MICROCREDIT THE IMPACT OF ON THE LIFE OF SPANISH WOMEN ENTREPRENEURS

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1 C/Villanueva 31, 1º Dcha MADRID Tel.: Fax: Web:

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3 This study was carried out among the women entrepreneurs who obtained a microloan through the different Spanish entities that offer them. It does not intend to generalize about the impact of microcredit, but rather to offer a view of how the loans affected this sample. The aim of this qualitative study is to find out how microloans influenced the life of these people and how they can be made more efficient. spent with us, and we are also grateful for the help received from the social and financial entities that collaborated with us in this study. Without them, it would not have been possible to prepare this report. Inger Berggren President Final Report This report belongs to Fundación Laboral WWB en España (Banco Mundial de la Mujer). You agree not to republish and copy partly or totally this document without express authorization from WWB. We would like to thank the entrepreneurs for the time they December 2007

4 TABLE OF CONTENTS FACILITATING ACCESS TO CREDIT FOR WOMEN: THE EXPERIENCE OF WOMEN S WORLD BANKING...5 FOSTERING GENDER EQUALITY: MEETING THE HIP AND MICROFINANCE CHALLENGE...9 FROM MEASURING IMPACT TO DEFINING A METHODOLOGY...11 IMPACT OF THE MICROLOANS ON THE LIFE OF WOMEN WHOSE ENTERPRISES ARE STILL OPEN...15 Profile of microentrepreneurs...15 Nationality of the women interviewed...15 Age range of the microentrepreneurs...16 Marital status of the microentrepreneurs...16 Level of education...17 Previous activity...18 Microcredit...19 Awareness of the microloan programme...19 Destination of the microloans...19 Characteristics of the microloans...20 Description of the enterprises...21 Age of enterprises...21 Legalization of enterprises...21 Business sector...22 Location of enterprises...22 Working conditions...23 Situation of enterprises...24 Quality of life...25 Material improvement...25 Psychological improvement...26 Most important improvement...27 What they have given up...27 IImpact on the family...28 Level of income of the homes and minimum expected income...28 Monthly savings in the home...30 Repayment of the microloan and difficulties arising...31 Ability to reconcile work and family...32

5 TABLE OF CONTENTS Impact on social and working life...33 Empowerment in the home...33 Social life...34 Relations with banks and suppliers...34 Microentrepreneurs conclusions...36 Appraisal of the microloan programme...36 Confidence in the future...37 Future improvement in quality of life...37 Satisfaction with the initial decision...38 DATA ON MICRO WHOSE ENTERPRISES HAVE CLOSED...39 Profile of the women entrepreneurs whose enterprises have closed...39 Nationality...39 Age...39 Marital status...39 Level of education...40 Characteristics of the enterprises that have closed...40 Business sector...40 Location of the enterprise...41 Characteristics of the microloan...41 Closing of the enterprise...42 Problem-free time...42 Closing date...42 Reason for shut-down...42 Attitude toward shut-down...43 Support...44 Current job situation...44 Current job...44 Date new job began...45 Satisfaction with current job...45 Current financial situation...45 Debt...45

6 Psychological state...46 State of mind...46 View of the future...47 Conclusions of the entrepreneurs whose enterprises have closed...47 Appraisal of the microloan programme...47 Conclusions about the experience...48 RURAL WOMEN, CREATING ENTERPRISES AND Analysis of the microloan as a financial instrument for rural women entrepreneurs...49 Previous studies on rural women and microloans...52 Impact of microloans on the life of rural women in Spain...53 Methodology...53 Profile of the rural women entrepreneurs with microloans...54 Microloans...55 Enterprises...55 Quality of life...58 Impact on the family...59 Impact on social and working life...62 Entrepreneurs conclusions and opinions on the microloan...63 Conclusion on the impact of microloans on the life of the rural women entrepreneurs...65 Other Women s World Banking statistics...66 How can we facilitate access to microloans for rural women?...67 Delving deeper: other groups in the rural context...67 Women entrepreneurs and microloans...67 Women entrepreneurs and business financing...69 Problems detected...72 The rural context and its consequences on enterprise creation and financing...72 Microloans: Are they an appropriate tool for all rural women entrepreneurs?...73 Conclusions and recommendations...77 CONCLUSIONS...79 COLLABORATORS...86

7 FACILITATING ACCESS TO CREDIT FOR WOMEN: THE EXPERIENCE OF WOMEN S WORLD BANKING Over the 19 years that we have been helping women wanting to start up small enterprises and enter the working world, we have noted that the main obstacle they face is access to financing. They often suffer true discrimination, on the part of banking entities, which prevents them from accessing economic resources on equal terms. True discrimination against women The terms offered to women who request financing for their entrepreneurial projects are considerably worse than those offered to men. To fight against this inequality, it is necessary to adopt legal and institutional measures that permit access to the economy for women. In the area of the economy and employment, the discrimination against women in the European Union is evident, their rates of activity and unemployment being much worse than those of men. They receive lower salaries for the same work, have fewer opportunities of advancement in their jobs and, in the event of economic recession, the women s jobs are the first to go. Thus, in Spain, the figures for unemployed women double those for men Women represent: 1/2 of the population 1/10 of the total wagebill 2/3 of the hours worked 1/100 of wealth One cannot talk about fighting poverty without acknowledging that women constitute the majority of the poor people in the world and that they are systematically excluded from decision-making in all spheres of society. Still today, women in the European Union run a much greater risk of falling below the poverty line than men. A change at international level Economic internationalization is producing new alternatives in the financial field. Initiatives are arising whose objective is to offer different responses to the effects produced by savings, and financial entities are beginning to realize that the concern of the citizens with regard to solidarity should be reflected in the banking business, transmitting new messages to consumers and offering new products and alternative models for the management of their savings. For 19 years, Women s World Banking in Spain has been fighting for the concept of microfinance, working to help the women who are excluded from the formal financial market. We are therefore delighted to see how, after all these years of relative solitude, an awareness is arising amongst all the social partners regarding the need of specific programmes to guarantee access to finance for socially and economically vulnerable people. 5

8 Microcrédit One way for women to access credit are the new microloan programmes for selfemployment or microenterprise projects for women, who, since they lack collaterals and guarantees or due to their own social situation, are excluded from conventional financing. Microcredit is one of the mechanisms that have been created to fight against poverty. We owe its origin to the economist Muhammad Yunus (awarded, among other prizes, the Prince of Asturias Award for Concord in the year 1998 and the Nobel Peace Prize in 2006), who created this instrument to foster development in Bangladesh. Rich countries have imported this system of alternative financing to fight against the financial exclusion of the most underpriviledged. The first Microcredit Summit was held in Washington in The United Nations proclaimed 2005 the International Year of Microcredit, considering that this would help achieve the objective of reaching 100 million families in the world. According to the data from that same year, more than 80 million families had already received a microloan. Spain has adopted this alternative financing system, and Her Majesty the Queen of Spain is its main embassador at international microcredit meetings, describing it as an excellent tool for social integration. However, the history of microcredit in Spain is very recent. Apart from some initial experiences, microloans began to be granted in Since this tool has to be adapted to economic reality, with regard to repayment terms, etc., in Spain we refer to microloan as not exceeding 15,000 Euros with interest rates of 5%-6% and repayment periods from 1 to 5 years, with the possibility of a grace period in the first few months. Above all, neither backing nor guarantees are required. The backing is the project and the person. The destination of the microloans reflects the inequality that exists. 58% go to women. They come from different social brackets, do not share the same educational level, cultural background or country of origin. But they all have a common denominator: they are usually hardworking, resolute, resourceful mothers who through selfemployment are looking for a decent way to participate in the working world. The transformation of Spanish society over recent years has logically influenced the destination of microloans, which are increasingly oriented toward immigrants. The tertiary sector is the most relevant: mainly commerce, but also services, training, nursery schools, etc. Activities in the fight for economic equality Alternative financing, and more flexible banking practices with regard to guarantees, are absolutely necessary for integrating the people who are excluded from the traditional financial circuits. In Spain, WOMEN S WORLD BANKING was the pioneering organization in the fight to facilitate access to credit for women, and was the first entity in Spain to sign a Banking Agreement in 1989 with the Caja Madrid. The aim was to create specific financing tools for female entrepreneurship. These agreements improved conditions in terms of interest rates, grace period, repayment terms, etc. 6

9 However, many women were left by the wayside because they did not have collateral or anyone who could back them. For these reasons, that same year, Women s World Banking in Spain, with the financing of the WWB International Organization, set in motion the first loans programme for women without guarantees. Between 1989 and 2007, WWB has carried out a series of innovative programmes aimed at achieving true equality in the financial sphere: 1989: Banking Agreement with Caja de Madrid Specifically for women with entrepreneurial projects. 1989: Banking Agreement. For women with entrepreneurial projects and without guarantees : Banking agreements with Banco Popular, Banco Herrero, Caja de Castilla la Mancha, La Caixa. Specifically for women : Solidarity Loans Programme. Financing model based upon solidarity among women entrepreneurs who do not have collaterals : Give her Credit Programme. Actions to achieve a change of mentality in banks with regard to women. Preparation of a Bank Negotiation Techniques Manual : Guarantee Funds Programme with the La Caixa Foundation. For immigrant women lacking collateral to set up their enterprises. 2001: Study on Guarantee Funds for women in Spain. Financed by the European Union : The Foundation was named a Social Work Institution for the management of the microcredit programme of the Official Credit Institute (ICO). Recipients: underpriviledged groups: immigrants, women, people over 45 years old. Agreements were signed with Caixa de Catalunya, BBVA, SCH : Agreement with the Un Sol Mon Foundation ( Caixa Catalunya ). Microloan programme for self-employment projects : Agreement with the Women s Institute and the La Caixa Foundation. Microloan programme for women without guarantees. The WWB Foundation forms part of the European Microfinance Network. It is the only Spanish entity forming part of that network that works on microloan programmes for women. 2005: Give credit to immigrant Women Programme. Expanded edition targeting immigrant women (see 1998 & 1999) : Processing of microloans for women within the following programmes: Un Sol Mon Foundation (Caixa Catalunya). Women s Institute (La Caixa). Caja de San Fernando (CajaSol). Aval Madrid. Since the creation of Women s World Banking, we have processed 960 bank loans, for a sum of 23.9 million Euros. 3,120 enterprises for women have been set up, with the creation of 5,440 jobs. We have processed 230 microloans, amounting to 2.5 million Euros. 7

10 FACILITATING ACCESS TO CREDIT FOR WOMEN: THE EXPERIENCE OF WOMEN S WORLD BANKING Participation by WWB Spain as experts in alternative financing systems for women at different conferences and international forums : Annual meetings on microcredit and alternative banking for women. In Peru, Honduras, Mexico, the United States, India, Holland, Poland, Hungary, Italy, we have participated alongside the most important entities in the world in this field: Grameen Bank, Sewa Bank, Triodos Bank, Inter-American Development Bank, World Bank : Third Round Table for Bankers and SMEs Monthly encounters in Brussels with the Financial Experts Commission, organized by the DG XXIII of the European Union. For two years, WWB Spain attended these meetings as a guest, at which banking entities from all the countries in the European Union participated, it being the only organization invited as an expert in financing systems for women. 1999: Conference on Alternative Financing Systems (Bosnia) Organized by the Belgian entity Alternative Banking. Año 1999: Conference on Alternative Finance (Hamburg) Organized by the DG XXIII of the European Union. 2000: Conference on Ethical Banking (Birmingham) Organized by the DG XXIII of the European Union. 2000: Conference on Women and Finance (Gothenburg) Organized by the Swedish Government. 2001: Conference on Alternative Financing Routes (Geneva) We attended, at the invitation of the United Nations, as the only experts in alternative systems for women. 2002: II Conference on Equality and Economy. Organized by the Women s World Banking Foundation Spain. 2003: II International Conference on Equality and Economy Topic: Ethical Banking and Women. Organized by the Women s World Banking Foundation Spain. 2005: International Forum on Women and Microcredits. Organized by the Women s World Banking Foundation Spain. 2005: III Conference on Equality and Economy. Organized by the Women s World Banking Foundation Spain. 2006: IV Conference on Equality and Economy. Organized by the Women s World Banking Foundation Spain. 2007: V Conference on Equality and Economy. Organized by the Women s World Banking Foundation Spain. 8

