, regardless
of their business form. According to the European Commission, social enterprises in
particular favour community’s interests in detriment of profit maximisation and they
frequently offer innovative goods and services and resort to original methods. Social
economy enterprises have therefore common characteristics (Curto & Martins, 2013),
such as:
Contribution to a more efficient market competition and encouragement of
solidarity and cohesion;
The primary purpose is not to obtain a return on capital;
Generally managed in accordance with the principles of solidarity and mutuality;
Adaptable to changing social and economic circumstances, as they are flexible and
innovative;
Based on active membership and commitment and very frequently on voluntary
participation.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
12
Since these enterprises associate economic performance, democratic operation and
solidarity amongst members, they also contribute to the implementation of some of the
Community goals, particularly in the fields of employment, social cohesion, regional and
rural development, environmental protection, consumer protection and social security
policies (European Commission, 2013). Considering this, the Commission wants to create
a favourable environment for the development of social businesses and social economy
in Europe.
2.5.2 Social Economy in Europe
Social economy enterprises represent 10% of all European businesses, translating 2
million enterprises across Europe and employing over 11 million paid employees,
equivalent to 6% of the working population in the EU (European Commission, 2013).
The distribution of the sector is characterized in the following graphic:
Figure 3 - Social Economy Sector Distribution
Source: European Commission, 2013
The goal of the Commission regarding social economy enterprises is to guarantee that
they have the proper conditions to “compete effectively in their markets and on equal
terms with other forms of enterprise, without any regulatory discrimination and
respecting their particular principles, modus operandi, needs, particular goals, ethos and
working style4” (European Commission, 2013).
To promote this particular form of entrepreneurship, the Commission has been supporting
several projects in related areas, namely examining and reviewing legislation, identifying
4 http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/social-economy/, accessed
07/12/2013
26%
4%70%
Cooperatives Others Non Profit Associations
Microcredit and Economic Development: Entrepreneurship or Self-employment?
13
and sharing good practices and also collecting statistical data. In 1989, the Commission
adopted a Communication on “Business in Social Economy Sector” and since then
several projects and activities have been done to promote the sector. In 2000 was founded
the Social Economy Europe, an EU representative institution for social economy. It aims
to “promote the social and economic input of the social economy enterprises and
organisations, to promote the role and values of social economy actors in Europe and to
reinforce the political and legal recognition of the social economy and of cooperatives,
mutual societies, associations and foundations at EU level5.” Also, as SME, social
economy enterprises benefit as well from Community programs, such as the
Competitiveness and Innovation Programme6 and other funds specially targeted to
regional development and research programmes.
Following these programmes, the European Commission settled the Entrepreneurship
Action Plan 2020, which aims to foster Europe’s entrepreneurial activity and boost
economic development. In the same ambit, the European Commission also took part in
the European Microfinance Network, promoting microcredit and microfinance across
Europe.
2.6 Entrepreneurship Action Plan 2020 and European Microfinance Network
As Congregado (2010) mentions, entrepreneurship and self-employment can contribute
to reduce unemployment by two channels: through the direct effect of an individual who
is unemployed becoming self-employed and through the indirect effect of an eventual
extra job creation by entrepreneurs in running enterprises that require outside job.
In the current economic crisis, problems related to the low rates of company’s creation
and company’s growth are a reality in Europe. According to the Flash Eurobarometer 354
(2012), 19% of EU respondents have started a business or taken over one and 4% is
planning to start one. This means that 77% of the respondents have never started a
business, taken over one nor intend to. In this line, 58% of the EU respondents say they
would prefer to work as an employee rather than being self-employed and more than a
5 http://www.socialeconomy.eu.org/spip.php?rubrique11, accessed 07/12/2013 6 CIP is a legal basis for all Community action relating to competitiveness and innovation. It covers
entrepreneurship, SME policy, industrial competitiveness, innovation, ICT development and use,
environmental technologies and intelligent energy.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
14
fifth of EU respondents do not see self-employment as a feasible alternative. Regarding
the motives, the most appointed are the lack of capital or financial resources (21%), the
current economic climate (12%), the lack of skills to be self-employed (8%), the lack of
a business idea (7%), the difficulty in reconciling self-employment with family
commitments (6%) and finally the risk of failure and its consequences (5%).
Despite this scenario, new enterprises have been seen as a crucial ingredient in creating a
job-rich recovery in Europe, therefore it is necessary to empower Europe's entrepreneurs
and stimulate them to be more adaptable, creative and to have greater impact in a
globalised competition. As it was stated before, entrepreneurship can be motivated by
factors such as the taxation policy, industrial policy, sources of finance, availability of
investment and market opportunities, among others. Following this reasoning, in order to
bring Europe to the desired levels of employment and foster economic development, the
European Commission is creating a series of measures that aim to boost investment and
promote entrepreneurship, reinvigorating Europe’s entrepreneurs and pushing
entrepreneurial activity. These measures are defined on the Entrepreneurship Action Plan
2020 – Reigniting the Entrepreneurial Spirit in Europe and intend to “restore confidence,
creating the best possible environment for entrepreneurs by putting them at the heart of
business policy and practice, revolutionising the culture of entrepreneurship”. Thus, this
plan is based on three action pillars7 that intend to set out the foundations for future
growth and competitiveness. According to the European Commission, the plan is a
“blueprint for decisive action to unleash Europe's entrepreneurial potential, to remove
existing obstacles and to revolutionise the culture of entrepreneurship in Europe”. The
main changes that will happen in this panorama will be the inclusion of entrepreneurial
education and experience in school’s curricula, a reduction of the time and bureaucracy
necessary to start up a business, obtain the necessary licenses and permits and complete
bankruptcy procedures, and finally the creation of a mentoring, advice and support
program for potential entrepreneurs.
As it was said before, the lack of proper sources of financing translates one of the main
restraints to entrepreneurship in Europe. In order to surpass this strain and improve the
7 The action pillars of the Entrepreneurship Action Plan 2020 are: 1 – Entrepreneurial education and training
to support growth and business creation; 2 – Create an environment where entrepreneurs can flourish and
grow and 3 – Role models and reaching out to specific groups.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
15
access to finance, the European Commission also plays an important role in the EMN
(European Microfinance Network), a non-profit association that aims to promote
microfinance, self-employment and microenterprises development, improving the
regulatory framework at European Union and Member State levels. The EMN was
launched in 2003 to bring together microfinance practitioners and people involved in
microfinance activities all over Europe and it had 22 members. Nowadays it has 87 active
members and partners located in 22 European countries. These members and partners are
practitioners, researchers and financial institutions. EMN has become a major actor in the
microfinance field in Western Europe and the creation of this network has proved to be
an essential step in the promotion of microfinance in the European Union, assisting the
fight against unemployment and social exclusion through the development of micro,
small and medium-sized enterprises.
2.7 Micro, Small and Medium-Sized Enterprises
According to Günter Verheugen (2005), the definition of Micro, Small and Medium-
Sized Enterprises (SME) represents a major step towards an improved business
environment for SME and aims to promote entrepreneurship, investments and growth.
The European Commission (EU recommendation 2003/361) defines SME according to
the number of employees and to either the turnover or the balance sheet total. The
distinction is made through the following parameters8:
Or
Company category Employees Turnover Balance sheet total
Medium-sized < 250 ≤ € 50 m ≤ € 43 m
Small < 50 ≤ € 10 m ≤ € 10 m
Micro < 10 ≤ € 2 m ≤ € 2 m
Table 1 - Categorization of SME
Source: European Commission, 2003
To Verheugen, SME are the “engine of the European economy and are an essential
source of jobs, create entrepreneurial spirit and innovation in the EU and are thus crucial
8 These values apply only to the figures of individual firms. Firms that are within a group may need to
include employee/turnover/balance sheet data from that grouping too.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
16
for fostering competiveness and employment9”. As Figure 4 illustrates, SME’s in EU25
represent almost 99% of all enterprises, providing around 75 million jobs (SME User
Guide, 2012). According to the European Commission (2011)10, microenterprises
represent 91% of the total enterprises in EU25, and the average company has five
workers. Despite the micro size of these companies, microenterprises account for 53% of
all jobs in EU25, having an enormous importance to European economy. One third of
these start-ups are launched by people who are unemployed (Relatório de Execução do
Instrumento de Microfinanciamento Progress, 201311).
Figure 4 - Weight of the categories enterprises in EU25
Source: European Commission, 2011
According to the European Commission (2011), microenterprises face particular
problems due to their small size and limited resources, such as finding the finance to get
the business going. To the European Investment Fund, the ability of a financial system to
reach such small entities is crucial for the achievement of general socio-economic
improvement. Microcredit and microfinance practices can be seen as a mechanism to
reach such small entities.
2.8 Microcredit and microfinance
Apart from self-employment and entrepreneurship, a concept that is becoming more and
more explored is microcredit. According to the Consultative Group to Assist the Poor
(CGAP), microfinance is the “provision of basic financial services to poor (low income)
people, who traditionally lack access to banking and related services12”. To the European
9 http://ec.europa.eu/enterprise/policies/sme/files/sme_definition/sme_user_guide_en.pdf, accessed at
08/12/2013 10http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/crafts-micro-
enterprises/index_en.htm, accessed at 09/12/2013 11 ec.europa.eu/social/BlobServlet?docId=12682&langId=pt, , accessed at 09/12/2013 12 http://www.cgap.org/about/faq/what-microfinance, accessed at 08/12/2013
86% 88% 90% 92% 94% 96% 98% 100%
Micro SME Big
Microcredit and Economic Development: Entrepreneurship or Self-employment?
17
Commission (2009), the meaning of microcredit sets apart from the poverty idea implied
by CGAP and is defined as a loan under 25.000 euros given to support the development
of self-employment and microenterprise that has both economic and social impacts. At
an economic level, it aims to create activities that generate income, creating jobs and
developing microenterprises and regions, and at a social level it ambitions to reduce social
exclusion and also the financial inclusion of individuals. Besides microcredit, another
important and broader notion is microfinance, defined by the United Nations
Environment Program (UNEP) as referring to “loans, savings, insurance, transfer
services, microcredit loans and other financial products targeted at low-income
clients13”. These concepts differ from commercial banking since they relate to small loan
sizes, quick and easy access, non-traditional credit worthiness evaluation, and alternative
collateral requirements.
