1. Conference on: “Rural Community Development” And plenary meeting Exeter, Devon (UK) 19-20 October 2005 Rural Organization for Community Activities, Banska Bystrica, Slovakia Zuzana Drímajová, Katarína Kubiňáková

2. VOKA – RURAL ORGANIZATION FOR COMMUNITY ACTIVITIES VOKA - a civic association, established in 1998 MISSION: activate local potential and to support, through technical assistance, the sustainable and democratic development of communities for the improvement of quality of life of rural people

3. VOKA - GOALS  encourage and support local democracy and the right to equal opportunities, free expression and tolerance of other’s opinions,to activate citizens and their participation in planning and decision-making processes, improve volunteerism in community activities, and develop advocacy initiatives on the local and national level  promote sustainable community and economic development by activating local resources and accessing appropriate outside resources. Community and economic development includes meeting basic human needs, leadership development, organizational development, and support for activities such as SME in rural areas  built a strong network of individuals,organizations and communities for active co-operation related to rural development activities. To create and maintain relationship with international organizations and institutions with similar goals

4. VOKA TARGET GROUPS Rural villages with population up to 5.000 inhabitants Rural leaders and activists (community development) Small businesses operating in rural areas (micro loans, training, advisory services) Local governments officials Rural NGO s (involved in rural development projects)

5. VOKA’ s Programme Structure  Rural Capacity Building Networking and exchange of experience Rural Women’s Leadership Network/gender equality  Social-economic Development Socio-economic strategies Entrepreneur Communities-development of business environment Employment Development  Educational Programme Business Development in Rural Tourism and Agrotourism Community Organizer Basic English for Entrepreneurs in Tourism How to Start Your Own Business Rural Career Guidance Local Action Groups LEADER-Development and Implementation of Strategies for Socio- Economic Development of Rural Areas

6. BANSKA BYSTRICA Self-governing Region

7. VOKA has 2 micro credit funds: A) Micro credit program (MCP)  establishment: 1999 in cooperation with USAID  initial portfolio: 10,000 USD  current portfolio: € 62,845 (2,419,523 Skk)  territory: nationwide  # of allocated micro credits from April 1999: 326 MC  source of front money: USAID, Tatra banka, Open Society Foundation, TRUST programme B)Micro credit fund under the project „Rural Employment Services for Youth Professional Trainings and Micro loans“(MCF U NIDEA )  donor of the project: Unidea - UniCredit Foundation, Milan, Italy  initial portfolio: € 49.997 (1,945.678 Skk)  first micro credits allocated in April 2005  territory: Self-governing region of Banska Bystrica (BB)  expected # of MC: 35  # of allocated MC: 20

8. Rural Employment Services for Youth - Professional Training and Micro loans Donor: UNIDEA UniCredit Foundation, Italy Duration: April 2005 – April 2006 Territory: Banska Bystrica Self Governing Region Overall objective: Improvement of conditions for employability of rural youth in Banska Bystrica region by networking with other relevant institution on regional and national levels promoting self-employment services and vocational training Specific objective: 1. Support self-employment of rural youth, improve their entrepreneurial skills and provide access to financial sources (micro loans) 2. Improvement of employment services of rural youth (individual guidance) Target groups:  Young people 18-35 living in rural areas  Over high school graduates  Long term unemployed  Being on welfare  Young entrepreneurs

9. MICRO CREDIT PROGRAM (MCP) Fund`s history  Although the fund works on national wide territory, most of MC clients come from region of BB  Original goal of the program: make credits available for “starting” rural entrepreneurs, promote cooperation among them and create conditions for development of rural enterprises  Type of MC: group MC with 3 to 5 members  During the first 6 months of program existence 30 MC were allocated (= € 17,532)  2003 – modification of some criteria for MC beneficiaries, shift from group to individual MC  2004 – MCP evaluation  2005 – change of MCP, transformation of MCP according to current state of MC market in Slovakia, target group of clients was extended by NGO  Up to the present 326 MC were allocated from MCP

10. MCP – current setting: Goal: make credits available for small entrepreneurs and organizations who are involved in rural development Type of MC: Individual MC Target group of clients: 1. small rural entrepreneurs 2. NGO s Current # of allocated MC: 58 (56 SE + 2 NGO s) Criteria for MCEntrepreneursNGO Min. amount of MC€ 779 Max. amount of MC€ 5 195 Interest rate10 - 12 %8 - 10 % Maturity of MC3 - 24 months Postponement of instalments1 month1 - 6 months Late payment penalty0,10 % Loan warrantyNotary record, 1 - 2 guarantors

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

12. Criteria for MC beneficieriesEntrepreneurs Min. amount of MC€ 260 Max. amount of MC€ 2 597 Interest rate6 % Maturity of MC12 – 24 months Postponement of instalments3 - 6 months Late payments penalty0,10 % Loan warrantyNotary record, 1 - 2 guarantors MCF UNIDEA – current setting:

13. MCF UNIDEA – structure of clients

17. INDICATOR MCF UNIDEAMCP Entrepreneurs NGO Portfolio size€ 49 997€ 62 845 First MC allocationApril 2005April 1999 Fund territoryRegion of BBSlovak republic Target group of clientsStarting entrepreneurs <2 years after establishing business, age: 18 – 35 (40) years Rural entrepreneurs NGO s involved in rural development Use of MCStarting businessDevelopment of rural business Rural development projects Type of MCIndividual MCP and MCF Unidea Comparison

18. INDICATOR MCF UNIDEAMCP Entrepreneurs NGO Amount allocated MC36 364 €€ 63 351€ 10 390 Assessed interest from MC4 751 €€ 10 287€ 710 # of allocated MC203242 Average amount allocated MC€ 1 818€ 1 131€ 5 195 Min. amount of MC€ 260€ 779 Max. amount of MC€ 2,597€ 5,195 Interest rate6%10 - 12 %8 - 10 % MC date due12 - 24 months3 - 24 months Postponement of instalments3 - 6 months1 month1 - 6 months Late payments penalty0,10 % Credit warrantyNotary record, 1 - 2 guarantors

19. After closing the project „Rural Employment Services for Youth Professional Training and Micro Loans“ we plan to merge both of VOKA`s funds into one what would make VOKA`s MCP more effective.

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

21. PROBLEMS and OBSTACLES  Effort to minimize the number of MC allocated to potential deptors (by requiring business plans, explanation of business plans in front of MC committee) spins MC distribution process out  Importance to control instalments from “delayed”clients and deptors  Problems with group MC – reasons: i. some clients speculate to raise higher credit by combining a number of smaller MC from other members of MC group; ii. scepticism or unwillingness to cooperate with other entrepreneurs  A change of condition on MC market in Slovakia (2005) i. Benefits from Labour office (ESF) are a competitor within the group of starting entrepreneurs ii. MC from banks are a competitor among the group of businessmen who set up their business 1 – 2 years ago

22. Thank you for your attention!