11 FOSTERING GENDER EQUALITY: MEETING THE HIP AND MICROFINANCE CHALLENGE Women s World Banking has been a member of the European Microfinance Network (EMN) since This network was created to bring together the players in the microfinance sector with all the people and organizations interested in the sector s activities in Europe, for the purposes of promoting microfinance, selfemployment, microenterprises, spreading good practices and participating in the improvement of the occupational framework at European Union level as well as within each of the member states. It currently has 57 members in 21 European countries. In December 2006, the European Microfinance Network, along with 9 of its members, has started up a 15-month programme financed by the European Commission, which is called: Fostering Gender Equality: Meeting the Entrepreneurship and Microfinance Challenge. This project stems from the following fact: only 30% of European enterprises are managed by women (Middlesex University, 2000). The number of women who are self-employed is lower than that of men, which limits their possible contribution to the local economy and social development. Microfinance has shown itself to be a particularly efficient tool for employment and assistance to women. However, in Europe, the microfinance bodies have not been able to reach women as well as men, although this has been possible in other regions. 45% of the clientele of the European Union s microloan programmes are women, 59% in North America and more than 80% in the developing countries. In order to foster gender equality in entrepreneurship and in microfinance in Europe, the project s partners have joined forces, with the following objective in mind: That more microentrepreneurs or selfemployed women working in the European Union can have access to microloans as well as to training and support services, so that they can continue developing or creating their own enterprises at local level, thanks to a reinforced network of microloan organizations which are more and better prepared to work with them... There are three parts to the project: Analysis in each country of the external context influencing women s entrepreneurship and of the specific issues with regard to gender equality in entrepreneurship and to the initiatives in the eight countries participating in the project. Organization of visits and the startup of pilot projects developed by the project s members, with the objective of developing and sharing good practices and experiences about actions that have been specifically designed to have a positive impact on women entrepreneurs and self-employed women, and analysis of the impact of such actions. 9

12 Preparation of publications and events to disseminate information on research studies carried out, good practices and the results of the pilot projects, in order to develop the capability of the European Microfinance Institutions to promote gender equality. Consequently, the project s results will be presented at a Transnational Conference to be held in Madrid on December 13th, 2007: publications, video on specific cases of women s microenterprises and programmes that foster gender equality. The organizations associated with the project are as follows: European Microfinance Network (France), Women s World Banking (Spain), Women's Employment, Enterprise & Training Unit WEETU (United Kingdom), Hungarian Microfinance Network (Hungary), Project funding comes from the European Union DG for Employment, Social Affairs and Equal Opportunities as part of the Community Framework Strategy on Gender Equality. The Enterprise Fund (United Kingdom), The Integra Foundation (Slovakia), Fonds de Participation (Belgium), EVERS&JUNG (Germany), Réseau Financement Alternatif (Belgium), Network Credit Norway (Norway). 10

13 FROM MEASURING IMPACT TO DEFINING A METHODOLOGY Ever since it started up in 1989, Women s World Banking in Spain (WWB) has linked its financial activities to the main Spanish savings banks, with the negotiation of agreements to help women access loans without backing, with a business plan, with a lower than normal interest rate and a longer than normal repayment deadline. In spite of its broad experience in microloan management, Women s World Banking (WWB) remains aware of the need to evaluate the quality and effectiveness of its programmes, in order to determine what improvements can be made in the future. In order to meet this double need to verify if the microloan has a real impact on the life of the recipients and to try to improve the existing programmes in 2005, WWB began to think about the possibility of carrying out a study on this topic. This first report was prepared internally, with the objective of gathering useful information for our daily work and data to quote at conferences on microcredit. The following year, a second study was drawn up, this time for the purpose of disclosing the results obtained at the national level, but also based upon the experience of WWB women entrepreneurs. The sample was limited to 84 women entrepreneurs, and the study was presented to a group of professionals from the sector in November 2006, within the framework of the Equality and Economy conference organized annually by WWB. However, when we saw that similar situations and difficulties were arising in the study and at working meetings with other players within the microcredit sector, we felt that it would be interesting to delve deeper into the study on the impact of microloans, but this time with a more significant sample of women entrepreneurs coming from other organizations throughout Spain. Unlike some of its collaborators, WWB works exclusively with women, and shows specific interest in the topic of gender equality in entrepreneurship. The European project on Fostering Gender Equality: Meeting the Entrepreneurship and Microfinance Challenge was the perfect framework for starting up this initiative, which would not have been possible without funding, and for inviting collaboration from Spanish microfinance organizations. Measuring the social impact of the microloan The microcredit sector in Europe brings together a heterogeneous set of practices and players, who work to achieve a balance between economic profitability and social focus. Spain presents a specific profile due to the variety of bodies that interact. Some, such as the savings banks, deal with the financial part. They have the financial resources, authorise the loans and carry out general follow-up. On the other side are the social entities, which see to the selection of recipients, draw up viability studies and offer advice on entrepreneurial projects. Unlike the classic microfinance institutions, which oversee their customers projects in an integral way, the roles of the different Spanish players are very well defined. On one hand, the financial aspect, and on the other, the social aspect. This peculiarity is reflected in the objectives of this study by Women s World Banking. Instead of combining the financial and social focus for an integral evaluation of the impact, it focuses more specifically upon the social impact of the microloans. From the very beginning, the financial entities set up a 11

14 series of financial indicators to measure the results of their programmes but there is little data on their social impact. Therefore, we do not try to analyse the financial wellbeing of the microentrepreneurs, but rather aim to ascertain their opinions with regard to their quality of life from different viewpoints. The study s objectives Women s World Banking set up a series of objectives for this study: To evaluate the effect of the microloan on the life of the women entrepreneurs, to determine if an impact exists and, if so, of what sort, taking into account the variables, both material and psychological. The study deals with the social aspect of the microloan, because it is based upon the recipients perceptions of changes in their quality of life after obtaining the loan and opening up their enterprises. To analyse access for rural women to entrepreneurship and to microcredit. The Ministry of Agriculture, Fishing and Food has observed scarce participation by rural women in selfemployment statistics and wishes to understand this situation. Therefore, the aim is to identify the specific problems faced by this rural group, as well as to determine whether microcredit can be a valid option for rural women in its present form or after modification. This study does not only analyse enterprises that have no problems. Enterprises created with a microloan are included in national statistics and many of them do not survive beyond a few months. In order to provide true help to women entrepreneurs, it is essential to understand the origin of their difficulties and to find solutions for better counselling and to avoid this type of situation, which often becomes dramatic (problems from the start + debts + a sense of failure). Metodology The methodology described here is the one used for the study on open and closed enterprises. The method employed for the study on rural women is described in the chapter on Rural women, creating enterprises and microcredit. The questionnaires were designed based upon a series of hypotheses. On the one hand, the aim was to demonstrate a positive impact of the microloan, through improvements at various levels: in the life of the woman entrepreneur, in the life of her family or of her home and in her relationship with her community and her enterprise. The following table shows the main hypotheses that served as the basis for the questionnaire on open enterprises: To propose improvements in the existing programmes, in the form of specific recommendations, bearing in mind the opinion of the microentrepreneurs regarding problems or omissions. 12

15 IMPACT ON THE FAMILY / HOME Increase in the family income Increase in the family s assets Improvement in material well-being IMPACT ON THE ENTREPRENEUR AS AN INDIVIDUAL Improvement in the capability to deal with unexpected events Improvement in the ability to negotiate with the environment (customers, suppliers, clients, family) More active participation in family decision-making process Better control of economic resources Increase in savings Greater self-confidence and self-esteem, improved psychological condition Greater difficulty in reconciling social and family life Less time available for personal needs IMPACT ON THE COMMUNITY More participation in the life of the community. In the study on enterprises that had closed down and on rural women, there were fewer hypotheses, because it was basically exploratory studies. In order to obtain a more representative view of the impact of microcredit in Spain, we tried first to prepare a sample on the basis of figures for market share among the different players. This proved to be impossible because of the lack of consolidated, reliable data in Spain. We therefore had to work with the tools available, accepting the problem of the loss of scientific rigour. We contacted the financial and social entities working in the microcredit sector in Spain to request their collaboration in carrying out interviews with their women entrepreneurs: The savings banks with which Women s World Banking usually works: Microbank la Caixa, Un Sol Mon Foundation, Caja Granada, CajaSol, Aval Madrid. The Women s Institute, which has an agreement with La Caixa for microloans exclusively for women entrepreneurs, through a number of social organizations. The social support entities: UATAE, Omega, Femenp, Fidem, Progressive Women s Federation, Secot, MITA... Each collaborating entity received the documents: a letter explaining the project to the women entrepreneurs and two questionnaires, one for those whose businesses were still open, and another for the women whose businesses had closed down. IMPACT ON THE ENTERPRISE Improvement in the capability to access classic financing Improvement in enterprise revenue Cash problems at first 13

16 FROM MEASURING IMPACT TO DEFINING A METHODOLOGY The entities decided to what degree they were prepared to collaborate and get involved in the project, so the participation varied, depending upon their possibilities: the despatch of questionnaires by or by post, the filling out of the questionnaires in interviews, etc. In total, 200 interviews were carried out: 162 with women entrepreneurs whose businesses were still open and 38 with those who had closed them down. The results of this study are presented below. The first chapter shows the conclusions concerning the impact of microloans on the life of the recipients whose businesses were still open, while the second refers to the experience of the women entrepreneurs who had closed them down. The third chapter analyses access for women in rural areas to microloans. Financial and social entities working in the microcredit sector in Spain carried out interviews with their women entrepreneurs. The microloan recipients were contacted in different ways. 14

17 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN In Spain, microcredit programmes have multiplied over the last few years. They target vulnerable groups, such as women. We believe it is necessary to evaluate the quality and effectiveness of these programmes in order to improve them in the future. This chapter focuses on the opinion of the women microentrepreneurs concerning changes in their quality of life since they obtained the microloan and started up their business. PROFILE OF THE MICRO Nationality of the women interviewed The microentrepreneurs whose businesses were still open were mainly from Europe and Latin America, representing, respectively, 62% and 37% of the women interviewed. Most were of Spanish nationality (53%), but there were also large numbers of Argentinians (10%), Colombians (9%), Venezuelans (4%) and Italians (4%). 10% of the women interviewed had dual nationality: from a country in the European Union and from Latin America. Latin America 37% Africa 1% Country of origin Rest of Europe 9% Spain 53% The significant proportion of women entrepreneurs who were not Spanish points to the growing importance of immigration in Spain. According to the INE 2007 census, 9.93% of residents in Spain are of foreign nationality, although this figure was only 2.28% in 2000 and 0.52% in Women represent 46.60% of total immigrants (INE 2005 Census), and 59.42% of those from South America. The high rate of unemployment in the immigrant population (11.78%) in comparison to that for Spanish nationals (7.4%) explains their weight in the statistics for women entrepreneurs and microloan recipients. The fact of being Spanish or an immigrant is important in entrepreneurship. The first reason is cultural: it is more complicated to set up a business when one has limited knowledge about how things work in the country (registration, Social Security, general framework, etc.). Being Spanish, and therefore having a work permit, makes it easier to do the paperwork necessary to set up an enterprise and deal with the administration. It also speeds up the entrepreneurship process, because immigrants have to wait for the second renewal of their work permits before they can change from working for someone else to being self-employed. Also, immigrants usually have fewer family members and friends to acenterprise them in their projects and provide support when problems arise. For all these reasons, women immigrants usually face greater difficulties than Spanish women in the entrepreneurship process. 15

18 Age range of the microentrepreneurs The average age of the microentrepreneurs was years at the time that they requested the microloan. The attached graph shows the breakdown by age of the women entrepreneurs. 64% of the microentrepreneurs were between 30 and 49 years of age when they requested the loan. = 60 years old1% years old 15% 31% years old requesting the microloan: years for the former compared to for the latter. Average age by nationality Africa 36,00 Latin America 39,78 Europe 37,59 Dual nationality 42,88 marry or not and, to a lesser degree, by the younger age of the European women entrepreneurs. Marital status of the microentrepreneurs Single 32% Married / Civil union 48% Divorced / Separed 17% Widow 3% years old 33% 14% years old 25 years old 6% If we compare the nationality of the microentrepreneurs with their age, we find that the Europeans were younger than the Latin American women at the time of Marital status of the microentrepreneurs 48% of the women live with a partner (married or cohabiting). In total, 32% of the women were single. There was a greater proportion of single women amongst the Europeans (40%) than amongst other nationalities (South American: 20%). This can be explained by the cultural component of choosing to The high proportion of women entrepreneurs who lived alone (single, widows and divorced / separated) should be taken into account because it adds another difficulty to managing an enterprise. 16

19 Level of education Few of the microentrepreneurs had a low level of education. The great majority had studied at a university (43%) or in vocational programmes (20%). This high level of education may come as a surprise since, in the Spanish population, only 21.5% of women reach university education levels, compared to double that figure for the women entrepreneurs studied here. This demonstrates that despite the social component of microloans, the women entrepreneurs benefiting from such programmes are not illiterate or women who have only elementary education. The high level of education of the immigrant women entrepreneurs also has to do with their difficulty in getting their qualifications recognized in Spain and, therefore, in obtaining recognition of their training in their search for employment. POSTGRADUATE UNIVERSITY VOCATIONAL TRAINING INTERMEDIATE BASIC HAS NOT STUDIED 1% 5% 7% 20% The level of education varies according to the age of the microentrepreneur. The older women are the ones with less education, while the youngest are the ones with post-graduate studies. Average age and education Has not studied 48 years old Basic 42,88 years old Intermediate 42,16 years old Vocational 37,25 years old Universitary 37,28 years old Postgraduate 35,36 years old 32% 36% 0% 10% 20% 30% 40% As for business training, 63% of the women interviewed had not participated in any course on entrepreneurship. Have you attended an entrepreneurship course? NO 63% YES 37% Those who had attended courses of this type stated that they had received them at the following places (see graph below). Place where the course on entrepreneurship was given Local projects 40% Country of origin 16% Others 3% Universities 10% Chambers of Commerce 9% Foundations NGOs 9% Programmes forming part of local projects and organized by Town Councils and the Autonomous Regions represent 40% of the courses received by the women microentrepreneurs 17