The first documented experience related to microcredit goes back to 1846, when, in the
south of Germany, the local farmers became tied to loan sharks after a rigorous winter.
As a solution, the German Mayor Raiffensem created the Bread Association, in which he
gave flour to the farmers so that they could make bread, being able to pay their debts with
the profit obtained from their sales. Since then, many other isolated actions similar to
microcredit have been done worldwide, but the stepping-stone to the development and
diffusion of microcredit was set by Muhammad Yunus in 1976. Like Raiffensem in
Germany, Yunus in Bangladesh noticed that several people were asking credit to the loan
sharks in order to run their own businesses, and despite the high interest rates charged,
they were able to pay their debts. Yunus started then to lend his own money to some
people who wanted to develop productive activities, and after numerous success cases,
he founded in 1983 the first microcredit institution – the Grameen Bank. His work led
him to the Nobel Peace Prize in 2006 in the field of Humanitarian Work, recognizing his
efforts to create economic and social development from below14.
With the success in Bangladesh, microcredit quickly expanded to other parts of the world,
especially to third world countries, being appointed as a popular tool for economic and
social development (Eunice, 2011).
13 http://capacity4dev.ec.europa.eu/unep/topic/microfinance, accessed at 08/12/2013 14 http://www.nobelprize.org/nobel_prizes/peace/laureates/2006/yunus-facts.html
Microcredit and Economic Development: Entrepreneurship or Self-employment?
18
Although “it was long thought that microfinance was limited to developing countries”
(Guichandut, 2006:55), microcredit has been more recently extending to developed
countries, namely in the European Union. While in developing countries the aim of
microcredit is to reduce poverty, promote self-employment and improve the
empowerment of socially excluded persons, in industrialized countries the goal is firstly
encouraging self-employment and entrepreneurship (Brana, 2011).
2.8.1 Microfinance in Europe
According to the European Investment Fund (2012), microfinance is long recognised by
European policy-makers as an instrument that not only boosts entrepreneurship and
competitiveness, but also promotes social inclusion. However, considering the legal and
political environments, the development of the European microfinance sector is still at an
early phase regarding its scale and broader impact, and faces a continuing gap between
supply and demand, as it will be explained in the next section – Microfinance Industry.
Considering the Progress Microfinance15 Report (2010), microfinance’s targets
individuals who lost their job or are at risk of losing it, individuals facing difficulties
entering the labour market, people at risk of social exclusion as well as vulnerable people
with difficulties accessing the credit market. It also targets microenterprises, especially
those in the social economy sector which employ individuals on the previous situations.
As in developing countries, microfinance in Europe started with social purposes.
However, unlike developing countries, microfinance in Europe has not moved forward to
a more professionalized business approach. The European Microfinance Network (2007)
presents some assumptions to explain why European microfinance schemes have not
managed to overcome obstacles and reach financial sustainability, namely the fact that
micro entrepreneurs have more options to finance their projects compared to
entrepreneurs in developing countries and financial markets are well developed, with
banks reaching the majority of the population. Nevertheless, over the past years, the
European Commission has been promoting several actions in order to support
microfinance (EIF, 2012/13), namely:
15 The European Progress Microfinance Facility is an initiative in which the European Commission and the
European Investment Bank have made available EUR 205 million of funding to microfinance services.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
19
Risk protection to financial institutions, namely banks, guarantee institutions and
counter-guarantee institutions, for new micro-credit portfolios, under the Growth
and Employment Initiative (2000), the Multi-Annual Programme for the promotion
of enterprise and entrepreneurship (2005) and the Competitiveness and Innovation
Framework Programme (2013), all managed by the EIF;
The Joint European Resources for Micro and Medium Enterprises (“JEREMIE”)
scheme, managed by the EIF on behalf of the European Union (2007-2013), aiming
to improve the access to finance, including micro-credit using European Structural
Funds;
The European initiative for the development of microcredit in support of growth
and employment (2007), a broader EU policy move to use public funds to contribute
to the development and long-term sustainability of the sector.
Despite the growing importance given to microfinance, there are still several criticisms
pointed out to it, namely the fact that most of its institutions are dependent on subsidies
and are unable to operate profitably enough to cover its costs (Christen & Rosenberg,
2000). In fact, according to the Deutsche Bank (2007), only 2% of all the MFIs worldwide
are financially sustainable, and in the most cases, these are bigger, established, regulated
and relatively well-known MFIs.
Also, to Banerjee and Newman (1993), production organized within a firm is often more
efficient that production organized across small autonomous individuals, due to
economies of scale and specialization effects and to Matsuyama (2007), microcredit
improves micro-borrowers access to capital and technology, but does not seem to allow
them to reach optimal capital scale and technology levels.
Finally, there are authors such as Ahlin (2011) who defend that microfinance may rely on
poor economies to survive, in the sense that microcredit may need a vibrant informal
economy, a situation that tends to grow rarer as a country develops. Besley and Coate
(1995) also believed that microcredit is at best an anti-poverty tool and not a stepping-
stone to broader development.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
20
As one can see, there are different opinions regarding microcredit and microfinance and
its practical impacts: while some believe microcredit and microfinance can represent a
possible answer to foster economic development in Europe, others doubt is outcomes,
especially considering the European panorama.
2.9 Summary
This section focused on the important concepts and existing ideas regarding microcredit
and entrepreneurship and intended to set a basis for further research. The main ideas to
retain are the following:
The high levels of unemployment in Europe are a barrier to the economic
development and to economic growth. According to Schumpeter (1911), economic
development is supported by technological innovation, by the credit for new
investments and by the entrepreneur. Throughout time there have been several
definitions of entrepreneur and most of them repeat some attributes such as the fact
of being risk-taker, innovator and creator of economic value. Self-employment sets
apart from entrepreneurship due to the fact that most of the self-employed people
do not create innovative businesses.
Connecting unemployment with self-employment and entrepreneurship comes
from Oxenfeldt (1943) and was later developed by Mandelman (2009), who
defends that the nature of self-employment can have two perspectives, and both
unemployed and experienced workers have probabilities to become self-employed.
Regarding the casual relation between self-employment and entrepreneurship with
unemployment, authors such as Blau (1987), Evans (1989) and Jovanovic (1989)
defined the “refugee effect” and the “entrepreneurial effect”, which have an
opposite causal link between entrepreneurship and employment. Although several
authors defend the positive effects of entrepreneurship and self-employment,
authors such as Thurik (2008), Carree (2008) and Millán & Román (2010) doubt
its practical outcomes.
Despite these negative ideas, the European Commission strongly believes that
entrepreneurship and self-employment are crucial for an European recovery and
therefore is trying to promote them, namely trough the creation of the
Microcredit and Economic Development: Entrepreneurship or Self-employment?
21
Entrepreneurship Action Plan 2020 and the European Microfinance Network. By
doing so, the expansion of microcredit in Europe is being promoted. According to
the European Commission (2009), microcredit is a loan under 25.000 euros given
to support the development of self-employment and microenterprises. Regardless of
the growing importance given to microfinance, authors such as Besley & Coate
(1995), Christen & Rosenberg, (2000), Matsuyama (2007) and Ahlin (2011) point
out several criticisms to it.
Although there are some authors that have studied the impacts of entrepreneurship and
self-employment on the employment level, the literature fails in making the direct
connection between microcredit and unemployment. The major topics of the Literature
Review are briefly schematized in the next page and the following sections will explore
the mentioned gap between microcredit and unemployment.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
22
2. Literature Review’s Conceptual Framework
The unemployed are more
likely to become self-
employed. vs
Experienced and best-
salaried workers are more
likely to start their own
business.
Nature Casual Relation Practical Outcomes
Entrepreneurship Action Plan 2020 and European Microfinance Network
Development of measures that promote entrepreneurship and fight unemployment
Mandelman (2009)
Blau (1987)
Evans & Jovanovic (1989)
Refugee effect
Entrepreneurial effect
Does not necessarily
stimulate economic growth;
Temporary effects;
Does not automatically
imply human development.
Unemployment Self-employment
Thurik (2008) Carree et al. (2008)
Millán & Román (2010)
Risk-Taker
Innovator
Creator of Economic Value
Theory of Economic Development
Schumpeter (1911)
High levels of unemployment in Europe
Economic development and growth
Technological
Innovation
Credit for new
investments
Entrepreneurship
Self-employment No Value Added Features
Baumol (2008) & Shane (2009)
Effects on Unemployment
VS Motivations
Tushman & Anderson (1986), Eckhardt (2003)
Economic
Psychological
Social
Expansion of microcredit and
microfinance in Europe
Social Entrepreneurship and Social Economy
Microcredit and Economic Development: Entrepreneurship or Self-employment?
23
“This is not charity. This is business: business with a social
objective, which is to help people get out of poverty”
—Muhammad Yunus
“This is not charity. This is business: business with a social
objective, which is to help people get out of poverty”
—Muhammad Yunus
Microcredit and Economic Development: Entrepreneurship or Self-employment?
24
3. Microfinance Industry
The microfinance industry is now quite diverse in terms of organizational types, with
Microfinance Institutions (MFIs) organized as Non-Governmental Organizations
(NGOs), banks, credit cooperatives and nonbank financial institutions (Hartarska, 2005).
The majority of the MFIs start as NGOs and finance their business via donations and/or
public money, and over time, they develop to formal financial institutions and regulated
entities.
