Enterprise Creation by the Unemployed : The Role of Microfinance

This paper analyzes the International Labor Organization's (ILO's) action program on enterprise creation by the unemployed. It highlights the role of microfinance in the industrialized countries.The study describes the aims and objectives of the action research program:

• It proposes to systematically explore the role, scope and limits of credit and other financial services as a strategic ingredient of self-employment programs.
• It aims to:
  • Address the information needs of Government on how to fine tune incentives, sanctions and other monitoring instruments for microfinance operators in self- employment/micro-enterprise promotion programs;
  • Upgrade performance and transparency in the microfinance industry, whether non-banks, banks and a variety of other agents.

The paper argues that surveys of microfinance applications in the developed countries adopt a micro perspective - they describe the development of individual schemes without attempting to assess the socio-economic relevance of microfinance for self-employment in the aggregate.It highlights issues related to:

• Survival of the self-employment activity:
  • Access to microfinance services;
  • Entrepreneurship among the unemployed.
• Sustainability and outreach of microfinance agents in self-employment programs:
  • Involvement of the unemployed in the design of programs;
  • Performance of outreach in terms of targeting, client selection, lending technology and financial innovations.
• Public support to microfinance agents.

Finally, the study concludes that ILO's strategy on microfinance and self employment is:

• Participatory;
• Demand driven;
• Action oriented.