20 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN Previous activity Almost 2/3 of the women interviewed had a job before requesting the microloan. Also, for 55%, the business activity was the same as that of their previous job. The biggest difference for these women between their previous situation and their current one was their change of status: before they were an employee and now they are self-employed. Working 66% Previous activity Unemployed 34% The remaining 34% were unemployed. This figure is very high in comparison with the national statistics: in 2006, the unemployment rate for Spanish women was 11.6% (8.5% being the national average, according to Eurostat data). This situation had existed quite some time: 65% of the women interviewed said they had been looking for a job for more than a year. 2% had not been looking for a job, for personal reasons, such as maternity. Period of unemployment < 1 year 33% Between 1 and 2 years 50% Between 2 and 3 years 11% > 3 years 4% Not looking for work 2% Comparison of this data with the age of the women interviewed reflects the overall situation of the labour market. 80% of the women under 25 years of age had worked before requesting the microloan. For the women between 40 and 49 years of age, this figure was only 56%. The older women were those most affected by unemployment, so their primary motivation for choosing self-employment was to go back to work. Their choice was based more on their need to go back to work than on the detection of a true opportunity in a market. It can be said that there is no single profile for the microloan recipient. The nationality, level of education and prior job situation vary greatly amongst those interviewed. However, some characteristics can be identified: Origin Spain: 53% Immigrants: 47% Age upon requesting Average: 38,83 years of age the microloan 64% between 30 y 49 years of age Marital status Married/Cohabiting: 48% Single: 32% Education 43% have a university education 37% have attended a course on entrepreneurship Previous activity 34% were unemployed 18

21 Awareness of the microloan programme According to the responses, there are four main sources of information about the programmes. The mass media represent 34%. Awareness of the microloan programme Other entities 29% The media 34% Public administration 12% Friends/ acquaintances 25% Internet (11% of the total) and NGOs and Foundations (10%) are the most commonlyused sources. This data shows the growing importance of the new communication technologies, as well as the importance of networking and recommendations. The following tables offer a breakdown of the results: OTHER ENTITIES NGO / Foundations 36% Banks 22% Entrepreneurship courses 18% Chambers of Commerce 9% Trade Unions 4% Other 11% 100% PUBLIC ADMINISTRATION National 38% Autonomous Regions 38% Town Councils 25% 100% MASS MEDIA Internet 55% Newspapers 24% TV 21% 100% Destination of the microloans The destination of the microloans does not vary much. 82% of the women requested a loan to start up a business, meeting one of the main requisites for obtaining a microloan: the enterprise has to have been operating for less than one year. Nevertheless, 12% of the women interviewed stated that they would like to have the possibility of extending their microloan or requesting a new one in order to upgrade the business created. This contrasts with the need highlighted by 12% of the women interviewed to extend the microloan in order to be able to upgrade the business created with the first one. Destination of the microloans To upgrade the existing business 16% Others 2% To begin a new business 82% 19

22 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN Characteristics of the microloans Information is available regarding 162 microloans granted, of which 41% were for 15,000 Euros. The average amount was 14,330 Euros, fluctuating between 900 and 60,000 Euros. The definition of microloan agreed upon in Europe entails a limit on the amount of the loan granted, set at 25,000 Euros. In spite of this, we consciously chose to include the data on some women entrepreneurs who received a loan through Aval Madrid S.G.R. These loans, which are granted only in the Autonomous Region of Madrid, may amount to as much as 60,000 Euros, providing certain requisites are met, but the reasons for including them in the sample are that the interest rate applied is 0% and no collateral is needed. These characteristics make them an interesting option for the group targeted by microloans, although the requisite of contributing 20% of the investment limits access to women who have a minimum amount of savings. AMOUNT OF THE MICROLOANS < % % % % > % The amount of the microloan varies according to how it is to be used. It is higher when it is to be used to start up a new business (14,751 Euros on average) than when it is only sought for upgrading an existing business (10,932Euros). To a lesser extent, it depends upon the business sector chosen: the Textiles sector requires the smallest investment (9,155 Euros) and Education the most (20,938 Euros). As for repayments, the average is 304 Euros per month. 55% of the women entrepreneurs pay between 200 and 299 Euros in return for their microloan. MONTHLY PAYMENT < 100 7% % % >= % The amount of payments depends upon the length of the microloan which, in 62% of the cases, is 5 years. The microloans were granted recently: 86% in the past three years, in line with the history of microloan programmes in Spain, which really developed as of 2001 and have grown exponentially in the past few years. DATE OF THE MICROLOAN years >3 years 40% 46% 14% <1 < 1year According to the 2006 Spanish Savings Banks Confederation Annual Report, 9,033 social microloans had been granted since 2001, for an amount of more than 97.2 million Euros. In 2006, more microloans were granted than over the five previous years. 20

23 According to the results of the study herein, these microloans have the following characteristics: Amount Average: euros Usual: euros Monthly payment Average: 304 euros Repayment period 5 years (62% of the women interviewed) Date granted 86% in the 3 past years Use of the microloan 82% to create a new enterprise 12% to upgrade an existing business DESCRIPTION OF THE ENTERPRISE Age of the enterprise Age of the enterprise 1-3 years 43% > 3 years 14% < 1 year 43% 86% of the enterprises studied had been open for less than 3 years. 8 out of every 10 businesses open within a period of 6 months around the date that the microloan was granted. This means that the women entrepreneurs depend upon the access to this capital to be able to start up their business. The speed of processing the microloan is a key factor for quick entry into the labour market. COMPARISON OF THE OPENING DATE AND THE MICROLOAN DATE Before 28% > 2 years 3% Between 1 and 2 years 3% Between 6 months and 1 year 3% <= 6 months 19% Same month 19% After 53% <= 6 months 43% Between 6 months and1 year 7% Between 1 and 2 years 1% > 2 years 2% Legalization of the enterprise 11% of the businesses had not yet been legalized, due to difficulties with the Social Security or with the tax authorities. The main conclusion drawn from the explanations given by the women interviewed is that this situation should change quickly: Are doing the necessary paperwork (18%). 21

24 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN Have not yet opened the business (18%). Are waiting for their self-employment work permit (24%). Are expecting to make their first sales (12%). Or are facing other temporary problems (18%). Only 10% of the women interviewed said they had not legalized their business because of a problem of access to the administrative offices: incompatibility of business hours, distance, etc. Business sector Based upon the responses received from the microentrepreneurs, we identified 5 business sectors. The two main sectors were Services in general (48%) and Commerce (35%). Business activity sector Education training 6% Commerce 35% Textiles 7% Craftwork 4% Other services 48% Within the Commercial sector, the Food (37%) and Clothing and Accessories (35%) businesses were the most important. In the Other services sector, Hospitality (16%) and Hairdressing (9%) proved to be traditional subsectors for microloans. Several new types of activities reflect how our society is becoming a services culture. First, Business Services, which represent 18% of the Other Services sector. This expression is understood to include services in the fields of translation, administration, advertising and communication, etc. Second, Education and Training (6% of the total), which consists, above all, of nursery schools and daycare centers. Other subsectors are growing, such as Culture and the Arts (9% of Other services) and Health and Beauty (13% of Other services). Preferences for one business sector or another also vary according with age. The younger entrepreneurs prefer Education (31.89 years of age) or Craftwork (35.83), while older women prefer sectors such as Other services (37.13 years of age), Commerce (41.11) and Textiles (46.55 ). Location of enterprise The businesses we contacted are located throughout Spain but, above all, in Madrid (52%), Catalonia (27%) and Andalusia (10%), where numerous microloan programmes exist and where the head offices of our collaborators in this study are located. Only 8% of the businesses are located in rural areas: 5% in cities having between 2,000 and 10,000 inhabitants, and 3% in towns with less than 2,000 inhabitants. Location by Autonomous Region Andalusia 10% Aragon 1% Asturias 1% Balearic Islands 1% Canary Islands 1% Castilla la Mancha 1% Castilla y León 3% Catalonia 27% Extremadura 1% Galicia 1% Madrid 52% Navarra 1% Valencia 2% 100% 22

25 Working conditions The women interviewed manage independent businesses, but only 43% work alone. The others employ between 1 and 11 people. The 162 women interviewed whose businesses were still open contributed to the creation of 199 jobs in addition to their own. That is to say that, in total, the microloans granted to these women served to create 361 jobs, more than 2 jobs per microloan granted (2.15). Number of workers (in addition to the Entrepreneurs) NONE 1 WORKER 2 WORKERS 3 WORKERS 4 WORKERS 5 WORKERS 2% 4% 6 WORKERS 1% 7 WORKERS 1% 11 WORKERS 1% 7% 15% 27% 43% 0% 10% 20% 30% 40% 50% 32% of the workers are partners of the entrepreneur, so are also self-employed. Of the remaining 68%, 18% have no contract. We have already shown that few businesses had not been legalized. However, the number of illegal workers is much higher. With regard to the working day, it is mostly full-time (53%). But for 47%, it is more flexible: part-time, half a day or by the hour. This last group (those working by the hour) explains to a great extent the absence of a contract. The majority of them are family members who come to help during their free time. Family members represent 24% of the workers. The remaining 76% are friends or people taken on who have no previous training. The microentrepreneur s working day is very different to that of her employees. The average hours worked add up to 61.2 hours a week, in comparison with 40 hours a week established in the general workers regulations. 78% work 6 days a week or more, and 34% work every day (weekends included), with a daily average of almost 10 hours. Working hours vary depending upon the business sector. The sector with the shortest working hours is Education (50.44 hours per week). The other sectors (Textiles, Craftwork, Commerce and Other services) are around 63 hours per week. Within the same sector, the disparities are also significant. Many hours are worked in subsectors such as News-stands (63.67 hours), Beauty (63.17 hours), Hospitality (59.15 hours), Clothes and accessories (58.16 hours) and Food (57.77 hours). Amount of time the women entrepreneurs dedicate to their business >=80 hours hours hours <40 hours/week 19% 13% 35% 33% 0% 10% 20% 30% 40% 23

26 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN One of the comments heard frequently during the interviews was that, in spite of wishing to contract more workers or more hours, the shortage of revenue generated by the business did not permit this. The lack of contract flexibility, the cost of social security for workers, as well as the obligation to respect weekly hours and holiday periods lead women entrepreneurs to prefer to spend more hours themselves to finish the work, without any added remuneration. Situation of the enterprises The situation of the businesses that were still open was as follows: 22% were starting up while the others were already operating. 55% were working well or very well and only 7% of the women entrepreneurs described the state of their business as bad. State of the businesses Very good 46% Bad 7% Seasonal 4% In spite of this, the businesses generated many expenses and little income at first. 71% of the women interviewed had gone through some point in time where they did not have enough money to manage the enterprise. A single profile of the businesses created with a microloan does not exist. Their characteristics depend very much upon the entrepreneur and her previous experience. Age of the business 86% open for less than 3 years Legality 11% of businesses not legalized 18% of the workers without a contract Business sector 48% in Services 35% in Commerce Jobs created 2.15 per microloan granted (including the position of the entrepreneur) Workers 32% partners 24% family members Hours worked Women entrepreneurs: 61.2 hours a week Employees: 53% full-time Business profile depends upon the entrepreneur and her previous experience. Good 9% So-so 34% Situation of the business For 55% good or very good For 7% bad 24

27 QUALITY OF LIFE Quality of life shows a positive trend. 57% of the women felt their quality of life and that of their family had improved. Perception of improvement in quality of life Still too soon to say 16% Has improved a lot 29% Has worsened 14% Is the same 13% Has improved a little 28% In order to understand this figure, we asked the microentrepreneurs what their expectations were when they requested the microloan and what had actually improved, differentiating between material and psychological elements. We noted a large difference between the women entrepreneurs expectations and the actual changes in their quality of life. In the case of expectations, the material and psychological elements were wellbalanced: the entrepreneurs expected to improve the two elements in like measure. But the greatest improvement was actually observed at the psychological level: this element increased much more than expected. Given this imbalance between expectations and reality, it might be assumed that the women entrepreneurs were not content with the change in their quality of life. However, 57% of the women interviewed considered that their overall quality of life had improved, which means that their satisfaction was due mainly to the psychological improvement which, therefore, was felt to be more important than material improvements. Improvement in the quality of life: expectations vs reality 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 49% 51% Expectations 63% 37% Reality Psychological Material It is important to inform women entrepreneurs about this difference between expectations at the time of starting up the business and actual changes. Many women entrepreneurs request a microloan having absolute faith in their project and in the material improvements that the income generated by the business is going to bring. But in reality, an immediate improvement is rarely observed in the economic level of the families and it is essential to explain this fact to the entrepreneurs, to prevent false expectations and help them plan better the initial management of their enterprise and the basic needs of their family. Objectives are reached in the medium or long term, but not immediately. Therefore, upon undertaking a new activity, plans should be made for getting through the intermediate phase before these fin objectives are achieved. Material improvement The following graphs show more details on material changes. Training and housing are the elements that improved the most. 24% of the women 25