According to the European Microfinance Network, the estimations are that exist 10.000
microfinance institutions worldwide, and among these, 2.000 report to the Microfinance
Information Exchange (MIX). The MIX is a non-profit organization that provides
performance information on microfinance institutions, funders, networks and service
providers dedicated to serving the financial sector needs for low-income clients. MIX
accomplishes its mission through a variety of platforms, being the most important the Mix
Market, in which instant access to financial and social performance of the MFIs is
provided. Considering data from the EIF, in 2008 the microfinance institutions that
reported to the MIX had 70 million borrowers and an equivalent number of savers. In
Asia, Africa, Latin America and Middle East, the majority of the clientele are women,
accounting for 98 percent of borrowers, while in the Eastern Europe and Central Asia,
women represent 47 percent of the borrowers. The evolution of the borrowings can be
seen in the following graphics:
Figure 5 - Evolution of the microcredit borrowings
Source: MixMarket, 2013
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
2009 2010 2011 2012
Borrowings
Africa East Asia and the Pacific
Eastern Europe and Central Asia Latin America and the Caribbean
Middle East and North Africa South Asia
Microcredit and Economic Development: Entrepreneurship or Self-employment?
25
Figure 6 - Evolution of the average loan per borrower in USD
Source: MixMarket, 2013
4.1 Microfinance in Europe
The microfinance industry is young in Europe and represents a growing sector with a
considerable potential (EMN, 2013). Despite its early life, the microfinance industry is
quite heterogeneous in terms of organizational types, due to the disparity of the legal and
institutional frameworks in the member states and the diversity of microcredit providers.
Credit organizations can be divided into two groups, based on the importance given to
microfinance services: those whose primary activity is granting microcredit accounts for
35% of all the participants, while the remaining organizations process microfinance as a
side activity. As a consequence, lending practices in microcredit vary considerably
depending on the type of institution providing micro loans, its legal setup, the
environment in which it operates and its own ability to apply sound and efficient
management procedures. Microfinance institutions in Europe are organized as showed in
the following graphic:
0
2000
4000
6000
8000
10000
2009 2010 2011 2012 2013
Average loan per borrower (USD)
Africa East Asia and the Pacific
Eastern Europe and Central Asia Latin America and the Caribbean
Middle East and North Africa South Asia
Microcredit and Economic Development: Entrepreneurship or Self-employment?
26
Figure 7 - Microfinance Institutions in Europe
Source: European Investment Fund, 2010
According to the EIF (2010), in the EU-15, MFIs are mostly characterised by having
“small size, very low or inexistence of profitability, very limited access to external sources
of funding, social lending activity mainly targeting disadvantaged groups,
unstandardized operational procedures16”. Also, as it was stated in the previous chapter,
many microfinance institutions heavily depend on subsidies to cover its costs.
Microfinance in Europe presents a dichotomy between Western and Central/Eastern
Europe namely in terms of intermediary profile, target beneficiaries and loan size (EIF,
2012). In Western European countries, microfinance has a strong focus on social
inclusion and therefore pays limited attention to profitability, while in Eastern Europe
there is a large presence of commercial intermediaries. The global microcredit demand in
the European Union reaches the 700.000 new loans, with a global value of 6.296 million
euros, and an average loan of 9000 euros.
In 2005, Europe had the following institutions providing microfinance services:
16 http://www.eif.org/news_centre/publications/EIF_WP_2009_001_Microfinance.pdf, accessed at
08/12/2013
28%
26%17%
28%
NGO Foundations Public Institutions Banks, Saving Banks and other Credit Institutions
Microcredit and Economic Development: Entrepreneurship or Self-employment?
27
Figure 8 - Microfinance Institutions in Europe
Source : EMN, 2005
As it was stated before, microfinance is a young and heterogeneous sector in Europe,
especially with regards to the diversity of institutional models, lending approaches and
regulatory frameworks (EMN, 2013). As lending practices vary significantly, the
European Commission identified as an important element to promote best practices in the
sector the development of a European Code of Good Conduct for Microcredit Provision.
This code intends to set a high bar for microfinance operations in Europe in line with
international policies and worldwide development of the sector and aims to benefit the
microfinance sector at large, including its funders, investors, customers, owners,
regulators and partner organizations. The code is divided into five sections: customer and
investor relations, governance, reporting standards, management information and risk
management, and its adoption is purely voluntary and is not expected to disrupt any
legislative requirements in any of the EU member countries (EMN, 2013).
Microcredit and Economic Development: Entrepreneurship or Self-employment?
28
The European Commission have been developing plenty of programmes in the field of
microfinance and microcredit, namely CIP, EPPA, JASMINE, JEREMIE and EPMF
(EMN, 2013):
The Competitiveness and Innovation Framework Programme (CIP) has several
schemes to facilitate access to loans and equity finance for SME where market
gaps have been identified. They cover different needs depending on the stage of
development of the small and medium sized enterprises;
The European Parliament Preparatory Action (EPPA) aims to foster the
development of microcredit in Europe on a sustainable basis, complementing
other European Investment Fund and European Commission’s initiatives in the
microfinance sector;
The Joint Action to Support Microfinance Institutions (JASMINE) was a pilot
initiative launched in 2008 by the European Commission, Directorate General for
Regional Policy, the European Investment Bank Group and the European
Parliament, helping non-bank microfinance institutions to scale up their
operations and maximise the impact of microfinance products on microenterprises
development and unemployment reduction within the European Union;
JEREMIE is a joint initiative developed by the European Commission in co-
operation with the European Investment Bank Group and other financial
institutions in order to make cohesion policy more efficient and sustainable.
JEREMIE offers EU Member States the opportunity to use part of their EU
Structural Funds to finance small and medium-sized enterprises by means of
equity, loans or guarantees, through a revolving Holding Fund acting as an
umbrella fund;
The European Progress Microfinance Facility (EPMF) provides covered
guarantees partially casing portfolios of micro-credits or of guarantees on micro-
credits to selected intermediaries authorised to provide microfinance instruments.
Despite the support from the European Commission in recent years to the microfinance
sector through these programmes, there is still a need to invest in capacity building and
refinancing of MFI’s in Europe, allowing them to improve their institutional capacities
and providing them with access to sustainable funding sources (EMN, 2013). In fact, as
it was mentioned by several European Institutions’ representatives in the 11th EMN
Microcredit and Economic Development: Entrepreneurship or Self-employment?
29
Annual Conference, MFI’s currently have a limited capacity to meet growing demand for
financial and coaching services from new entrepreneurs, which makes the provision of
economic support for business development services a priority.
4.2 Microfinance in Portugal
Microcredit as an instrument of social inclusion and of support to job creation was first
introduced in Portugal by Associação Nacional de Direito ao Crédito (ANDC) in 1999.
ANDC is a non-profit association founded in 1998 and was the pioneer in the
development of microcredit in Portugal. To do so, a partnership between three entities of
three different sectors was established: ANCD, from the social economy sector;
Millennium-BCP, from the private sector, and finally the Instituto de Emprego e
Formação Profissional (IEFP), from the public sector. Until 2005, Millennium-BCP had
an exclusive partnership with ANDC, but since then the range of the association had
become broader and is currently working with other banks, namely the Caixa Geral de
Depósitos (GDD) and Banco Espíirito Santo. Montepio and BPI are other banks that also
provide microfinance services.
Apart from banks, CASES (Cooperativa António Sérgio para a Economia Social) is
another entity that offers services related with microcredit and microfinance. Together
with IEFP, CASES is responsible by the National Microcredit Plan, which is a subsidized
credit line in the ambit of Programa de Apoio ao Empreendedorismo e à Criação do
Próprio Emprego, which intends to support of the creation of SME. The projects within
the National Microcredit Plan can benefit of a technical support from its creation to its
consolidation, during the first two years. The technical support activities consist on the
accompaniment of the approved project, formation and consulting in the management or
viability of the project. These activities are assured by representative entities from the
social economy sector that work with CASES or by non-profit entities from the private
sector or local authorities accredited by IEFP. IEFP, in partnership with CGD, Sociedade
de Garantia Mútua (SGM) and Sociedade de Investimento (SPGM), have two credit lines:
MICROINVEST and INVEST +. The main characteristics of these two lines can be seen
in the table below:
Microcredit and Economic Development: Entrepreneurship or Self-employment?
30
Maximum Amount Deadlines Interest Rate
Investing Financing 7 years, with 2 years of
capital shortage and 1 year
of integral bonification of
interests.
Reimbursement: 5 years,
with monthly constant
capital repayment
EURIBOR
30days + 0,25%
and minimum
rate of 1,5% and
maximum rate
of 3,5%.
MICROINVEST €20.000 €20.000
INVEST +
€20.000
to
€200.000
€100.000
(95% of the
investment and
€50.000 per full
time job created)
Table 2 – MICROINVEST and INVEST+ main characteristics
Source: Caixa Geral de Depósitos (CGD), 2009
The microcredit bank provider’s panorama in Portugal is summarized below:
Millennium BCP – grants maximum credit of €25.000 for a period of five years.
For credits until €7.000, the line is four years. The spread practiced depends on
the risk and on the type of business. In eight years, Millennium BCP has approved
2888 projects summing a value of €25,8 million;
CGD – operates over the protocol between ANDC and IEFP. The credit given
varies between €15.000 and €20.000 and the term can range between five or seven
years. Through this channel, CGD has granted €12,6 million;
BES – As CGD, it operates in partnership with ANDC and IEFP. The maximum
credit given is €20.000 over four years. Since 2009 it has supported 1000 projects,
giving €16 million;
BPI – Has a protocol with IEFP and MICROINVEST credit lines and it has a own
bank line. The maximum amount is €25.000 for four years or €20.000 for seven
years, according to the different instruments. BPI has supported 879 projects,
summing €20 million;
Montepio – Develops projects and partnerships in microcredit since 2006. The
amount given varies between €500 and €25.000 and the term goes from 6 months
up to 4 years.
The following scheme condenses the microfinance industry in Europe and shows the main
microcredit institutions in Portugal.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
31
4. Conceptual Microfinance Industry Framework
CIP
Microfinance and Microcredit in Portugal
MFI’s types
worldwide
European Commission Initiatives
Hantarska (2005)
Credit Cooperatives
NGO’s
Banks
JEREMIE EPMF JASMINE EPPA
Promotion of the Microfinance and Microcredit Industry in Europe
Non-bank financial
institutions
Microcredit developed in
Bangladesh Grameen Bank (1983)
Microfinance in
Europe
Young Industry
Growing Sector
Heterogonous
ANDC Millennium BCP
CGD
BES
BPI
Montepio
CASES IEFP National Microcredit Plan
MICROINVEST
INVEST +
Microcredit and Economic Development: Entrepreneurship or Self-employment?
