Financial instruments and services in smaller towns and rural areas Good practice presentation Evtim Stefanov ARDBC-Vidin, BG

JOBS Centres Network

General description of the practice Jobs Opportunities through Business Support (JOBS) - a project of the United Nations Development Programme (UNDP) in Bulgaria Start - since October 2000 in principal partnership with the Ministry of Labour and Social Policy. By the end of 2009, some 30,100 long term jobs had been created at a cost of USD 26.6 million through the operations of 43 Business Centres, 10 Business Incubators and 17 Window Offices spread through the less advantaged municipalities of Bulgaria.

General description of the practice An integrated package of non-financial and financial business development services: A capital fund of USD 5.6 million for a financial leasing scheme - possibly the most widespread microfinance scheme in Bulgaria of its kind Till end leases to a value of BGN 15,744,792 (~EUR ).

General description of the practice Project start up grant and support scheme implemented in 2004; Micro-Grants for Roma scheme implemented in 2006; Additional non-financial services - Business incubators, IT, trainings, consultations, informational services, technical and office services; Specialized initiatives – support to producers of herbs and alternative agricultural products. As a result, local businesses were able to create more than 4,020 jobs

Financial services and instruments 1. The Financial Leasing Scheme - provided local businesses with leases for purchase of new or used business equipment for start ups, ordinary businesses and agricultural businesses. The maximum size of a lease ranges from BGN 15,000 to BGN 35,000;

Financial services and instruments As of December 31, 2007 until 2010, 38 business centres provide services under FLS. They offer leases of up to BGN 15,000 for start-ups, up to BGN 30,000 for existing MSMEs and up to BGN 35,000 for agriculture equipment.

Financial services and instruments Project grants of up to BGN 20,000 for people with viable ideas to start a business. More than 1000 individuals were trained in entrepreneurship - helped to prepare business plans which could be used for other financing. By mid 2008, four project cycles were completed in 13 economically disadvantaged Bulgarian regions.

Financial services and instruments Micro-Grants for Roma - run in two Business Centres in urban neighbourhoods with Roma population of over 20,000. The micro-grants bundle a FLS lease with a grant of up to BGN 2,000 for initial start-up expenses. It helps a person start a business with the basic legal requirements and equipment in place.

Characteristics Well structured to meet the needs of micro and small enterprises for business financing at times of economic stagnation and high unemployment; Well positioned network of business centres; Good reputation of these services amongst local communities; Balanced portfolio of complementary non- financial business services; Well trained staff.

Necessary resources Structure - well established local non-profit institutions, experienced in the local economic and social context, adaptable to diverse types of funding, well positioned as competent partners to local authorities and NGOs in implementing local development policies and initiatives. In short - a unique commodity in any city, town or village and a valuable partner to the relevant civil authorities.

Necessary resources Staff - The manager of JOBS BC has a small number of staff: financial consultant, an agronomist, a marketing expert and other professionals employed on projects. For financial services - appropriately qualified leasing/loan consultants to staff the BCs is obligatory.

Necessary resources Economic resources - an averagely performing business centre can make BGN 28,500 per annum from interest on the leases. Current average annual expenses of a well performing Business Centre are between BGN 20,000 – 25,000.

Necessary resources - Conclusion What distinguishes the JOBS BC network from other service providers is the personal touch, the closeness to the client and the good knowledge and grip on local community, employment and economic issues.

Current situation Microfinance institutions JOBS Ltd. was established as a banking group to Bulgarian Development Bank in 2010 providing funds by four schemes - leasing of industrial equipment, leasing of vehicles and leasing of agricultural machinery and other equipment leasing. JOBS MFI operate funds of the European Investment Fund in a business network of more than 30 brokers (the former JOBS centres) in the country.

Problems Changed economic environment – new needs; Discontinuation of state funding - some centres ceased operations; Consolidation of the financial resource of the leasing instrument at JOBS centres and its granting to the Bulgarian Development Bank led to a significant outflow of operation with this instrument by the centres – currently, they are only financial intermediaries.

What can be transferred? Financial engineering instruments can be used as a tool for sustainable regional development and economic revival. A Specialized Revolving Fund for development of environment-friendly animal breeding and horticulture, is vital for the recovery from the economic crisis, especially in the rural areas of partner SEE countries.

What can be transferred? Non-banking providers of financial services are often too small and their funds too limited but they offer an alternative. Business Centres are well equipped with knowledge and financial instruments to serve the start-up enterprises and those rejected by the banks -> they create clients for banks.

What can be transferred? They offer a good combination of financial and non- financial BDS services. Strong ties with the local communities is a prerequisite for success. Possibility for leases with a grace period of up to six or nine months, the leases for used machinery and equipment more than 5 years old – no alternative on local financial services market.

Why make the transfer? Development and management of transnational and regional non-banking financial engineering instruments managed by business supporting structures, especially in rural areas could be regarded as flagship initiatives for the countries and it is strongly supported by the EC.

JOBS Special Component SUPPORT TO PRODUCERS OF HERBS AND ALTERNATIVE AGRICULTURAL PRODUCTS Overall results: 1195 people trained; 4125 jobs created (including seasonal jobs) 827 farmers supported ( ) to create plantations and sell their produce 201 beneficiaries supported in 2008 alone 66 farmers supported to start organic growing and certification 550 other entrepreneurs/farmers from the herb industry supported with specialized assistance – consultancy, information, business contacts, etc.

Success Story Going Green – Organic Farmers Support through JOBS Business Centres

Thank you for your attention! Evtim Stefanov Executive director Agency for Regional Development and Business Center -Vidin