28 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN interviewed considered that their level of training had evolved positively since they obtained the microloan and opened their Material elements that have improved the most Training Housing Savings Health 22% 20% 19% 24% businesses, and 22% that their housing had improved. The elements that worsened were savings, health and clothes. 21% of the women entrepreneurs had seen their savings decrease. For 30% of the women interviewed, expectations did not focus upon improving any single element, but they were looking rather for a general improvement in their lives. Psychological elements that have improved the most Confidence in the future Self-esteem Independence Motivation Capability to negotiate Self-confidence Better emotionally 49% 47% 46% 44% 43% 43% 40% Food 19% Psychological improvement Decision-making 39% Clothes 15% Education 14% Savings Health Clothes Food Housing Education Training 0% 10% 20% 30% Material elements that have changed most for the worse 4% 4% 6% 6% 9% 7% 21% 0% 10% 20% 30% At the psychological level, confidence in the future and self-esteem were the elements that had improved the most. 49% of the women interviewed believed they were more optimistic than before they obtained the loan, and 47% that their self-esteem was higher than before. These elements show the women s psychological strength, which makes them more optimistic when they achieve their business aspirations. For 12% of the women interviewed, the element that had changed most for the worse was their social life. As we have seen above, the women entrepreneurs dedicate an average of 61.2 hours a week to their enterprise, so have little time for other activities. Social life 23% 0% 10% 20%30% 40% 50% Psychological elements that have changed most for the worse Social life Emotional aspects Independence Confidence in the future Motivation Self-esteem Capability to negotiate Decision-making Self-confidence 4% 4% 3% 3% 3% 6% 6% 6% 12% 0% 10% 20% 26

29 Most important improvement When it comes to determining what improvement in their quality of life seems most important to them, the microentrepreneurs value, above all, the psychological part, which confirms the previous hypothesis that their satisfaction comes from this element. What type of improvement seems most important to you? Material aspect 10% Everything 18% Psycological aspect 72% What they have given up We have seen that 57% of the women interviewed had seen an improvement in their quality of life since they obtained the microloan and started up their business. However, not all the effects are positive and it is very important to observe the changes, both positive and negative. In the case of the people interviewed, stress and anxiety are two factors which greatly affect their psychological stability, while the reinvestment of the family savings in the business is a curb to maintaining economic stability. 85% of the women interviewed found they had to give up some aspect of their life and 10% even affirm that they had given up the majority of them. Two main elements had to be given up: personal relationships (52%) and leisure time (36%). What aspects of your life have you had to give up? Leisure time 35% Most aspects 10% Training 3% Social life 8% Friends 18% Family 26% Overall, the quality of life of the women entrepreneurs had improved, although the psychological elements had improved to a greater extent than the material ones: Changes in quality of life 57% have seen an improvement Importance Psychological improvement > material improvement and more important Material elements Improved: training and housing Changed for the worse: savings and health Psychological elements Improved: confidence in the future and selfesteem Changed for the worse: social life What they have given up 85% some aspect in their life 10% almost everything The quality of life of the women entrepreneurs has improved. 27

30 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN IMPACT ON THE FAMILY Level of income of the homes and minimum expected income According to the sample studied, the women entrepreneurs households are made up of between 2 and 3 people: 74% are adults, and the remaining 26% are under 18 years of age. Between 1 and 2 people in the family bring in income, but not all earn a fixed salary, so the stability of the family economy often depends upon only one person. Less than half of the women interviewed receive a salary from their business activity: 52% are still waiting for their enterprise to generate sufficient income to take on this expense. This shows how difficult it is to reach a financial balance: the business generates little income during the first months of its operation, and this money goes first to paying off expenses and the debt and to reinvestment in the business. It is only after these expenses have been covered that the women can begin to earn a salary. Are you receiving a salary from your business? Yes, a proper salary 19% Yes, but insufficient 29% No 17% No, but I hope to receive one in the future 35% Initially, the business activity, created in general with the objective of generating income, turns out, above all, to be a source of expenses. At these times, the family mantains the business rather than living off it. This situation may end up limiting the independence of the women entrepreneurs within their families, given that they depend upon the money earned by another family member to sustain their enterprise. Only a part of the income comes from the enterprise. On average, the entrepreneur contributes 55% of the household s income. The rest is provided by other family members (44%) or other activities (renting rooms, etc.). The level of family income covers basic needs. 69% of the women interviewed Source of the family income Others 1% Business 51% Other family members 44% Other activities of the entrepreneur 4% affirmed that the family income reached the minimum level necessary to sustain their home in acceptable terms: 26% just cover their needs, and 43% earn more than is necessary. It should be clarified that this information is subjective and depends upon the concept of each woman interviewed, the composition of her home and her personal needs. Perception of the minimum family income necessary vs. current family income of the women entrepreneurs Has not reached it 31% Already reached 69% 28

31 29 35% 30% 25% 20% 15% 10% 5% 0% On average, the real income per capit in the home is 782 Euros per month, and the minimum estimated income necessary is 778 Euros. On the following graph, a comparison is provided between the current income per capita and the expected income per capita by income bracket. The results show that currently 17% of households live with less than 300 Euros per member, with a total of 40% of families living with less than 600 Euros per person. 87% of the minimum expectations with regard to income per capita fall between 300 and 1000 Euros. Comparison of current income per capita and the minimum necessary 17% 13% 31% 23% 31% 34% 25% 26% < >=1000 Current income Necessary income The start-up of the businesses studied was too recent for drawing conclusions about the overall and continuous growth in income. 16% of the women interviewed stated that it was too soon for them to evaluate this aspect of their lives. The women who did answer this question showed that the proportion of women entrepreneurs who had seen their income (personal and family) increase (31% and 26%, respectively) was similar to the proportion that had observed a decrease (32% and 22%). Evolution of the entrepreneur s personal income Improved 31% Stabilized 8% The same 15% Still too soon to say 14% Decreased 32% Evolution of the family income Improved 26% Stabilized 11% Still too soon to say 16% Decreased 22% The same 25% In the cases where the family income had increased, this was due, firstly, to the income generated by the new business (89% of the responses), to the development of the business and to the increase in sales, and to a lesser degree (11%) to the new employment of another member of the home. Likewise, the first explanation in the case of a decrease in the family income came from the business, from insufficient levels of income from the business (71%), but also from health problems, affecting the women entrepreneur or her family members (6%) or from some family member losing his/her job (6%). The following table indicates the difference between the minimum income necessary per home and the current income. The idea of this table is to estimate the extra income that each business should have to reach what is considered by the entrepreneur to be the minimum level. It shows that 41% of the homes could consider their minimum needs to be covered at the point where the business generates a monthly additional income of up to 500 euros.

32 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN How much more should each business produce? <500 41% % <= % It should be remembered that the businesses observed here are quite new, so these needs can be expected to be covered in the near future. Monthly savings in the home When it comes to differentiating between the business savings and the family savings in general, the women interviewed were not clear about how much they saved periodically in the business, so the data included on the following graph refer to total savings in the home. Improved 22% Evolution of the level of savings Decreased 33% Still is soon to say 6% Stabilized 2% Stayed the same 37% Since they created their businesses with the microloan, 22% of the women interviewed had improved their level of savings, but 33% had fewer savings than before because they had invested them in the enterprise. However, the absence of money reserves does not always mean that the family is not capable of saving, since saving is also cultural. As can be seen from the following table, the microentrepreneurs used their savings in different ways. The most relevant was of spending savings was on reinvestment in their enterprise, repayment of the debt and unforeseen expenses. When added up, these three elements represent 64% of the total and show that the money saved is not used to better the family s living conditions but, rather, for resolving urgent needs and fulfilling obligations. Items such as food or clothing are not really considered to be a cause for saving but rather a periodic expense within the family budget. 69% of the women interviewed stated that they did not have money saved for unforeseen expenses or for a big purchase Use of savings Reinvestment in the enterprise 29% Debt repayment 20% Unforeseen expenses 15% Housing 11% Leisure time 6% Education / training 4% Food 3% Clothing 2% Remittances to country of origin 2% Health 1% Others 7% or investment and only half of them had stopped to think how they would face such matters. Their first reaction might lead them toward a spiral of debt, since they would request a loan from the bank (47%), even before resorting to friends or family members (20%). What they would do if they do not have money for some unforeseen expense or an important purchase Ask for a loan 47% Save money 8% Improvise 9% Look for another job or alternative 16% Go to family members and friends for help 20% 30

33 Repayment of the microloan and difficulties arising As seen from the above table, one of the main uses of savings is to repay debt. During the interviews, the microentrepreneurs were asked if they had had difficulties in paying back the microloan. Difficulty in paying back the microloan No difficulty 74% Great difficulty 6% Little difficulty 20% It is important to point out that 16% of the people whose microloan was still in the grace period were included in the group of those who had not had difficulty paying it back. They had only paid interest so far, so difficulties might arise later on, when they have to start paying interest and capital. In total, 26% of the women interviewed had found repayment difficult, with short delays or real arrears of payment. Also, we note that these problems began very early. 46% of those who found it difficult faced such difficulties after being granted the microloan or after the end of their grace period, and 18% after the first year of operation of the business. The main reasons mentioned for explaining this difficulty are failure of the business, lack of sales (32%), seasonality of the business (3%), because the business is not profitable (15%) or because debts have piled up. In many cases, these problems could have been avoided by doing a better study of the project and providing assistance, as well as recommendations for solving the difficulties observed, assuming that the entrepreneur would apply such recommendations. Personal problems such as illness or the family situation also had an effect upon the smooth running of the business and therefore, on the ability to pay off the debt. Causes of difficulty in paying the monthly payments Insufficient sales / demand Lack of cash Unforeseen expenses Business not profitable Illness of entrepreneur or family member Debt 8% 8% Seasonality of the sales 3% 18% 16% 15% 32% 0% 10% 20% 30% Lack of cash (18%) is another recurring problem. The amount of the microloan is calculated in such a way that expenses are covered and monthly repayment should not become a problem but, as a result, businesses begin with a very low level of cash. It might, therefore, become difficult to meet all the payments. Reaching a balance between the amount to be repaid and the level of cash is an important challenge. 31

34 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN Ability to reconcile work and family Another very important point with regard to the impact of the microloan is the woman s ability to reconcile work and family. 50% 40% 30% 20% 10% 0% Ability to reconcile work and family 13% Has greatly decreased 28% Has decreased a little 47% Is the same 9% Has increased a little 3% Has greatly increased This was one of the most difficult subjects to talk about with the microentrepreneurs. 41% of them stated that their ability to reconcile work and family had decreased, but they tried to justify this situation, as if they felt guilty about not being able to dedicate more time to their families. In Spanish society, the idea still exists that it should be the women who take care of the children. 47% said that nothing had changed and that they still saw their children as much as before, even though we have already seen that women entrepreneurs work an average of 61.2 hours a week. One of the realities of self-employment is that during the first few years, the business requires great dedication, so reconciliation usually becomes difficult. The economic situation of women entrepreneurs is usually unstable for the initial period after opening the business, since most of the money earned is reinvested in the enterprise and for returning the loan. Even so, the income generated permits the minimum income necessary for the home to be reached. Salary Only 48% of the women entrepreneurs receive one Origin of the household income 55% comes from the entrepreneur Home income 69% reach the minimum income necessary Necessary income per capita: 778E/ month Real income per capita: 782E / month Evolution of the family income Has improved: 26% Has stabilized: 11% Has decreased: 22% Level of savings 22% has increased 33% has decreased Use of savings 29%: reinvestment in the enterprise 20%: repayment of the debt 15%: unforeseen expenses Money for unforeseen expenses 69% have no cash reserves Difficulty in paying back the loan 74% have had no difficulty Ability to reconcile work and family life 41% have more difficulty in reconciliation 32