32
6. Future Trends in Microfinance
According to the report to MicroNed17 developed by Triodos Facet, a consultancy
company specialised in the promotion and development of sustainable SME, the sector
of microfinance is facing some trends that began in the past years and are likely to
continue, in which the key words are growth, scaling up, increased use of technology,
integration in mainstream finance and segmentation. Considering this, the future relations
between the different providers and clients are described in the following table:
Providers Products Clients
Banks;
Finance Companies;
NGOs;
Savings & Credit coops;
Big box consumer
reltailers;
Property developers;
Money transfer agencies;
Other new providers.
Micro loan & Small loan;
Educational loan;
Credit card;
Mortgage;
Consumer loan;
Checking & Savings
account;
Supplier Credit;
Leasing;
Other new products.
Families;
Micro entrepreneurs;
Small farmers;
Families in their different
roles: as consumers,
house builders, parents,
savers, insurance takers,
part of money flow
networks.
Table 3 - Future relations between providers and clients
Source: Triodos Facet, 2009
The prospect of microfinance will depend on how the industry manages the challenges
caused by its rapid growth. A survey developed in 2008 by the Centre for the Study of
Financial Innovation to microfinance practitioners, investors and analysts identified 20
risks that could aim the progress of microfinance. Among these, six of the top 10 were
management risks, namely management quality, corporate governance, cost control,
staffing, technology management and credit risk management.
17http://www.microfinancegateway.org/sites/default/files/mfg-en-paper-trends-in-microfinance-2010-
2015-may-2009_0.pdf
Microcredit and Economic Development: Entrepreneurship or Self-employment?
33
“One of the great liabilities of history is that all too many
people fail to remain awake through great periods of
social change. Today, our very survival depends on our
ability to stay awake, to adjust to new ideas, to remain
vigilant and to face the challenge of change”
— Martin Luther King Jr.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
34
7. Methodology and Method
There are several types of master projects, namely the case study, the business plan, the
in-company project and the dissertation. The present thesis follows the dissertation
format, which translates an extensive and formal essay that covers a specific theme in
detail. In this particular case, the theme considered is microcredit and its impacts on
economic development, focusing on whether it can be considered as entrepreneurship or
self-employment. To do so, it is fundamental to have the proper method and methodology
in order to assure reliable results and conclusions. Methodology is the study of methods
and refers to the philosophical framework and the fundamental assumptions of research
(Van Manen, 1990), while a method is a specific technique for data collection under those
philosophical assumptions (University of Sheffield, 2010). This section will explore the
method and methodology used as well as its specifications.
7.1 Methodology
As it was formerly stated, methodology relates to the philosophical framework and to the
essential assumptions of research (van Manen, 1990). Since the framework used
influences the research process, methodology is considered the framework that delineates
the entire process of research (Creswell, 2006). The methodology can be developed
according to two approaches: inductive and deductive. In the inductive one, the researcher
starts by gathering data of several particular cases, then analyses it looking for patterns in
order to develop a general theory. On the other hand, in the deductive, the process is the
opposite, since the researcher starts with a general level of focus, studying a general
theory and trying to particularize it to a specific case. The central difference between the
deductive and the inductive approach is that while in the deductive the aim is to test a
theory, the inductive one is concerned with the generation of a new theory (Gabriel,
2013).
7.1.1 Inductive approach
The present thesis will follow an inductive methodology, since the research will be
focused on the observation and analysis of information of the Portuguese panorama, and
if such analysis is replicated in other countries, it is be possible to analyse if any pattern
arises. If so, a new theory can start to be developed regarding microcredit and
entrepreneurship and the impacts on economic development.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
35
7.2 Method
As it was stated before, the method regards the specific techniques used to collect
information (University of Sheffield, 2010) as well as the detailed procedures of analysis
and writing (Creswell, 2003). There are therefore techniques of data collection and
analysis that may be quantitative standardized instruments or qualitative theme analysis
of text data (van Manen, 1990). Hence, within the method are two types of analysis:
quantitative and qualitative. The quantitative works upon numeric information and the
measurement must be objective, quantitative and statistically valid, while the qualitative
uses text information, collected through the analysis and interpretation of what people say
and do. As the Imperial County Office of Education (2006:3) cleared, “whereas
quantitative research refers to counts and measures of things, qualitative research refers
to the meanings, concepts, definitions, characteristics, metaphors, symbols, and
descriptions of things”.
The overall central research question of the present thesis is
“Can microcredit be considered an entrepreneurial activity capable of creating
innovative and value-added businesses rather than a self-employment movement with few
effects on economic development?”
In order to develop a better understating of the research problem and to provide a
pluralistic, problem-centred and consequence oriented view (Creswell, 2003), both
quantitative and qualitative analysis will be applied throughout the thesis and therefore
the mixed method approach will be used.
7. 2.1 Mixed Methods Approach
The mixed method approach is a strategy of inquiry that consists on triangulating data
sources either simultaneously or sequentially, using both quantitative and qualitative
approaches to collect and analyse data rather than subscribing only on. By gathering both
numeric and text information, the final database will embody both quantitative and
qualitative information (Creswell, 2003). Since it was perceived by the author that both
qualitative and quantitative information were needed to improve the quality of the
research, this thesis uses a mixed methods approach. esta tabela tendo em conta os meus
comentários abaixo
Microcredit and Economic Development: Entrepreneurship or Self-employment?
36
7.2.1.1 Qualitative Approach
A qualitative approach relates to a type of research in which the researcher gathers open-
ended, evolving data with the primary intent of developing themes from the data
(Creswell, 2003). This type of research is more subjective than the quantitative one and
uses several methods to collect information, namely individual and in-depth interviews.
In these interviews, the researcher intends to explore effectively the responses and to
acquire information, identifying and defining “people’s perceptions, opinions and
feelings about the topic being discussed” (Imperial COE, 2006:3). In a qualitative study,
“inquirers state research questions, not objectives or hypotheses. These research
questions assume two forms: a central question and associated sub questions” (Creswell,
2002:12).
The central research question is as follows:
Central Research Question: “What are the motives that lead people to apply to
microcredit programs and what type of projects are implemented?”
In order to better understand and properly study the central research question, some sub
questions had to be placed, namely:
Sub Question 1: In what conditions and why do people apply to microcredit
programs?
Sub Question 2: In what kind of activities do the microcredit applicants invest?
To answer these questions, several microcredit and microfinance as well as
entrepreneurship institutions have been contacted and a semi-structured interview has
been conducted. As one can see in Table 4 and Table 5, ten institutions have been
contacted by email or telephone, five regarding microcredit and microfinance and other
five regarding entrepreneurship. From these ten institutions contacted, five responded:
ANDC, CASES, Millennium BCP, BES and AUDAX. Furthermore, four presencial
interviews have been conducted with ANDC, CASES, Millennium BCP and AUDAX.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
37
Microcredit and Microfinance
Institutions contacted ANDC CASES Millennium BCP BES +E+I
Responses x
Presencial Interview x x
Table 4 - Interaction with the microcredit and microfinance institutions
ANDC – Associação Nacional de Direito ao Crédito | CASES – Cooperativa António Sérgio para a Economia Social
| BES – Banco Espírito Santo
Entrepreneurship
Institutions contacted +E+I APE IFDEP ANJE AUDAX
Responses x x x x
Presencial Interview x x x x
Table 5 - Interaction with the entrepreneurship institutions
APE – AssociaçãoPortuguesa de Empreendedorismo | IFDEP - Instituto para o Fomento e
Desenvolvimento do Empreendedorismo em Portugal | ANJE – Associação Nacional de Jovens Empresários
Apart from the contact with the previous institutions, information regarding the
entrepreneurial tissue in Portugal was studied, especially focusing on the role that
microenterprises take on the Portuguese economy and in the economic development.
7.2.1.2. Quantitative approach
A quantitative approach is a type of research in which the measurement must be objective,
quantitative and statistically valid (Imperial COE, 2006). According to Creswell
(2003:21), in this approach the investigator firstly uses claims to develop knowledge,
through “cause and effect thinking, reduction to specific variables and hypotheses and
questions, use of measurement and observation, and the test of the theories”. In this
process, strategies of inquiry such as experiments and surveys are employed and data is
collected on predetermined instruments that produce statistics data. As Imperial COE
(2006:3) stated, “simply put, it is about numbers, objective hard data”.
To better study the reality of microcredit and entrepreneurship, the following research
question is posed:
Microcredit and Economic Development: Entrepreneurship or Self-employment?
38
Research Question: “Are microcredit applicants able to develop innovative and job
creating projects?”
In order to be able to respond to such research question, the following hypotheses are
tested:
H1: The majority of microcredit applicants are unemployed individuals;
H2: Microcredit applicants tend to apply the money in businesses with innovative
features;
H3: Micro entrepreneurs create only their own job and not for others.
To test these hypotheses, the online survey present on Appendix 1 was developed and
sent to the microentrepreneurs through microcredit and microfinance institutions. Since
this instrument was constructed from the scratch, its validity was not yet proved. In order
to assure that the surveys properly fit their purpose, firstly there was an experimental
period with a testing sample constituted by seven people with different backgrounds, to
assure that the questions were clear and well structured. Hence, validity was constructed
by following the principles of data collection, namely using multiple sources of evidence
and triangulating sources (Creswell, 2003).
As it was previously mentioned, the online surveys were sent to the microentrepreneurs
trough microcredit and microfinance institutions. Especially considering privacy aspects,
the institutions functioned as intermediates, and after a previous contact, CASES and
Millennium BCP forwarded the online survey to their database of entrepreneurs during
the month of May and June 2014. By doing this, four surveys were responded. Due to the
reduced number of answers, a step further was taken and the inquiry was sent directly to
the microentrepreneurs whose contact was on the different microcredits association’s
websites. Although the inquiry was sent to extra 13 entrepreneurs, the number of answers
increased only to six. Despite the fact that this sample does not allow to extrapolate
representative conclusions and perform an extensive analysis, a descriptive analysis will
still be done in the following topic.