35 IMPACT ON SOCIAL AND WORKING LIFE Empowerment in the home Analysis of women s social role in terms of empowerment in the home is important, to see if it has evolved after setting up the business. For this purpose, we observed evolution in the capability to go shopping without asking for permission or money, and participation in decisions made in the family. Evolution of the capability to go shopping without asking for permission or money Is the same 48% Has decreased a little 6% Has increased a little 22% Has greatly increased NA 4% 12% Has greatly decreased 8% In both cases, a significant proportion cannot be measured: women who, since they live alone or are economically independent, do not have to request permission from anyone to go shopping and make their investment decisions alone. Regarding purchasing power, 14% of the women entrepreneurs felt it had decreased. Such women were usually the ones whose businesses had been open for only a short time so they still had not been able to take out sufficient money to sustain themselves and were still dependant upon friends and family members. But for 26%, purchasing power had increased. This aspect stands out within the Latin American population. 50% of the women who said there has been a marked increase in their capability to go shopping without requesting permission or money were Latin American, although they only represented 31% of the total women interviewed. As for participation in the family s investment decisions, it is significant that very few women had noticed a decrease in this aspect. 16% even thought their power to decide in the home had increased. The remaining 60% considered there had been no change. Evolution in the participation in the family investment decisions Has greatly Has increased a little 12% Is the same 60% increased 4% NA 20% Has greatly decreased 2% Has decreased a little 2% Here a difference was noted depending upon the origin of the women interviewed. Of those who responded that their participation had not decreased, 75% were European (57% of the total women interviewed), while out of those who responded that it had increased, 45% were Latin American (31% of the women interviewed). Cases where the capability to go shopping without asking for permission or money and participation in family investment decisions had decreased are important, because they show that, in the early days of the business, in some cases a certain dependence on those around her can be observed on the part of the entrepreneur, because the income generated by the enterprise does not permit her to live 33

36 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN independently. Women entrepreneurs who affirm that their main objective is to be independent should be warned about this risk. Social life 63% of the microentrepreneurs maintained that the time spent on their personal needs had decreased since they opened their businesses, and 37% affirmed that the time they had for themselves was the same or had increased. Evolution of the time spent for personal needs Has decreased a little 28% Is the same 32% Has increased a little 4% Has greatly increased 1% Has greatly decreased 35% Since they started up their business, the women entrepreneurs have had more income, improved their psychological state and their material standard of living. But the long working hours resulted in a substantial decrease in the time they could dedicate to themselves or to their social lives. For 45% their dedication to their community was the same, in many cases because they did not previously participate in anything particularly time-consuming. Evolution of the participation in the social life of the community Is the same 45% Has greatly increased 4% Has decreased a little 21% Has greatly decreased 22% Has increased a little 8% It is interesting to observe that the first thing that decreases is the time spent on personal needs. When free time is reduced, the women entrepreneurs preserve, in the first place, their dedication to their family, and also to the life of their community and, therefore, they sacrifice the time spent on themselves. The first thing that decreases is the time spent on personal needs. Relations with banks and suppliers The following table gives data on the relationship of the women entrepreneurs with the banks, whether in terms of access to conventional financing, familiarity with the financial system or negotiation of terms. Ability to access financing Familiarity with the financial system Ability to negotiate with banks Has increased 43% 38% 58% Is the same 46% 18% 32% Has decreased 6% - 2% NA 5% 44% 8% 100% 100% 100% 34

37 It is very positive to see that the majority of the sample affirmed that their ability to access financing and negotiate with banks had increased (43%, 38% and 58%, respectively). They felt more at ease when they had to face a bank negotiation, because they understood the subject better. Less than 6% felt that their ability in these areas had decreased. The high percentage of people who did not respond to these questions represent women who had not yet tried to get more involved with banks or financial services. When asked subsequently about their ability to negotiate with suppliers, 73% stated that it had improved after having received the microloan, and 26% said it had remained the same for them. The rest of the women do not use suppliers in their businesses. 60% of the interviewees felt more at ease when negotiating with customers. In general, it can be said that the business skills of the women interviewed had been strengthened thanks to their experience and to the development of their business activity. Evolution of ability to negotiate with suppliers Has increased 73% Is the same 26% Has decreased 1% Evolution of ability to negotiate with customers Is the same 38% Has decreased 2% Has increased 60% The social life of the women entrepreneurs had worsened since they set up their enterprises, in that they had less time for their personal needs and for getting involved in their community. But their skills had improved, because the business experience had permitted them to improve their relations and their ability to negotiate with different agents (banks, suppliers and customers). Empowerment in the home 26% improvement in the ability to go shopping without asking for permission or money 16% improvement in family investment decisions Social life 63% have less time for personal needs 43% get less involved in the life of their community Relations with banks Improvement in: access to classic financing familiarity with the financial system negotiation with banks Relations with suppliers and customers 73% improvement in negotiation with suppliers 60% improvement in negotiation with customers 35

38 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN MICRO CONCLUSIONS Appraisal of the microloan programme After talking about the microloan, the business and their impact, we asked the women for their opinion about the microloan programme in which they had participated. Their appraisals were very positive, as 96% of the women interviewed felt the microloan had helped them. It has helped me greatly 65% Opinion regarding the microloan It has added dificulties 4% It has helped me a little 31% According to these women, the positive aspects of the microloan were the terms of the loan (40%), which represented help in setting up an enterprise (23%) and an opportunity to start up something of their own (13%). The fact that they helped underpriviledged groups was also a positive factor (14%). Most complaints referred to the terms of the loan (46%), although 39% of the women interviewed saw no negative aspects in the microloans. It is important to emphasize that, for 4% of the women entrepreneurs, being in debt is negative. We also asked them to evaluate a set of statements about the programme and the organization that manages it, from 1 (totally agree) to 5 (do not agree at all), for the purpose of evaluating the services rendered. The results are good as they all fall between 1 and 3: The aspects with the highest scores have to do with the organization that processes the microloan: ease of contact with the organization (1.65), high competency and qualification of the advisers (2.05) and understanding that the advisers have concerning the women entrepreneurs s needs (2.05). The suitability of the services offered to the entrepreneur s needs (2.23), the good terms offered for the loans (2.27) and the facility of obtaining a microloan (2.45) receive an average score. The elements that received the worst scores were the distance between the entrepreneur s place of work or residence and the organization (2.60) and the amount of advertising on microloans (2.88). Information about the existing programmes and accessibility to them were the two main problems identified by the women entrepreneurs interviewed. As for possible improvements, they made several proposals. In general, they felt that the terms of the loan could be improved, above all by lengthening the grace period, but also by lowering the interest rates and extending the repayment period. Adaptability of the conditions to the entrepreneur s profile and to the specific needs of her enterprise seemed to be a key element for the microloan as a financial tool to work optimally. 24% of the women interviewed asked to be offered the 36

39 possibility of increasing the amount of the loan or obtaining a second loan to expand their business. Possible improvements in the microloan programmes BETTER TERMS FOR THE LOAN POSSIBILITY OF EXTENDING THE LOAN ADVISORY SERVICES AND PAPERWORK 16% ADAPT THE TERMS TO THE PROFILE MORE ADVERTISING GIVE A NON-REPAYABLE AMOUNT OTHERS 5% 3% 12% 13% 24% 27% 0% 10% 20% 30% Confidence in the future We also asked the respondents about their future: if they had more faith in it, what they thought it would be like, what their expectations were. Do you have more confidence in the future? Much more 33% Less than before 4% No more than before 17% A little more 46% The results were very positive and were related to a large extent to the psychological elements already mentioned (above all, the fact of having their own business). In total, 79% of the women interviewed said that they had more faith in the future, and only 4% were more pessimistic than before. had an influence on the response to this question: a business that is running smoothly generates more optimism than one that is not doing so well. Future improvement in quality of life Future improvement Everything 16% Psychological aspect 23% Nothing 1% Material aspect 60% As for desired improvements, the material elements were the most highly-valued. This can be explained in part because the elements that had improved in their lives so far were psychological, as we have already seen. Having gained at this level, the time comes to improve material aspects. In general, the microloan and the creation of their business had given the women entrepreneurs more self-confidence, making them feel more capable of facing the future. Of course, the state of the business Below is a breakdown of the material elements, in order of importance: 37

40 IMPACT OF THE MICROLOANS ON THE LIFE OF THE WOMEN WHOSE BUSINESSES ARE STILL OPEN Material elements to be improved Financial stability 63% Housing 21% Business 8% Training 4% Health 4% Satisfaction with the initial decision Lastly, we asked them whether, if they could do things over again, they would make the same decision to set up their business or they would do something else. Would you change your decision in any way? I would open I would another business work for 16% someone else 4% Other 2% I would do the same thing over again 78% It is interesting to note that 94% of the microentrepreneurs did not question their decision to choose self-employment. Only 4% would go back to work for someone else, for the job security and the working conditions (hours and holidays), these being advantages that are difficult to obtain as a self-employed person, or because their own business was not running smoothly. The only doubt arising regards the type of business. Many thought they had chosen the wrong sector, because their business was not going very well, or because another sector attracted them more. All had learned a lot from their mistakes and stated that they would be more careful if they were to start over again, that they would do certain things better or simply that they would think things out more. The most satisfied ones recommend to their friends that they set up their own businesses. In spite of the stress, anxiety, worries, weariness after long hours of work and the responsibility involved in managing a business, the microloan has opened new doors for women. It has given them aspirations and has helped some of them to come out of a depression. They all feel more motivated, and face the future more calmly. One of the women interviewed even told us: "This is what was lacking in my life I should have opened my business earlier". This is what was lacking in my life - I should have opened my business ealier. 38

41 DATA ON MICRO WHOSE BUSINESSES HAVE CLOSED Setting up a business is complex and risky. In 2006 in Spain, 8.7% of enterprises closed down, that is, almost 9 out of every 10. Microentrepreneurs are exposed to this risk. We therefore thought it would be interesting to study their characteristics and the characteristics of their businesses, as well as the reasons that led them to close down, with the aim of avoiding such situations where possible. PROFILE OF THE WOMEN WHOSE ENTERPRISES HAVE CLOSED Nationality If we compare the data obtained here with the data for businesses that are still open, we observe that European women also represent the majority of the women interviewed (64%) and that Latin American women continue to be very numerous (27%). businesses continued open - 42 years old instead of Distribution by age shows a larger proportion of women over 50 years of age: 27% of the women interviewed who had closed their businesses fall within this category, compared to 16% for the businesses still open. Range of ages upon opening the business years old 27% The immigrant population represents 46% of the sample. 27% years old Origin of the women entrepreneurs Rest of Europe 10% Africa 2% Latin America 27% years old 31% 15% years old Age Spain 54% Asia 7% The microentrepreneurs whose businesses had closed were older at the time they set up their business than those whose Marital status The proportion of women who lived alone was greater than in the case of the businesses that were still open, making it more difficult for them to obtain support in the event of a problem with the enterprise or illness: 69% of the women interviewed 39

42 whose businesses had closed were single, divorced or widows. In the case of the businesses still open, they represented 52%. Marital status of the microentrepreneurs Single 29% Married / Cohabiting 32% Divorced / Separated 37% Widow 3% Level of education The level of education of the microentrepreneurs was similar to that observed before for the intermediate, vocational training and university categories. 41% of the women interviewed whose business had closed had studied at university, compared to 43% in the overall sample (including post-graduates). On the other hand, the proportion of women with basic studies was higher: 13% compared to 5%. University Vacational training Intermediate Basic Level of studies of the microentrepreneurs 13% 16% 30% 41% 0% 10% 20% 30% 40% 50% Only 32% of the women had attended a course on setting up a business. The figure was 37% in the sample of women entrepreneurs with open businesses. Older women participate the most in such courses (average age: years). The training courses are held in the same places - local development centres, foundations and NGOs, Chambers of Commerce, countries of origin. Have you attended a course on entrepreneurship? No 68% CHARACTERISTICS OF THE ENTERPRISES THAT HAVE CLOSED Business sector Yes 32% As in the first sample, the two main business sectors of the enterprises that have closed are Commerce (52%) and Other Services (32%), but this time Commerce is by far the most relevant. The subsectors that stand out are Other Trades, Clothing and Accessories (40% and 30%, respectively, in the Commerce sector), and Hospitality (67% of the Other Services sector). 40

43 Business sector of the businesses Education Training 8% Commerce 52% Textiles 5% Other services 32% The subsectors included here are more traditional than those studied before: Hospitality, Food, Hairdressing. Business Services and Culture and Art sectors are not found on the list of closed businesses. These results are not surprising. A study done by the National Council of Chambers of Commerce on Companies in Spain 2006, shows that the majority of shut-downs in 2005 were in the Textiles, Leather and Shoes and Hospitality sectors. Location of the business Craftwork 3% The businesses studied were located in different parts of Spain: Location by Autonomous Region Andalusia 19% Balearic Islands 3% Catalonia 24% Madrid 54% 100% The majority were in urban areas: 89% in cities with more than 10,000 inhabitants, and only 11% in towns having between 2,000 and 10,000 inhabitants. Characteristics of the microloan The average amount of the microloans was 12,740 euros, with 84% of the loans falling between 5,000 and 15,000 euros. 27% of the microloans processed were for 15,000 euros. Amount of the microloan < % % % % > % The repayment period varied between 3 and 5 years, the latter being the most common (80% of responses). As for the monthly payments, large amounts are the majority: 70% of the interviewees paid back more than 200 Euros per month, compared to only 55% in the overall sample. Amount of the monthly payment < 100 3% Between 100 and % Between 200 and % >= % 70% of the interviewees pay back more than 200 per month. 41

44 DATA ON MICRO WHOSE BUSINESSES HAVE CLOSED CLOSING OF THE ENTERPRISE Problem-free time To delve more into the reasons for closing down, we began by asking how long the business had been going without problems since the start. We observed that the difficulties had usually appeared from the very start of the business: 66% began to have problems during the first year. 29% of the businesses had not closed because they were having difficulties, but rather for personal reasons on the part of the microentrepreneur. In some cases, the business was still open but the entrepreneur no longer worked there. How long has your business been problem-free? Never 42% Up to the second year 5% No determined 29% The first 6 months 19% Up to the first year 5% Closing date The businesses had closed starting in 2004, but most of them closed down in This data is only for informational purposes: it depends on the date that the businesses studied were set up, and not on a possible economic situation. Closing date % % % % Almost 82% of the businesses that had closed had been kept open for less than 3 years. >3 years 18% Age of the business <1 year 12% 1-3 years 70% The study mentioned above, Companies in Spain 2006, shows that business survival is directly related to the age of the enterprise. According to national statistics, during the first year, between 15% and 20% of enterprises close down. Survival rate of enterprises 1 year 83,86% 3 years 65,01% 5 years 51,48% 9 years 30,80% Source: "Companies in Spain", National Council of Chambers of Commerce, 2006 Reason for shut-down For over half of the women interviewed (45%), there were various reasons for closing business. They stated that their personal problems had been compounded by those of the business, leading to a situation that was untenable. The three main reasons given were as follows: 42

45 Lack of viability of the project, which is directly linked to the entrepreneur s management or depends upon external factors, The personal situation of the entrepreneur: her own health or that of family members, transfer, separation, Administrative problems: Obtaining licences, registration as a self-employed worker. The interviewees actually gave many reasons: Reason for closing Insufficient profitability of the business 32% Causes outside their control (administrative problems ) 10% Financial pressure 10% Family situation (change of residence, illness, death of a family member ) 10% Business project not sufficiently thought out 8% Personal illness and/or pregnancy 7% Lack of business training 3% Too heavy a business load 2% Lack of support from the family 2% Administrative and accounting management problems 2% Sales management 2% Others 12% 100% In some cases, the shut-down had been a matter of choice - to separate from partners or to go back to being a wageearner, with all the advantages this entails. The entrepreneurs seemed to be aware of the mistakes made and, if they could correct them, 26% would change the location of the business, 23% would prepare the project better, through market research and business training, and 17% would change the business activity. Only 11% would begin by renegotiating the terms of the loan. Attitude toward shut-down On the basis of their experience in advising and monitoring enterprises created with a microloan, the economists at Women s World Banking have realized that many women entrepreneurs do not know how to act when faced with the need to close their businesses. For this reason, some questions on this topic were added to the interviews. 55% of the women entrepreneurs whose businesses had closed down believed they had done everything possible to avoid the closing. 42% did not answer the question - in some cases, because the entrepreneur made the decision freely, without feeling forced to close. Some acknowledged that they did not follow the recommendations of the entities that were advising them. Do you consider that you did everything possible to make your business prosper? Yes 55% No 3% Not determined 42% After closing their business, the women entrepreneurs acted in different ways. 21% admit to having done nothing. The majority had sold the business assets, in order to receive a return on the money invested. How did you dissolve your enterprise? Sold the assets 54% The business has not closed 8% I did nothing 21% Other 17% 43

46 DATA ON MICRO WHOSE BUSINESSES HAVE CLOSED Support At these difficult times, 60% of the women who needed some type of help received it. Did you received help when times were tough? No 40% Yes 60% Family members and friends helped the most. They represent 73% of all those who helped. Associations also contributed significant support. 80% 70% Those who helped 73% CURRENT JOB SITUATION Current job After closing their businesses, 47% of the women interviewed had found another job, either working for someone else or being self-employed, working full-time or occasionally. 8% were taking care of their children, while 29% were looking for work. Current jobs of the women entrepreneurs Paid employment 34% Other 16% Housewife 8% Unemployed 29% New business activity 13% Origin of the family income Family members with temoporary work 15% Others 1% Famiy members with steady job 24% Entrepreneur 60% In 35% of the cases, the new job was related to the business activity that had closed down, indicating that the experience and knowledge acquired were still useful. Relationship between current job and business activity Yes 35% 60% 50% 40% 30% 20% 10% 0% 23% Associations Friends family members 4% Public organizations This unemployment rate is quite alarming if we consider the origin of the family income. 60% of the family income comes from the entrepreneur s income and by closing her business, there is a loss of stability in the family s economy. No 65% 44

47 Date new job began If we compare the date that the business closed down with the date that the new job was started, we realize that 28% of the women were already working somewhere else while they were managing their businesses. The reason for this dual employment was that the income generated by the business was not sufficient to maintain the family. When did you start the new job? Comparison with closing date Before 28% At the same time 17% Afterwards 56% Satisfaction with current job CURRENT FINANCIAL SITUATION The current financial situation of the women entrepreneurs had been very much affected by the closing-down of their businesses. 59% described it as so-so or good, while 41% said it was not going well. With the loss of money resulting from shutdown of the enterprise, living expenses and repayment of the debt had become complicated. In some families, the husband s salary covered living expenses, while the entrepreneur s was used to pay off the debts. Others lived with no income or depended upon family members. Current financial situation Bad 41% So-so 46% Debt The microloan was the first debt that the women entrepreneurs had had. Much difficulty 32% Evolution of the family incomne Has increased 10% Has stayed the same 19% Has decreased 71% Difficulty paying back the microloan Han aumentado 10% None 31% The women who had started a new job said they were fairly satisfied: 61% affirmed that things were going well and 17% said very well. Only 22% described their level of satisfaction as so-so. Good 13% 71% of the women interviewed stated that their household income had decreased since the enterprise closed. Only 10% said their situation had improved. I cannot pay it back 5% Some difficulty 32% 69% had difficulty in paying it back, in general because of poor sales and the lack of profits from the business (52%), but also because of the lack of cash (10%), health 45

48 DATA ON MICRO WHOSE BUSINESSES HAVE CLOSED problems of the entrepreneur herself or of a family member, which had not allowed her to dedicate time to the enterprise (10%) or because the income generated by the business was only enough to cover the family s basic needs (10%). 29% of the women interviewed put forward several reasons for their difficulty in fulfilling the obligations of the loan. The following table shows that approximately a third of the women entrepreneurs had difficulties from the very start of their business (when the microloan was granted or at the end of the grace period). The high degree of difficulty during the months before closing (38%) also shows the effect of the financial pressure. When did the problems begin? From the beginning 21% End of the grace period 12% In the last months of the business 38% Closing of the business 8% Not determined 21% Debt refinancing is an option that is increasingly being offered to people who are having problems with paying back a microloan. 48% of the women entrepreneurs with difficulties had received a refinancing offer from their financial entity. Some were still in the process of organizing the refinancing, and others had agreed to pay back the debt within a period of 3 to 10 years. As for the utility of this option, the responses varied but the majority of them were positive: Those who helped Yes 40% No 30% Not clear 30% In addition to the microloan, 39% had another loan pending, generally a mortgage for their house or a loan for the car. Other loans Yes 39% No 53% ND 8% PSYCHOLOGICAL STATE State of mind We also wanted to know how the women entrepreneurs were from a psychological point of view, because having to close down a business and face the difficulties that ensue may lead to a sense of failure. 68% say that they were so-so or fine, but 29% were not good. 25% stated they were in a state of depression and were under medical care. Others were happy, thanks to a new job or because they were solving some of the problems that led them to close the business. 46

49 Current state of mind Not determined 34% So-so 3% View of the future We thought it would be interesting to see what their view of the future was, if they were still optimistic and wanted to get ahead, or if this experience had discouraged them. So-so 42% Bad 29% View of the future Bad 13% Good 34% Not clear 11% Good 34% 13% of the interviewees had become quite pessimistic. In general, these were women who were depressed or ill, who could not get back into the labour market for a while and who were going to have to face still bigger problems during this period. 42% have misgivings about their future. They wanted to set up another business but at the same time were afraid they lack security. Others preferred to look for a employment position, even at the risk of unemployment. 34% were convinced things were going to go well for them: some were content with their new job, while others planned to set up another business. CONCLUSIONS OF THE WHOSE ENTERPRISES HAVE CLOSED Appraisal of the microloan programme The opinion about the aid represented by the microloan for these women entrepreneurs varied: 50% felt that the loan had brought them added difficulties, while the other 50% believed the opposite - that it had helped them - to varying degrees. Opinion regarding the microloan It has helped me a little bit 18% It has greatly helped me 32% It has added difficulties 50% The microloan s most positive aspects were the opportunity to set up your own business (29% of responses) and the fact that it helped underpriviledged groups (19%). The negative aspects were linked to the characteristics and conditions of the programmes: inappropriate amount of the loan (28%), insufficient monitoring (28%), complexity of the paperwork (28%). As with the women entrepreneurs whose business were still open, we asked the interviewees who had closed down their businesses to evaluate a series of statements, from 1 (totally agree) to 5 (do not agree at all). The results were not as positive as in the first case, with the answers falling between 2 and 4: 47

50 DATA ON MICRO WHOSE BUSINESSES HAVE CLOSED The aspects receiving the best score were the ease of contact with the organization that processed the loan (2.10), the high competency and qualification of the advisors (2.46) and the ease of obtaining a microloan (2.46). In second place was the level of advertising about microloans (2.70) and the suitability of the services announced for meeting the entrepreneur s needs (2.82). The advisors understanding of the entrepreneur s needs (3.00), the closeness to the offices of the entrepreneur s place of residence or work (3.10) and the terms of the loan (3.36) received the worst scores. Proposals for improving the microloan programmes focus mainly upon greater monitoring and counselling during the entire life of the enterprise, and upon better terms for the loan, with greater flexibility and adaptability to the specific situation of each business. An idea that attracted interest was the creation of an insurance to prevent indebtedness in the event that the business fails. Possible improvements for the microloan programmes MORE COUNSELLING BETTER TERMS FOR THE LOAN INSURANCE IN CASE OF DEBT SIMPLER PAPERWORK MORE ADVERTISING 5% 5% 10% Conclusions about the experience 35% 45% 0% 10% 20% 30% 40% 50% What did the women who had had to close their businesses think about their experience as entrepreneurs? Although almost half of the women interviewed did not answer this question, it is clear that this experience of self-employment was perceived as a failure: Conclusions about the entrepreneurship experience Don t know 10% Negative 29% Positive 16% Not clear 45% Through this experience, various women realized that self-employment was not a suitable option for them, because they were not sufficiently motivated, because they did not have sufficient training to manage a business, or simply because they did not want to give up their free time and holidays to dedicate their time to a business. This fact could be positive (because they find out what they really want), but what they think about first is the loss of time and money invested in this activity. Moreover, some women, having shut down the business, had had to go back to working for someone else or had ended up unemployed. In such cases, apart from the loss of the money invested, they also had the feeling they have lost social status. There is no apparent acknowledgement of the benefits received from the experience of setting up an enterprise and being selfemployed, as well as recognition of the qualities acquired during this time - autonomy, management capability, initiative... It is still necessary to work on changing the perception of business failure, to begin to get the best out of the experience and turn it into a positive stage of one s professional career. 48

51 RURAL WOMEN, HIP AND In Spain, rural women hardly figure in self-employment statistics. The objective of this chapter is to understand this situation and to find solutions, to identify the specific problems faced by this rural group, and to determine whether a microloan can be a valid option for rural women in their entrepreneurial process. ANALYSIS OF THE MICROLOAN AS A FINANCIAL INSTRUMENT FOR RURAL WOMEN In this study on Spanish women entrepreneurs, we felt it was essential to analyse in greater detail the situation of women living in rural areas. The peculiarities of this numerous group had to be taken into account, given that the rural environment conditions their lives to a great extent, particularly when it comes to work. So, what do we understand by a rural area? There is no agreement on a definition of the rural world. Studies and statistics consider a town with less than 2,000 inhabitants to be rural, relating the idea of rural to dependence upon agriculture / cattle farming and to low density of population, or even towns with less than 20,000 inhabitants, when it is decided to include the county towns around which the life of an area is organized. For this study, we chose somewhere in between. We defined rural women as women who live and/or work in towns with less than 10,000 inhabitants, following the definition from the White Paper on Agriculture and Rural Development. According to the 2006 Municipal Census in Spain, 21.27% of women live in towns of less than 10,000 inhabitants, and 6.11% in towns of less than 2,000 inhabitants. Population by municipality size and sex Both sexes Men Women Total population Less than 101 inhabitants From 101 to 500 inhabitants From 501 to 1,000 inhabitants From 1,001 to 2,000 inhabitants From 2,001 to 5,000 inhabitants From 5,001 to 10,000 inhabitants Source: National Institute of Statistics, 2006 Municipal Census A greater proportion of men can also be observed in these areas, above all in smallersized towns. Women represent 49.16% of the population of municipalities with less than 10,000 inhabitants, and only 48.30% in those with less than 2,000 inhabitants. The Population Census also provides information about women s activity, even if it erroneously measures seasonal and parttime work and, therefore, the situation of the numerous family helpers in the rural environment. In Spain, the female labour force participation rate is very low: only 39.08% of women were working in 2001, 27 points below the male labour force participation rate. 49