Taking into account the limitations of the previous qualitative research due to the small
number of respondents, statistic portals such as INE and PORDATA were accessed to
Microcredit and Economic Development: Entrepreneurship or Self-employment?
39
obtain further information. At the same time, in order to study the potential innovation on
microcredit’s business, data from the Instituto Nacional da Propriedade Industrial (INPI)
was consulted, with the purpose of knowing the contribute of microcredit companies in
the registration of patents. Nevertheless, and since microcredit and microfinance
represent a young sector which is not yet well regulated, these portals also presented a
lack of specialized material regarding this specific topic.
To overcome this lack of information and pursuit the research, the universe of the
Portuguese microenterprises was studied. Considering that the microcredit-started
enterprises are typically microenterprises in the service sector, figures regarding
microenterprises and service’s enterprises in Portugal were collected and, based on the
information and tendencies of the microcredit industry gathered throughout the
quantitative approach, some extrapolations have been made.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
40
“If you treat an individual as he is, he will remain how he
is. But of you treat him as if he were what he ought to be
and could be, he will become what he ought to be and
could be”
— Johann Wolfgang von Goethe
Microcredit and Economic Development: Entrepreneurship or Self-employment?
41
8. Data Analysis: Content and Results Analysis
As it was explained in the previous chapter, in order to gather information and data to
pursuit the research for the thesis, both qualitative and quantitative methods have been
used. In this section, the content of the interviews with the microcredit, microfinance and
entrepreneurship institutions will be explored in the content analysis and the results of the
survey to the micro entrepreneurs and the statistic portals will be approached in the results
analysis.
8.1 Qualitative: Content Analysis
With the aim of answering to the central research question - What are the motives that
lead people to apply to microcredit programs and what type of projects are implemented?
- it was fundamental the contact with microcredit, microfinance and entrepreneurship
institutions. Through the information gathered in semi-structured interviews with
CASES, Millennium BCP, BES, ANDC and AUDAX and also with informal interviews
at the 11th EMN Annual Conference, it was possible to answer the sub questions - In what
conditions and why do people apply to microcredit programs? and In what kind of
activities do the microcredit applicants invest?, as well as obtain extra relevant
information.
Considering the inductive method, some patterns have been taken and the main inferences
were the following:
The microfinance and microcredit sector is quickly expanding in Europe, with
75% of the EMN members granting more than 100 loans per year, while one
decade ago the average was about 10 loans per year;
This upsurge in the sector can be related with the increase of the funds provided
by the European Commission, as well as the enlargement of supporting
microfinance and microcredit programs developed by national governments;
Despite the general increase on the microfinance and microcredit sector in Europe,
the industry is still very heterogeneous amongst the different countries;
There are two emerging categories of applicants to microfinance and microcredit
programs that were not representative 5 years ago: migrators and young
unemployed. The high flows of migration throughout Europe are originating a
Microcredit and Economic Development: Entrepreneurship or Self-employment?
42
new profile of microcredit and microfinance applicants, as well as the high level
of young unemployment in Europe;
The provision of economic support for business development services (BDS),
focused on the selection, mentoring and coaching of entrepreneurs is a priority.
MFIs need to provide some of these expensive non-financial services in order to
reduce the default rate and sustain the growth of the supported businesses.
Regarding the Portuguese reality of the sector, the main conclusions are:
The most frequent nationality of the applicants is Portuguese (between 80% to
90% of the total), followed by Brazilians and individuals coming from the
PALOPs;
The distribution of the applicants according to gender is quite uniform, although
women have a slight advantage over men (around 53% of the applicants are
women);
The most typical age group that resources to the institutions is from 26 until 35
years old (almost 40%), followed by 36 up to 45 years old (approximately 30%);
The majority of the applicants has a low level of education (until basic level or
until high school), and only around 15% of the total have a bachelor degree or
higher;
Almost half of the applicants are facing a situation of involuntary unemployment,
while around 30% are self-employed and about one quarter of the applicants are
employed;
Considering the previous topic, almost half of the applicants are socially excluded
individuals or at risk of social exclusion;
Since the beginning of the activity of ANDC (1999), 1788 investment projects
have been credited, reaching a total amount credited of €10.349.340,95;
From the time when ANDC started to be operational (1999), 2239 work posts
have been created through microfinance and microcredit projects;
In 2013, the average value of the credited projects was €7014,75, translating an
increase of 21% comparing to the historical value of €5788,22;
The main businesses created through microcredit are traditional ones, mostly in
wholesale and retail industry (40%), followed by the hospitality sector, namely
Microcredit and Economic Development: Entrepreneurship or Self-employment?
43
restaurants, cafes and lodgings (14%). In the other services activities (13%), the
main areas to sign are hairdressers and beauty salons;
Concerning an evolutionary perspective of microcredit, microfinance and
entrepreneurship in Portugal, the main conclusions taken from the interviews are:
The profile of the micro entrepreneur in Portugal is changing throughout time:
whereas formerly the majority of the applicants were individuals with low levels
of scholarity, that reality is changing and nowadays the number of applicants with
high-education, mostly with a bachelor level, is increasing at a fast pace;
Although the majority of the businesses created through the resource to
microcredit and microfinance institutions regards traditional activities, there is a
growing concern on adding differentiating and value-added features to those
businesses;
The way the Portuguese see and understand the resource to microcredit and
microfinance institutions is changing: Formerly there were stereotypes and
prejudice against the people who resort to these institutions, as they were
associated almost merely to “banks for the poor”. Nowadays this perspective is
changing and microcredit and microfinance began to be seen in a positive
perspective, in a way that people are able to master their own destiny, creating and
assuring their own jobs.
Despite the overall increasingly encouraging overview on microcredit and microfinance,
there are still some less positive aspects perceived by the institutions, namely by the
banks:
The higher level of education of the applicants does not always translate a higher
intrinsic quality of their projects. Adding to this reality, despite the fact that plenty
applicants have now bachelor degrees, it’s rare the ones that present projects
related with their field of study;
The mimetic of the presented ideas does not produce the expected success due to
a lack of creativity of the projects presented;
In the last four years, considering the deepening of the crisis and the increase on
the unemployment levels in Portugal, it should be expected that the resource to
microcredit, microfinance and entrepreneurship institutions would upsurge.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
44
Nevertheless, the relationship between the levels of unemployment and the
number of microcredit, microfinance and entrepreneurship applicants is not
closely linear and one fact does not necessarily imply the other.
Regarding the previous topic, banks and other institutions expressed some opinions that
intend to clarify the reality mentioned formerly and explain why people do not resource
more to microcredit, microfinance and entrepreneurship. According to most of the people
interviewed, there is a general lack of self-confidence of the applicants, which highlights
their diminutive entrepreneurial mentality, as well as the risk aversion manifested in a
social climate that is still not very favourable to entrepreneurship. In fact, many applicants
are afraid to lose the social support they currently receive, namely the unemployment
subsidy: those who create an enterprise loose the social benefits that might be receiving,
without having any guarantee that they will be successful.
8.2 Quantitative: Results Analysis
To assess the validity of the hypotheses formulated in the Method and Methodology
chapter and to answer the research question Are microcredit applicants able to develop
innovative and job creating projects?, the online survey presented in Appendix 1 was
developed and sent to the micro entrepreneurs through microcredit and microfinance
institutions. The answers and graphical analysis of the survey can be found in Appendix
2. Unfortunately, only six answers were obtained, hence the quantitative analysis
presented on the thesis cannot be considered as representative of the microcredit and
microfinance panorama in Portugal. Nevertheless, the answers will still be presented:
To assess H1: The majority of microcredit applicants are unemployed individuals
the question placed was “Before applying to the credit, what was your
occupation?”. As one can see in the graphic bellow, the hypothesis is verified
within the sample: 83% of applicants were unemployed and 17% was in paid
employment:
Microcredit and Economic Development: Entrepreneurship or Self-employment?
45
Figure 9 - Occupation of the applicants to microcredit and microfinance
Source: Inquiry Appendix 1
Regarding H2: Microcredit applicants tend to apply the money in businesses with
innovative features, the question placed was “In a scale from 0 up to 5, how
innovating is usually considered your business? (0 as nothing innovator and 5 as
totally innovator)”. The results were the following:
Figure 10 - Innovation level in the businesses created
Source: Inquiry Appendix 1
Finally, bearing in mind H3: Micro entrepreneurs create only their own job and
not for others, the question placed was “How many people are employed thanks
to your business (including yourself)?”. The results show that 17% created only
his/her own job, while 50% created a job for themselves and for another person,
17% created 3 jobs and finally 17% created more than 4 jobs:
Figure 11 - Number of employed persons on each business created
Source: Inquiry Appendix 1
0
1
2
3
4
5
6
Unemployed Newly bachelor
level
Newly master
level
Paid employment Self-employment
Occupation of the applicants
0
1
2
3
4
0 1 2 3 4 5
Innovation level in the businesses created
0
1
2
3
4
1 2 3 4 >4
Number of employed persons on each business
Microcredit and Economic Development: Entrepreneurship or Self-employment?
46
As it was previously explained in the Methodology and Method chapter, considering the
limitations of the qualitative research due to the small number of respondents, statistic
portals such as INE and PORDATA were consulted, as well as the INPI website.
Nevertheless, these portals present a data shortage regarding the microcredit and
microfinance industry in Portugal.
To overcome this lack of information and pursuit the research, the universe of the
Portuguese microenterprises was studied. Considering that microcredit-started
enterprises are typically microenterprises, figures regarding microenterprises in Portugal
were collected and, based on the information and tendencies of the microcredit industry
gathered throughout the quantitative approach, some extrapolations will be made. The
relevant figures gathered on INE (2010) and PORDATA (2010) were the following:
SME represent 99.9% of the entrepreneurial sector in Portugal;
96% of the SME in Portugal are microenterprises, reaching a total number of
1 094 125 enterprises;
SME employ 3 025 155 workers, representing 78.71% of the total employed
population;
From the 3 025 155 workers mentioned above, 56.26% of the jobs are from
microenterprises;
The production of PME, measured in 103 euros, is of 140 782 616.