52 Rural areas are the most affected by the low labour force participation rate: higher figures are found in the more urban Autonomous Regions or those with tourism activities. The unemployment rate also varies by sex: it is 19.76% for women, that is, almost double the rate for men (10.54%). Certain Autonomous Regions, particularly those with many rural areas and little tourist activity, combine low labour force participation rates with high unemployment rates, such as Extremadura, Castilla y León, Castilla la Mancha, Cantabria and Asturias. There are three main difficulties for these women, resulting from the rural environment in which they live: The characteristics of the labour market in rural areas: The women living in these areas usually have a rather low level of training and they find unskilled work, often in seasonal and very specific activities due to the limited diversity available: farming and agrifood jobs, craftwork This limitation in activities also affects younger women with high or medium levels of training, because they find fewer job opportunities that are appropriate. The problems arising from the scarcity of infrastructure and services to facilitate employment: Rural areas have fewer infrastructures, both physical and social, limiting mobility, services offering care for children and dependents are very inferior to those in urban areas, and leisure and social activities are very scarce. For all these reasons, rural women have more difficulties in reconciling their work and family lives, and more frequently have to give up the idea of working. The social environment and characteristics of rural society: The rural environment is a familybased, male-dominated world. Support from the family is necessary for any type of project, and masculinization curbs the development of women s entrepreneurship, since little trust is placed on women s projects and they are not allowed to invest family money in an activity that is seen to be risky. In a world where working life has to be reconciled with the social obligation of caring for family members and where there are few employment opportunities, with added difficulties for entrepreneurship due to the lack of infrastructure, services and access to information, it is very difficult for women to enter the world of work. It is complicated for them to innovate on the family farm or to launch their own businesses, because of the men s lack of faith in them, and also their own fear of failure. Many of them only play a secondary role on the farm, where they work as family helpers, without co-ownership or access to Social Security. Others hold unskilled jobs. In all cases, there is no professional or social recognition of their work. This context explains why mothers encourage their daughters to leave for larger towns, to receive training and to find a job where 50

53 they are appreciated. They do this based upon their own experience in the hope their daughters will have a better future, and they encourage them to reject agricultural work. In general, with all these problems, rural women have two options: To abandon the sector and the rural environment. Since there are no satisfactory employment opportunities, they are forced to leave the countryside. This attitude reinforces the problems of masculinization and aging of the rural population, leading to a demographic imbalance which often leads to gradual abandonment of rural towns. To find different types of work in the rural environment or to set up their own business, in sectors such as commerce, craftwork, rural tourism. This second option leads to diversification of activities in the rural world. Also, some professionals (such as architects) do not need a specific location to work in. Our objective with this study was to determine how microloans, by creating businesses, can help rural women find employment opportunities and to evaluate whether they can become a tool for rural development and for stabilizing the female population, fighting against the situation of abandonment of rural areas. As part of the study that we prepared for the European Microfinance Network within the project on Fostering Gender Equality: Meeting the Entrepreneurship and Microfinance Challenge, we decided to study the situation of rural women entrepreneurs and their access to financing. We observed, from our experience of counselling women, that many rural women entrepreneurs asked us for information about microloans, but few actually went through the necessary proceedings to obtain a loan through our Agreements. Given this problem, our aim was: 1.To determine whether the rural women who obtained a loan had a different profile to the others, that is, whether there was a certain profile for rural women entrepreneurs with microloans, and for the microloans that they requested (amount, use, repayment period). 2.To analyse why the women entrepreneurs in rural areas who contacted us only did so to request the preliminary information. We do not know if this was because of the treatment they received from our staff, if the terms of the microloans did not meet their needs or if they changed their minds and were not going to set up a business. 3.Lastly, to determine how women entrepreneurs in rural areas had managed to finance their enterprises and if they had used the microloans to do so. Overall, we wanted to verify if microloans were a valid option for rural women entrepreneurs and, if so, to proceed to make the necessary changes in the services offered and the information provided, in order to correct the imbalance observed between the number of requests received for information and the number of microloans granted. 51

54 RURAL WOMEN, HIP AND We designed several questionnaires for the groups defined above (microloan recipients, women entrepreneurs), and we also held meetings with rural women s associations, to learn about their experience in this field. 38% of women entrepreneurs devot between 60 and 79 hours a week to their business. PREVIOUS STUDIES ON RURAL WOMEN AND MICROLOANS According to data from Oxfam (The Trap of Rural Poverty. June 2004), Around 96% of the world s farmers approximately 1.3 billion people live in the developing countries. In the rural areas of the developing world, close to 900 million people live on less than one dollar per day. This fact is behind the concern existing throughout the world for putting microfinance programmes into operation in rural areas. From the start, microloans have targeted the poorest groups in developing countries, or those excluded in industrialized countries. At world level, much thought has been given to this subject, and numerous studies have been carried out. The first web site with information about microfinance, The Microfinance Gateway, published a dossier on Rural and agricultural finance, prepared by international experts, which aimed to present the special characteristics of the microfinance market in the rural environment and to provide specific answers for setting up programmes in these areas. Local studies have also been carried out, at regional or national level, to resolve specific doubts. The French association Adie, the organization that grants the most microloans in Western Europe, carried out the study on Rural Territories and the agricultural sector: outcome and strategy of Adie s actions, with the objective of understanding the specific difficulties for entrepreneurs in these areas and rectifying the strategy of their microloans programmes to adapt it to the needs detected. All these studies acknowledge the need for offering microfinance services in the rural world. They also emphasize their complexity, the difficulty of working in rural areas and the importance for the organizations managing microloans programmes of adapting to the characteristics of rural areas and of their inhabitants. According to these studies, there is no doubt that the microloan is a useful tool for helping in the development of rural areas in the poorest parts of the world. 52

55 But the needs and realities of each country must be taken into account. This means the specific situation in Spain must be analysed to see to what extent the microloan tool can be used to help the country s female rural population. Methodology We made a selection from the study s overall sample, to keep only the data on rural women, following the definition mentioned above, women who live and/or work in towns having less than 10,000 inhabitants. In total, the sample comprised 16 rural women, that is, 10% of the total sample of women entrepreneurs (162 interviews done). Type of interview performed Visit 19% 12% Telephone 38% Post 31% IMPACT OF MICROLOANS ON THE LIFE OF RURAL WOMEN IN SPAIN It is important to study the situation of rural women in Spain to determine whether microloans can be a valid option for them. The opinion of microloan recipients about these programmes is fundamental, in order to find out if obtaining the loan and setting up their business had an effect on their lives and how they evaluate this experience. Town size Live Work < inhab inhab. > inhab. Total Different methods were used to contact these women and to obtain their answers: telephone, post, personal visits and % 56% 13% 100% % 56% 13% 100% Note: The data on towns with more than 10,000 inhabitants are on women who live and/or work in rural areas. For example, 13% of the women who live in towns with more than 10,000 inhabitants actually work in towns with less than 10,000 inhabitants. The questionnaire used was the same as for the overall sample, so the urban and rural women entrepreneurs answered the same questions, although it was adapted to obtain specific data about the situation of the rural women entrepreneurs, in order to be able to compare their answers to those of the rest of the sample. 53

56 RURAL WOMEN, HIP AND Profile of the rural women entrepreneurs with microloans In general, the rural women entrepreneurs were Spanish, representing 63%, unlike the general sample, in which the figure was 53%. Place of origin of the women entrepreneurs receiving microloans Spain 63% Latin America 31% Rest of Europe 6% With regard to age, two observations were made. The average age of the rural women when they created their businesses was slightly below that of the sample (38.5 years, compared to for the whole group), but behind this average are two realities: there were many young women entrepreneurs (19% were less than 25 years years old when they created their enterprises, compared to 6% in the overall sample) and many were over 40 years old (57%, compared to 47% in the sample). Age range upon requesting the microloan years old years old < 25 years old 19% 38% 25% 19% years old The education level was also different. Rural women had more professional training (50% have studied Vocational Training, for which the figure in the overall sample was only 20%. There was also a higher than average number of women with basic education - 13% instead of 5%. POST-GRADUATE BASIC Level of education of the microentrepreneurs UNIVERSITY DEGREE VOCATIONAL TRAINING INTERMEDIATE 6% 13% 13% 19% 50% 0% 10% 20% 30% 40% 50% Participation in courses on entrepreneurship was rare. 81% of the women interviewed had never attended any training of this type, while in the overall sample, the figure was only 63%. Have you attended a course on entrepreneurship? No 81% Yes 19% Comparing their situation prior to the creation of their business with that of the sample, we discovered that the unemployment rate was higher for the rural women: 44% were unemployed before obtaining the microloan and setting up their enterprise. Only 34% were unemployed in the overall sample. Working 56% Previous activity Unemployed 44% 54

57 On the other hand, other elements did not vary from the sample: marital status, for example. Approximately 50% of the women interviewed were married, although there were fewer single women (32% in the overall sample). Marital status of the microentrepreneurs Single 25% Married / Cohabiting 50% Divorced / Separated 19% Widow 6% The microloan The women interviewed had found out about the microloans through two main channels: the media (43%), and various entities (44%, with 41% in the overall sample). These entities included local authorities, banks, associations and trade unions. Awareness of the microloan programme Other entities 38% Public Administration 6% The Media 43% Friends Acquaintances 13% The rural women had used the microloan obtained either to create a new enterprise (81%) or to upgrade an existing business (19%). These data are similar to those obtained from the overall sample. To begin a new business 81% Use of the microloan To upgrade an existing business 19% The average amount of the microloan obtained was higher than the average: 14,646 Euros, compared to 14,330 Euros for the total sample due, to a great extent, to the larger investment necessary to start up the type of business we find in rural areas (rural tourism, agricultural operations, etc.). 57% of the microloans granted to rural women were for 15,000 Euros or more (52% in the overall sample). Microloan amount % % % > % ND 12% On the other hand, the term was similar, 5 years for 50% of the women interviewed. The business The age of the businesses of the rural women interviewed was less than in the general sample: only 6% had been open for more than 3 years while for the whole set of women entrepreneurs, the percentage was 14%. Age of the business <1 year 38% >3 years 6% 1-3 years 56% The opening date of the business was linked to the date that the microloan was 55

58 RURAL WOMEN, HIP AND obtained, very similar to what was observed in the general sample. 69% of the rural women opened their businesses within an interval of 1 year around collection of the microloan (between 6 months before and 6 months afterwards), compared to 81% in the overall sample. The proportion of businesses that did not fulfill the legal requirements (registration with the Social Security, tax authorities, etc.) was double that observed in the overall sample - 25% instead of 11%. Of those who had legalizad their businesses, 67% did it in the same month that they opened their business. Yes 75% Have you legalized your business? No 25% 63% of the enterprises were in this area (only 48% in the overall sample), mainly in hospitality and tourism. In the overall sample, 52% of the businesses were located in the Autonomous Region of Madrid. This distribution obviously changed when studying women in rural areas. Only 19% of the businesses were located in the Autonomous Region of Madrid. The other Autonomous Regions most represented were Catalonia, Andalusia and Castilla y León. The business activities of rural women financed by microloans were very serviceoriented. Sector of business activity Education training 6% Commerce 31% Other services 63% As for working conditions, 56% of the rural women entrepreneurs worked alone 56

59 in the business (43% in the total sample). The rest had been able to take on between 1 and 5 paid employees. All in all, the 16 women interviewed had created 17 jobs besides their own. That is, all in all, the microloans granted to these rural women had contributed to the creation of 33 jobs, around 2 jobs per microloan granted. 38% of the workers were partners in the enterprise and the remaining 62%, employees. 60% 50% 40% 30% 20% 10% 0% Number of workers (besides the microentrepreneur) 56% None 13% 13% 12% 1 Worker 2 Workers 3 Workers The family component of the businesses stands out. 59% of the workers were family members with only 24% in the total sample. 6% 5 Workers The working day of the rural women entrepreneurs continued to be much longer than the 40 hours a week for wageearners. They devoted an average of 56.5 hours a week to their businesses: 9.3 hours a day, 6 days a week. This figure is less than the average, which is 61.2 hours a week. Time devoted by women entrepreneurs to their business >=80 hours hours hours <40 hours/week 6% 13% ND 13% 31% 38% 0% 10% 20% 30% 40% The situation of the enterprises at the time of the interview was as follows: 44% were starting up, 44% were already working, and the remaining 12% were preparing to open the business in the next few days. Since they started their businesses, 70% of the women interviewed had gone through a period when they did not have enough money to manage the enterprise, the majority right at the time of opening the business and for a few months afterwards. At the time of responding, 50% declared that the overall situation of their enterprise was good and only 7% described it as bad. State of the businesses So-so 36% Bad 7% Seasonal 7% 38% of women entrepreneurs devot between 60 and 79 hours a week to their business. Good 50% 57