Microenterprises account for 44 928 840 and the production reached by big
enterprises is of 102 807 815;
The gross value added of PME, measured in 103 euros, is of 54 639 579.
Microenterprises are responsible for 19 560 149 of it, and the gross value added
achieved by big enterprises is of 33 605 478.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
47
8.3 Summary
As one can see in this section, information was gathered through qualitative and
quantitative methods. Considering the research question and respective sub-questions, the
most relevant aspects to retain to this study are:
The profile of the micro entrepreneur is changing throughout time: whereas
formerly the majority of the applicants were individuals with low levels of
schooling, nowadays the number of applicants with high-education is increasing;
Despite the previous fact, the higher level of education from the applicants does
not necessarily translates a higher intrinsic quality of the projects and the projects
rarely reflect the field of study of the applicants;
The main businesses created through microcredit are traditional ones, mostly in
the wholesale and retail industry, in the hospitality sector and in the other services
activities.
Although the majority of the businesses created through the resource to
microcredit and microfinance institutions regards traditional activities, there is a
growing concern on adding differentiating and value-added features to those
businesses;
SME and particularly microenterprises have a very important role in the economic
tissue in Portugal, in similarity with the European panorama. Almost 80% of the
total employed population works in SME, being the microenterprises responsible
for more than half of the jobs created.
Regarding the number of jobs created through microcredit and microfinance,
considering only data from ANDC from the past 15 years, the average value is of
1,25 jobs created. If considering the data from the inquiries, this value raises to
2,5 jobs created in each business.
The deepening of the crises and the increase on the unemployment levels in
Portugal however does not translate a linear increase in the number of microcredit
applications.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
48
“Poor is the one that does not have talent; weak is the one
that does not have aspirations”
— Indian Traditional Saying
Microcredit and Economic Development: Entrepreneurship or Self-employment?
49
9. Discussion
Although some authors studied the impacts of entrepreneurship and self-employment in
the employment level, the literature fails in making the direct connection between
microcredit and unemployment, hence the research question “can microcredit be
considered an entrepreneurial activity capable of creating innovative and value-added
businesses rather than a self-employment movement with few effects on economic
development?”. To answer this question, microcredit, microfinance and entrepreneurship
in Portugal and Europe have been explored. As it was explained in the Methodology and
Method and also in the Data Analysis chapters, both quantitative and qualitative
approaches have been used and an inductive method has been applied. In the present
section, the main conclusions and results of the investigation will be highlighted and
compared to what has been previously said in the Literature Review.
To start answering the research question, first it is necessary to remind the definitions of
self-employment and entrepreneurship. According to European Migration Network
(2014), self-employed is a person that is the sole or joint owner of an unincorporated
enterprise. This definition approaches the definition of entrepreneur given by Mclean
(2006) and Hamilton (2000). According to Drucker (1985:28), entrepreneur is “someone
who searches for change, responds to it and exploits opportunities”. Bearing in mind this
definition, as well as the ones from McLean (2006) and Hamilton (2000), all of
microcredit and microfinance users are considered entrepreneurs and there is not really a
difference between entrepreneurship and self-employment. However, if viewing the
definition of Dees (1998:2), as the “venturesome individuals who stimulate economic
progress by finding new and better ways of doing things”, not every microcredit applicant
can be considered as an entrepreneur. The difference between the two classifications
relies on the fact that the last one ponders a “better ways of doing this”, associating with
value added features, defined as the “extra features of a business that go beyond the
ordinary expectations and provide competitive edges” (Business Dictionary, 2010). As it
was said in the previous section, a parcel of the microcredit and microfinance projects do
not present value added features and are purely mimetic of existent projects or businesses.
In fact, according to Baumol (2008) and Shane (2009), most of the people who become
self-employed are not entrepreneurs in the sense of people creating business that generate
innovative businesses. Nevertheless, this panorama is currently changing and nowadays
Microcredit and Economic Development: Entrepreneurship or Self-employment?
50
the number of projects that present differentiating features is increasing. Even if in the
majority of the cases these differentiating features consist in adapting traditional business
and adding them different characteristics rather than developing a completely innovative
business idea or project, the new microcredit and microfinance applicants are taking one
step further on entrepreneurship and approaching to the definition of Dees (1998).
Regarding the motivations to the entrepreneurial activity, as it was said in the Literature
Review, they can be seen through economic, psychological and social angles.
Considering the microcredit panorama in Portugal, not all these factors present the same
importance and have the same impact. According to the research done throughout this
thesis, the perspective that contributes the most to the entrepreneurial activity is the
psychological one. The individual traits of the entrepreneurs and their personal human
attributes contribute positively to the development of the entrepreneurial activity, and are
the ones responsible for propelling the majority of the Portuguese entrepreneurship in the
field of microcredit. Regarding the economic perspective, its influence is similar to the
mechanisms of the hygiene factors in the Dual-Factor Motivation Theory (Herzberg,
1959): the existence of advantageous economic structures, such as the access to sources
of financing or a favourable taxation policy, does not represent an incentive to the
development of entrepreneurship, but its absence restricts the entrepreneurial activity.
This means that it is crucial to consider economic factors, but their existence per se does
not boost entrepreneurship. Lastly, according to the social prism, entrepreneurship
depends on cultural factors and societal values. In Portugal, these influences are in fact
not motivators but represent a disabling factor, due to the general prejudices and
stereotypes that are associated with microcredit. Adding to this, Portugal, in similarity to
other European countries, does not have a wide and strong entrepreneurial culture.
Despite this fact, it is important to recall that this reality is changing and nowadays
microcredit is being less and less associated with poverty. Furthermore, the European
Commission is developing efforts to create a more open minded environment towards
entrepreneurship, using it as a tool to fight unemployment and promote social inclusion.
Linking entrepreneurship and self-employment with unemployment comes from
Oxenfeldt (1943), who stated that unemployed individuals with low prospects for wage-
employment will find in self-employment a feasible alternative. This is consistent with
Microcredit and Economic Development: Entrepreneurship or Self-employment?
51
the refugee effect of Blau (1987), Evans (1989) and Jovanivic (1989), in which high
unemployment rates induce people to become self-employed. It is indeed a possible
solution for some of the unemployed, but not all of them see self-employment as a valid
alternative. In the last four years, considering the deepening of the crisis and the increase
on the unemployment levels in Portugal, it should be expected that the resource to
microcredit, microfinance and entrepreneurship institutions would upsurge. Nevertheless,
the relationship between the levels of unemployment and the number of microcredit,
microfinance and entrepreneurship applicants is not closely linear and one fact does not
necessarily imply the other. As it was said before, the psychological traits of the
individual are the ones that represent a higher motivator when deciding whether to pursuit
an entrepreneurial activity or not, so the propensity of the individual to be entrepreneur
will influence whether self-employment represents an option or not. According to
Mandelman (2009), there are two perspectives when reviewing the nature of self-
employment: in the first one, the unemployed are more likely to become self-employed,
whilst in the second the experienced, better-educated and best-salaried workers are the
ones that present a higher likelihood to enter self-employment and start their own
business, since they have easy access to good business opportunities and financing
sources. Once microcredit and microfinance targets mostly people in financial-exclusion
or that do not have access to regular financing sources, the second perspective does not
apply in this case. The Portuguese reality serves as an example that corroborates
Mandelman’s first viewpoint. Firstly, the majority of the applicants has a low level of
education and only a minority has a bachelor degree or higher. Adding to it, almost half
of the applicants are facing a situation of involuntary unemployment, while around 30%
are self-employed and only about one quarter of the applicants are employed. Finally,
almost half of the applicants are socially excluded individuals or at risk of social
exclusion. Another important factor against the second perspective of Mandelman is the
fact that the higher level of education from the applicants does not always translate a
higher intrinsic quality of the projects. Adding to this reality, despite the fact that a
growing number of applicants have now bachelor degrees, it is rare the ones that present
projects related to their field of study.
Regardless the motivations or origins of self-employment, Congregado (2010) defends
that entrepreneurship and self-employment can contribute to reduce unemployment
through two channels: the direct effect of an individual who gets out of unemployment
Microcredit and Economic Development: Entrepreneurship or Self-employment?
52
and the indirect effect of an eventual extra job creation. The European Commission shares
this understanding and is developing numerous efforts to promote entrepreneurship and
self-employment in Europe, namely through the European Microfinance Network.
Despite the efforts that are being done, the microcredit and microfinance industry in
Europe is young and still presents some structural problems, which become more evident
when comparing between different European countries. Some authors point out criticisms
to this industry, namely the fact that most of its institutions are dependent on subsidies
and are unable to operate profitably enough to cover its costs (Christen & Rosenberg,
2000). Also, to Banerjee and Newman (1993), production organized within a firm is often
more efficient that production organized across small autonomous individuals, due to
economies of scale and specialization effects and to Matsuyama (2007), microcredit
improves micro-borrowers access to capital and technology, but does not seem to allow
them to reach optimal capital scale and technology levels. Finally, there are authors such
as Ahlin (2011) who defend that microfinance may rely on poor economies to survive, in
the sense that microcredit may need a vibrant informal economy, a situation that tends to
grow rarer as a country develops. As a conclusion, Besley and Coate (1995) believe that
microcredit is at its best an anti-poverty tool and not a stepping-stone to broader
development. EMN defends a different perspective, and to its representatives, the remarks
of the former authors do not present real issues, except regarding the sustainability of the
sector. Indeed, in the 11th EMN Annual Conference in Lisbon, one of the topics on the
agenda was precisely the structure of the microfinance system and the need to change it,
once most of the banks do not have capacity to be sustainable by their own, as defended
by Christen & Rosenberg (2000). One of the solutions pointed out was the provision of
economic support for Business Development Services (BDS), focused on the selection,
mentoring and coaching of entrepreneurs. Some of the MFIs already provide some of
these non-financial services in order to reduce the default rate and sustain the growth of
supported businesses, but a higher effort needs to be done. Another major concern
expressed in the conference was the heterogeneity of the industry amongst countries and
the ability to create a more consistent and solid microcredit and microfinance industry
across Europe. According to Faisel Rahman, president of the EMN, the sector is rapidly
expanding, however it is growing at an unequal pace through Europe: while in some
countries the institutions provide more than 100 loans per year, in a few others this
number does not reach the 40 loans/year. Another expressed concern was the performance
Microcredit and Economic Development: Entrepreneurship or Self-employment?
53
measurement of the institutions and the necessity of developing indicators, since currently
there is not a settled and consistent method to measure the impact of microfinance and
microcredit in the economy. Adding to that, there are also problems regarding the fact
that only a few banks across Europe are involved in the industry and mostly the fact that
European laws are not very clear yet.
Whether there is established legislation or not, some of the literature suggests that public
policy can reduce unemployment by providing instruments to promote entrepreneurship,
but does not necessarily stimulate economic growth. In fact, to Millán & Román (2010),
self-employment is a tool for fighting unemployment that will only have temporary
effects. Firstly, according to their findings, self-employed show a low probability of
survival and secondly, only a minority of the self-employed will hire other workers.
According to the research made throughout the present thesis, these two evidences do not
necessarily apply in the microcredit and microfinance sector. In Portugal, the success rate
of the businesses created through the resource to microcredit and microfinance
institutions, measured by the number of the active businesses, is close to 80%.
Considering only data from ANDC, since 1999, 1788 investment projects have been
credited and 2239 work posts have been created, translating an average of 1.25 jobs
created per project. Bearing in mind one of the workshops at the 11th EMN Annual
Conference, in France, 77% of the enterprises are still active 3 years after the beginning
and 2.6 jobs are created or maintained. This means that, adding to the applicant, in
average, 1.6 people get out of unemployment thanks to the indirect resource to
microcredit and microfinance.
Taking into account the information gathered up to this point, the sub questions raised in
the beginning of the thesis will now be answered:
In what conditions and why do people apply to microcredit programs?
Almost half of the applicants of microcredit programs in Portugal are facing a situation
of involuntary unemployment, being socially excluded individuals or at risk of social
exclusion. In their majority, they apply to these programs due to the fact that they do not
have another option in becoming employed. Only around 30% of the applicants are self-
employed and about one quarter are employed. The majority of the applicants has a low
Microcredit and Economic Development: Entrepreneurship or Self-employment?
54
level of education (until basic level or high school), and only around 15% of the total
have a bachelor degree or higher. However, the profile of the micro entrepreneur is
changing throughout time: whereas formerly the majority of the applicants were
individuals with low levels of scholarity, that reality is changing and nowadays the
number of applicants with high-education is increasing at a fast pace. This change in the
profile of the microcredit applicants is verified not only in Portugal but also at a European
level.
Another important remark both at national and European level relates to the high flows
of migration and to the high levels of young unemployment. According to the president
of the EMN, about five years ago these factors were not very significant, but nowadays
they are taking a growing influence in the conditions in which people apply to microcredit
programs, increasing the number of immigrant applicants and the number of young and
qualified unemployed.
In what kind of activities do the microcredit applicants invest?
Despite the fact that the applicants’ schooling level is increasing, this does not necessarily
translates a higher intrinsic quality of the projects and the projects rarely reflect the field
of study of the applicants. The main businesses created through microcredit are hence
traditional ones, mostly in wholesale and retail industry (40%), followed by the
hospitality sector, namely restaurants, cafes and lodgings (14%). In the other services
activities (13%), the main areas to sign are hairdressers and beauty salons.
Although the majority of the businesses consists in activities generally lacking high
technological features, there is a growing concern in adding differentiating features into
the business. This means that regardless of the traditional nature of the activity,
microcredit applicants are increasingly trying to differentiate themselves from others in
the same sector of activity.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
55
“They always say time changes things, but you actually
have to change them yourself”
— Andy Warhol
Microcredit and Economic Development: Entrepreneurship or Self-employment?
56
10. Conclusions
As stated in the previous chapters, the industry of microcredit and microfinance is
evolving and going through several changes, namely regarding the profile of the
entrepreneur and the type of business created. Considering the overall research question
“Can microcredit be considered as an entrepreneurial activity capable of creating
innovative and value-added businesses rather than a self-employment movement with few
effects on economic development?”, it is important to divide the answer into two parts.
The first one relates to the extent to which microcredit can be considered as
entrepreneurship and the second one to its potential effects on economic development.
Microcredit and microfinance industry is young in Europe and there is still a long path to
cover regarding legislation and the standardization of the sector amongst countries.
However, as the research on the present thesis has showed, microcredit is a promising
sector that is growing and evolving rapidly throughout the years. As discussed in the 11th
EMN Annual Conference, 75% of the EMN members are granting more than 100 loans
per year, while one decade ago the average was about 10 loans per year; also in Portugal
this growth tendency is verified, with the average value of credit projects in 2013
representing a 21% increase when compared to the historical value.
Although almost half of the microcredit applicants are facing a situation of involuntary
unemployment and in the majority of the cases the reason to apply to these programs is a
lack of alternatives on finding a job, the profile of the applicants is changing, both at a
national and European level. Whereas formerly the majority of the applicants were
individuals with low levels of schooling, that reality is shifting and nowadays the number
of applicants with high-education is increasing. This fact however does not necessarily
translate a higher intrinsic quality of the projects and the projects rarely reflect the field
of study of the applicants. Nevertheless, even if the majority of the businesses consists in
activities generally lacking high technological features, there is a growing concern in
adding differentiating features into the business. This means that regardless of the
traditional nature of the activity, microcredit applicants are increasingly trying to
differentiate themselves from others in the same sector of activity. The concept of value
added features is therefore being progressively present on microcredit-started businesses,
Microcredit and Economic Development: Entrepreneurship or Self-employment?
57
approximating microcredit to the definition of entrepreneurship and setting it apart from
simply self-employment movements.
Regarding the connection between microcredit and economic development, given the
small number of replies obtained in the quantitative research and the lack of information
on statistical portals, its effects could not be practically validated throughout this thesis;
nevertheless, some extrapolations can be made.
As seen in the research previously done, SME and particularly microenterprises have a
major role in the Portuguese and European economic tissue. In EU25, SME represent
almost 99% of all the enterprises and microenterprises account for 53% of all jobs (SME
User Guide, 2012). The Portuguese numbers are similar to the European ones, with SME
representing 99.9% of the entrepreneurial sector and microenterprises employing 57% of
the total working population (INE, 2010).
The microcredit-started businesses are typically microenterprises, which, as it was seen
before, represent a vital role in the European and Portuguese economy. Combining this
with the growing tendency that microcredit is facing in Europe and the increasingly broad
propagation of its practice, one can extrapolate that microcredit can actually develop
microenterprises able to have a role on job creation as well as in the lessening of social
exclusion.
In conclusion, and answering to the overall research question, the study conducted shows
that although microcredit doesn’t nurture highly innovative businesses, it can in fact be
considered as an entrepreneurial activity capable of creating value-added businesses that
can positively affect economic development.
10.1. Theoretical and Practical Implications
As it was stated before, the high unemployment levels in Europe represent a serious
concern to the European Commission and one solution proposed to overcome this
panorama is the development of entrepreneurship and consequently the easing of the
access to financing, namely trough the support of microcredit associations. Despite the
optimistic position of the European Commission on the outputs of microfinance and
microcredit, several authors doubted of its real contributions in developed countries. At a
Microcredit and Economic Development: Entrepreneurship or Self-employment?
58
scientific level, the thesis leaned over the existing literature and explored the assumptions
and hypothesis proposed by the different authors, studying the validity of their
conclusions. As it was discovered, the findings of the previous authors are not necessarily
true when referring to microcredit in Europe and in Portugal. In fact, this industry is
currently being developed and legislated and can actually have its role on the reduction
of unemployment and stimulation of the economic development.
Considering a practical perspective, the knowledge of the real effects of microcredit in
developed countries can have several implications at economic, social and political levels.
According to the findings of this thesis, the economic motivations such as the existence
of advantageous economic structures, namely the access to sources of financing or a
favourable taxation policy, do not represent an incentive to the development of
entrepreneurship, but their absence restricts the entrepreneurial activity. Regarding the
social factor, it is actually not a motivator factor but a disabling one, due to the general
prejudices and stereotypes that are still associated with microcredit and microfinance.
Bearing in mind this information, it is crucial to consider economic factors, but be aware
that their existence per se does not boost entrepreneurship. Hence, it is fundamental to
create a favourable climate for entrepreneurship, not only at an economic level but also
at a social one, educating people regarding microcredit in order to overcome the negative
ideas associated to it as well as the link made to “the bank for the poor”. By doing this, a
factor that is currently restraining the microfinance and microcredit activity would
disappear or at least be minimized, at the same time that the psychological factor would
be propelled. As it was found, the psychological influences are the one that represent a
higher motivator while pursuing the entrepreneurial activity, however, the intrinsic
propensity of the individuals to create new businesses can be restricted due to the existing
stereotypes. By focusing on the development of the social prism and mostly in the
overcoming of the prejudices, a positive impact would be generated: the entrepreneurial
individuals would not have social and psychological barriers regarding the resource to
microfinance and microcredit institutions, which would foment their appetence to create
new businesses and stimulate the creation of new jobs. Microfinance and microcredit
cannot be seen though as isolated instruments, and it does not make sense to perceive
them as exclusive and satisfactory solutions. They are in fact the most important tool in
the process of the development of the industry, but are not enough to produce favourable
results if not conjured with other factors as the ones mentioned before.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
59
10.2. Practical Recommendations
Throughout the interviews conducted, some aspects were perceived and some practical
recommendations regarding microcredit and microfinance in Europe could be given:
Consider young unemployment as a critical area and create measures to stimulate
this strategic target. The young unemployed have usually higher levels of
education and are more motivated and dynamic in pursuing their goals, which
gives them a better preparation and likelihood of being successful in developing
their own business and creating jobs for themselves but also for others;
Consider the high flows of migration that are occurring across Europe and develop
programs and tools especially to this cluster;
The provision of economic support for Business Development Services (BDS),
focused on the selection, mentoring and coaching of entrepreneurs should be a
priority. In order to reduce the default rate and sustain the growth of supported
businesses, it is crucial that the MFIs across Europe provide some of these non-
financial services throughout the development and settlement of the microcredit
and microfinance projects;
Regarding the previous topic, a possible solution discussed in the 11th EMN
Annual Conference for the advance of BDS was to motivate experienced
entrepreneurs to teach and coach microcredit and microfinance applicants,
creating a pool of voluntary consulters that would willingly share their
experiences and advices with the new entrepreneurs;
It is crucial to caption the attention and interest of the policy makers in order to
increase budgets and supporting programs to the microfinance and microcredit
industry. To do so, it is vital to develop concrete and objective metrics to be used
as a tool to aware politicians of the positive impacts that microfinance and
microcredit can produce. The most important metric would be the number of
people that get out of unemployment, and associated to it, the specific saved value
that it represents for the governments, namely in the unemployment subsidies and
other charges from social security. Another important metric would be the overall
number of jobs created.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
60
“Success is not final, failure is not fatal: it is the courage
to continue that counts”
— Winston Churchill
Microcredit and Economic Development: Entrepreneurship or Self-employment?
61
11. Further Research
Throughout the present thesis, several conclusions regarding microcredit and
microfinance have been taken. Despite the fact that the investigation answers to the
proposed research questions and test the veracity of the hypothesis placed, it would be
interesting to go further on the topic, deepening the research and exploring the findings
obtained.
To better support the conclusions reported in this thesis, it would be interesting to apply
the inquiry on Appendix 1 to a broader number of microcredit and microfinance users.
By reaching an extensive sample, the results would be more representative of the
microcredit and microfinance universe. Furthermore, a higher sample would allow the
development of an in depth analysis with the resource to predictive analytics software
such as SPSS, where the variables could be exhaustively studied and extrapolations could
be taken. Still considering the inquiry on Appendix 1, it would be interesting its
application to different microcredit and microfinance users across the European Union in
order to determine the main characteristics of each country and explore the differences
among them.
Another interesting point would be the study of the motives that explain the lack of
technological features in the businesses created through the resource to microcredit and
microfinance associations. As it was previously said, the majority of the businesses
created through microcredit and microfinance present traditional characteristics, and an
important step would be to know the reasons why this happens. To do so, a quantitative
analysis could be conducted and the hypothesis could be:
H1: The amount provided by the microcredit and microfinance associations is
insufficient for the investment in the creation and development of technological
businesses;
H2: The existence of other associations that promote entrepreneurship minimizes
the resource to microcredit and microfinance and the applicants that intend to
develop business with technological features resource to these entrepreneurship
associations instead of microcredit and microfinance ones.
Microcredit and Economic Development: Entrepreneurship or Self-employment?
62
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Appendix 1 – Inquiry to Microcredit and Microfinance Applicants
Microcrédito e Desenvolvimento Económico: Empreendedorismo ou Auto-
emprego?
O presente questionário realiza-se no âmbito de uma tese de mestrado em Business
Administration do ISCTE-IUL, cujo tema é "Microcrédito e Desenvolvimento
Económico: Empreendedorismo ou Auto-emprego?". A sua ajuda é imperativa para o
desenvolvimento da mesma e como tal agradeço desde já a sua colaboração. As suas
respostas serão tratadas de forma anónima e destinam-se unicamente à realização deste
projeto. O tempo médio de resposta completa a este questionário é de 5 minutos.
Género *
Feminino Masculino
Idade *
<25 25-35 36-45 46-55 <56-65 >65
Habilitações Literárias *
Sem frequência escolar 1º ciclo 2º ciclo 3º ciclo
Ensino Secundário Licenciatura Mestrado
Outra:
Nacionalidade *
Portuguesa Brasileira Outra:
Antes de obter o empréstimo, qual era a sua situação profissional? *
Desempregado Recém licenciado Mestrado recentemente
obtido Empregado por conta de outrem Empregado por conta própria
Tinha experiência profissional antes de ter recorrido ao crédito? *
Sim Não
Caso tenha respondido afirmativamente à questão anterior, que tipo de
experiência profissional teve?
Trabalhador por conta de outrem Trabalhador por conta própria
Microcredit and Economic Development: Entrepreneurship or Self-employment?
67
Recorreu ao crédito: *
Sozinho Em parceria com outra pessoa
Recorreu ao crédito com o objetivo de: *
Criação e desenvolvimento de novo projeto Expansão de projeto existente
Qual o montante do crédito pedido? *
< 5.000 euros [ 5.000 - 7.000 euros [ [ 7.000 - 10.000 euros [
[ 10.000 - 15.000 euros [ [ 15.000 - 20.000 euros [ > 20.000 euros
Há quanto tempo recorreu ao crédito? *
<1 ano [ 1-2 anos [ [ 2 - 3 anos [ [ 3-4 anos [
> 4 anos
Qual a área do seu negócio? *
Agricultura, produção animal, caça, floresta e pesca
Indústrias transformadoras Construção Comércio por grosso e a retalho
Alojamento, restauração e similares Atividades de informação e de
comunicação Atividades administrativas e dos serviços de apoio
Educação Atividades artísticas, de espetáculos, desportivas e recreativas
Outra:
Qual o número de pessoas empregadas no negócio criado? (Incluindo-se) *
1 2 3 4 >4
Indique por favor o seu volume de vendas em 2013: *
Porque é que decidiu criar o seu próprio negócio? *
Desejo de trabalhar por contra própria
Desejo de criar o próprio emprego e emprego para outros
Tinha uma ideia de negócio
Impossibilidade em encontrar emprego
Outra:
Microcredit and Economic Development: Entrepreneurship or Self-employment?
68
Numa escala de 0 a 5, quão inovador é geralmetne considerado o seu
negócio? * 0 nada inovador e 5 totalmente inovador
0 1 2 3 4 5
Descreva brevemente o seu negócio
Microcredit and Economic Development: Entrepreneurship or Self-employment?
69
Appendix 2 – Results from the Inquiry to Microcredit and Microfinance
Applicants
Género
Feminino 3 50%
Masculino 3 50%
Idade
<25 1 17%
25-35 2 33%
36-45 3 50%
46-55 0 0%
<56-65 0 0%
>65 0 0%
Microcredit and Economic Development: Entrepreneurship or Self-employment?
70
Habilitações Literárias
Sem frequência escolar 0 0%
1º ciclo 0 0%
2º ciclo 0 0%
3º ciclo 1 17%
Ensino Secundário 1 17%
Licenciatura 4 67%
Mestrado 0 0%
Outro 0 0%
Nacionalidade
Portuguesa 6 100%
Brasileira 0 0%
Outro 0 0%
Microcredit and Economic Development: Entrepreneurship or Self-employment?
71
Antes de obter o empréstimo, qual era a sua situação profissional?
Desempregado 5 83%
Recém licenciado 0 0%
Mestrado recentemente obtido 0 0%
Empregado por conta de outrem 1 17%
Empregado por conta própria 0 0%
Tinha experiência profissional antes de ter recorrido ao crédito?
Sim 5 83%
Não 1 17%
Caso tenha respondido afirmativamente à questão anterior, que tipo de
experiência profissional teve?
Trabalhador por conta de outrem 5 100%
Trabalhador por conta própria 0 0%
Microcredit and Economic Development: Entrepreneurship or Self-employment?
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Recorreu ao crédito:
Sozinho 6 100%
Em parceria com outra pessoa 0 0%
Recorreu ao crédito com o objetivo de:
Criação e desenvolvimento de novo projeto 6 100%
Expansão de projeto existente 0 0%
Qual o montante do crédito pedido?
< 5.000 euros 0 0%
[ 5.000 - 7.000 euros [ 1 17%
[ 7.000 - 10.000 euros [ 2 33%
[ 10.000 - 15.000 euros [ 1 17%
[ 15.000 - 20.000 euros [ 2 33% > 20.000 euro s 0 0%
> 20.000 euros 0 0%
Microcredit and Economic Development: Entrepreneurship or Self-employment?
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Há quanto tempo recorreu ao crédito?
<1 ano 4 67%
[ 1-2 anos [ 2 33%
[ 2 - 3 anos [ 0 0%
[ 3-4 anos [ 0 0%
> 4 anos 0 0%
Qual a área do seu negócio?
Agricultura, produção animal, caça, floresta e pesca 1 17%
Indústrias transformadoras 1 17%
Construção 1 17%
Comércio por grosso e a retalho 1 17%
Alojamento, restauração e similares 0 0%
Atividades de informação e de comunicação 0 0%
Atividades administrativas e dos serviços de apoio 0 0%
Educação 0 0%
Atividades artísticas, de espetáculos, desportivas e recreativas 0 0%
Outro 2 33%
Microcredit and Economic Development: Entrepreneurship or Self-employment?
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Qual o número de pessoas empregadas no negócio criado? (Incluindo-se)
1 1 17%
2 3 50%
3 1 17%
4 0 0%
>4 1 17%
Indique por favor o seu volume de vendas em 2013:
0 | 20000 | 50000 | … | 0 | 5000
Porque é que decidiu criar o seu próprio negócio?
Desejo de trabalhar por contra própria
2
33%
Desejo de criar o próprio emprego e emprego para outros 2 33%
Tinha uma ideia de negócio 0 0%
Impossibilidade em encontrar emprego 2 33%
Outro 0 0%
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Numa escala de 0 a 5, quão inovador é geralmetne considerado o seu negócio?
0 0 0%
1 0 0%
2 0 0%
3 3 50%
4 3 50%
5 0 0%
Descreva brevemente o seu negócio
Doçaria | Apoio domiciliário e serviços de saúde ao domicílio | Uma loja com
produtios nacionais, desde compotas, chocolates, biscoitos, vinhos, azeites, chás.
Tudo produtos feitos artesanalmente, mantendo as tradições antigas. Uma loja
gourmet | Pesca em águas interiores
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