60 RURAL WOMEN, HIP AND Quality of life The perception of the women interviewed regarding an improvement in their quality of life is a very important aspect, because it helps to determine the impact of the microloan and the entrepreneurial activity. In the case of rural women entrepreneurs, 2/3 of them felt their quality of life and that of their families had improved since they obtained the microloan. Perception of improvement in quality of life Yes, a little 33% It is worse 13% Yes, very much 33% Too soon to say 21% We observed results similar to those of the overall sample when looking at the difference between the expectations of the rural microentrepreneurs upon requesting the microloan and the actual improvements that occurred, separating the material and the psychological elements. They hoped to improve the material aspects of their lives more than the psychological ones but, in fact, 68% of them felt the psychological elements had improved the most (63% in the overall sample). Improvement in quality of life: expectations and reality 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 47% 53% Expectations 68% 32% Reality Psychological Material Comparing the data from the above two graphs, we can again affirm that the women interviewed very much appreciated the psychological improvement, since they perceived a real and overall improvement in their quality of life, even though they had not fulfilled their expectations with regard to material aspects. The following graphs provide more details on the evolution of the material elements, and point to the aspects that had improved the most or worsened the most. In general, the women entrepreneurs felt that the material elements of their lives had not worsened. 61% stated they had stayed the same, 20% that they had improved and only 6% that they had worsened (the remaining 13% did not answer the question). The elements that had improved the most were training, food and health. So, for 31% of the women interviewed, their level of training had improved since they received the microloan. TRAINING FOOD HEALTH HOUSING SAVINGS Material elements that have improved the most 13% CLOTHES 13% EDUCATION 6% 19% 25% 25% OTHERS 25% 0% 10% 20% 30% 31% 35% 58

61 With regard to the elements that had worsened, the rural women entrepreneurs felt that their level of savings was the aspect that had worsened the most. 25% of them had noted a decrease. Material elements that have changed most for the worse Psychological elements that have improved the most CONFIDENCE IN THE FUTURE ABILITY TO NEGOTIATE SELF-CONFIDENCE MOTIVATION 32% 38% 56% 50% Impact on the family In general, between 2 and 3 people lived in the home, but not all of them brought in income. Only 1 person received a fixed wage, so the family s financial stability was quite fragile. SAVINGS CLOTHES EDUCATION OTHERS 25% 13% 6% 6% 0% 10% 20% 30% SELF-ESTEEM 31% DECISION-MAKING 31% INDEPENDENCE 25% SOCIAL LIFE 25% EMOTIONALLY BETTER 25% OTHERS 13% Only 30% of the women entrepreneurs received a wage for their work. 39% expected to start receiving one before too long. This situation illustrates the complexity of managing a business and the financial difficulties observed at the beginning and during the first few months / years. At the psychological level, we observed that, as in similar studies carried out in other countries, microloans gve hope to the recipients. They also helped to reinforce business skills, improving the ability to negotiate and the self-esteem of women entrepreneurs. Psychological elements that have changed most for the worse SOCIAL LIFE INDEPENDENCE EMOTIONALLY BETTER SELF-CONFIDENCE 0% 10% 20% 30% 40% 50% 60% 13% 13% 13% 13% Are you receiving a wage from your business? Yes, a correct wage 15% Yes, but insufficient 15% No 31% No, but I expect to receive one in the future 39% Regarding the elements that had worsened, we noted that social life took first place. 13% of the women interviewed had seen a reduction in their time off work. MOTIVATION CONFIDENCE IN FUTURE SELF- CONFIDENCE MOTIVATION OTHERS 6% 6% 6% 6% 6% Only part of the family s income comes from the enterprise. On average, the women entrepreneurs contributed 49% of the household income (including their other activities). The rest was provided by other family members or from rentals. 59 0% 10% 20%

62 RURAL WOMEN, HIP AND Origin of the family income Other family members 49% Others 2% Enterprise 42% Other activities of the entrepreneur 7% Comparing the real family income, according to data given by the microentrepreneurs, with the minimum income that they consider necessary to maintain their households under acceptable conditions, we noted that 73% of those who responded had been able to reach the necessary income: 27% stated that they just reached it, and 45% earned more than was necessary. Perception of the minimum family income necessary vs. current family income of the women entrepreneurs Have already reached the minimum income 73% Yet to be reached 27% According to the data collected, 18% of the households of the rural women entrepreneurs had more than 1,000 per month and per person. 73% of the minimum expectations for per capita income were between 600 and 1,000. Comparison of current per capita income and the minimum necessary income 100% 80% 60% 40% 20% 82% 73% 18% 27% 0% E >=1000E Current income Necessary income On average, the real income of the household was 2,005 per month and the estimated minimum income necessary was 2,068 per month. All the rural women interviewed that had yet to reach the level of income necessary estimated that they could cover their needs with a monthly added income of between 600 and 999. The next analysis was of developments in the women entrepreneurs family income and personal income since they created their enterprises. The first thing we observed was that for many women entrepreneurs, the starting up of their businesses was still too recent for them to reach conclusions concerning the overall and continued evolution of their income. In the case of family income, 24% of the rural women interviewed stated that it was still too soon for them to evaluate this aspect of their lives, and for personal income, the percentage was 33%. Evolution of the family income Stabilized 19% The same 19% Improved 13% Still too soon 24% Decreased 25% The improvement in income is observed at the personal level more than at the family level: the family income tends to stay the same, while the personal situation of the women entrepreneurs is a little bit better. 34% of the rural women 60

63 61 entrepreneurs said that their personal income had improved since they created their business, while only 13% thought so in the case of family income. Evolution of the entrepreneur s personal income Improved 34% Stabilized 8% Still too soon 33% Decreased 25% The level of savings on the part of the rural women entrepreneurs had also changed since they obtained the microloan. For many of them, it had decreased because they had invested the family savings in starting up the business. However, 25% of the women interviewed had observed an improvement in their level of savings. Evolution of the level of savings Decreased a little 37% Still too soon 13% Stayed the same 25% Improved a lot 6% Stabilized 6% Improved a little 13% Rural women entrepreneurs use their savings first for reinvesting in their businesses (39% of responses) and also for unforeseen expenses (24%). Use of savings Reinvestment in enterprise 39% Unforeseen expenses 24% Food 9% To pay back debts 7% Training / education 7% Clothing 5% Health 3% Housing 3% Remittances to country of origin 1% Miscellaneous 2% The majority (75%) claimed they did not have sufficient savings for unforeseen expenses or to make an important acquisition or investment. If necessary, they would consider different types of action: Action in the event that they did not have money for contingency or important acquisition Ask for a loan 16% Lower expenses 17% Improvise 16% Don t know 51% 16% would take on a further debt to cover expenses, but half (51%) had not given it any thought. Borrowing is a risk for any entrepreneur who requests a microloan. But in the case of rural women entrepreneurs, we observed less difficulty in paying back the microloan. Only 14% of the women interviewed had had difficulties so far, compared to 26% for the overall sample. However, more of the rural women entrepreneurs interviewed were still in the grace period so had small repayments. They represented 33% of the sample, with 16% in the overall sample. Yes, somewhat difficult 7% Yes, much difficult 7% Difficulty in repaying the microloan Had no difficulty 86% The evolution in the ability of rural women entrepreneurs to reconcile their family and working life is very similar to that of the total sample: this ability had decreased for 37% (41% in the overall sample), and had increased for 13% (12% in the overall sample).

64 RURAL WOMEN, HIP AND 50% 40% 30% 20% 10% 0% Ability to reconcile work and family 31% Has greatly decreased 6% Has decreased somewhat 44% Impact on social and working life Is the same 13% Has greatly increased There was a slight improvement in the ability to go shopping without having to ask for permission or money, if we compare the results of the rural women entrepreneurs with the results of the general sample. Overall, they did not see any significant change at this level. Only 17% considered it was easier for them than before (compared to 26% for the group as a whole) and there were more who considered it had become more difficult (28% compared to 14%). Evolution of the capacity to go shopping without asking for permission or money The same 55% Increased 17% Decreased 28% Participation in family investment decisions had not varied for more than half of the women interviewed (57%). For 22%, it had increased. Evolution of the participation in family investment decisions Increased 22% NA 14% NA: not applicable Decreased 7% The same 57% A definite decrease was observed in the free time available for the women entrepreneurs personal needs, because of the time they devote to their enterprises. 69% affirmed that they had less time than before, and this situation had only improved for 12%. Evolution in the time devoted to personal needs The same 19% Increased a little 6% Decreased a little 31% Increased a great deal 6% Decreased a great deal 38% The time set aside for participation in the community varied slightly. 55% of the rural women entrepreneurs maintained the same degree of dedication to such activities (45% in the overall sample). 32% increased their degree of participation, a clear improvement in comparison with the results of the overall sample, where only 12% of the women interviewed said they had noticed an improvement. Participation in the social life of the community Increased a little 19% The same 55% Increased a great deal 13% Decreased a little 13% 62

65 In the microentrepreneurs ability to access conventional financing, we observed a marked difference when compared with the total sample. 63% of the rural women entrepreneurs continued having the same access to classic financing, and it had only improved for 25%. There were two main reasons for this. Some women continued to be excluded due to their location in rural areas, whereas others already had relatively good access to such services before creating their business. On the other hand, their familiarity with the financial system had greatly improved. None of them felt it had worsened, and 38% said they had noticed an improvement. Ability to access financing Increased 25% Is the same 63% Not changed 6% NA 6% 100% Familiarity with the financial system Increased 38% Is the same 25% Not changed 0% NA 37% 100% The rural women s ability to negotiate had also improved significantly, with suppliers (75%), banks (56%) and customers (38%). Ability to negotiate with banks Increased 56% Is the same 38% Not changed 0% NA 6% 100% Ability to negotiate with suppliers Increased 75% Is the same 19% Not changed 6% NA 0% 100% Ability to negotiate with customers Increased 38% Is the same 19% Not changed 0% NA 43% 100% Entrepreneurs conclusions and opinions on the microloan The results concerning confidence in the future were even better than for the overall sample: 94% of the rural women entrepreneurs had more confidence in the future than before, while the percentage was only 79% in the overall sample. Since you obtained the microloan, are you more confident about the future? Yes, a little 56% Yes, much more 38% No more than before 6% As in the overall sample, the main element of their lives that the rural women entrepreneurs wanted to change in the future was the material aspect (56% of responses), since so far the psychological elements were the ones that had improved the most. 12% said they did not want to improve anything they were satisfied with their current situation. Material aspect 56% Future improvement Everything 19% Nothing 12% Psychological aspect 13% 63

66 RURAL WOMEN, HIP AND The following is a breakdown of the material elements they wanted to improve, in order of importance: Material elements to be improved Financial stability 38% Housing 31% Business 15% Training 8% Health 8% If they could turn the clock back, the results prove to be very positive. 100% of the women interviewed would again choose self-employment. 75% would even set up the same business, while the rest would prefer to start up a different one. Would you change your decision in any way? I would open another business 25% I would do the same thing 75% The opinion on these programmes of the rural women entrepreneurs who had been granted a microloan is very important, in order to find out their strong points and any possible improvements. In general, the interviewees had a favourable opinion about their microloan, since 90% of them felt it had helped them. Opinion regarding the microloan It has helped me a great deal 80% It has helped me a little 10% It has added more difficulties for me 10% We asked the women interviewed to evaluate a series of statements from 1 (totally agree) to 5 (do not agree at all). The results concerning microloans were good: The high degree of competency and qualification of the advisors, as well as the ease of contacting the organization that provided the microloan were the two most valued elements (1), This was followed by the suitability to the entrepreneur s needs of the services offered, the good terms of the loans, understanding of the entrepreneur s needs on the part of the advisors, as well as closeness of the organization to the entrepreneur s place of work or residence (2). Points that were not so well appraised (3) were the level of advertising about microloans (insufficient) and the ease of obtaining a microloan (due to the complexity of the paperwork). The improvements they suggest for the microloan programmes are as follows: Possible improvements for the microloan programmes MORE FOLLOW-UP BETTER TERMS SPEED UP THE PAPERWORK NON-REPAYABLE LOANS 15% 15% 31% 38% 0% 10% 20% 30% 40% 64

67 Conclusion on the impact of microloans on the life of the rural women entrepreneurs The rural women entrepreneurs interviewed were different to the others: they were Spanish, they had a lower than average and less professionalized level of training, and few had participated in courses on entrepreneurship. The characteristics of their businesses were also slightly different: They were more service-oriented, above all hospitality and tourism. They were more recent and required a higher than average investment, so the amount of the microloans granted was higher. A larger proportion of businesses had not been legalized. The number of jobs created was similar to the average, but the family component of the businesses was greater, with almost 2/3 of the workers being family members. The rural women entrepreneurs work fewer hours a week than the average. With regard to the impact on their lives of the microloan and the new enterprise: 2/3 of the rural women entrepreneurs said their life had improved since they received the microloan. The psychological elements, such as confidence in the future, selfconfidence and self-esteem, were the elements that had improved the most. Material aspects had not improved in the same proportion. For example, their level of savings had decreased, because of the investment made, but 73% of the women interviewed said that their family had the minimum income necessary to sustain them. They had difficulties finding time for their personal needs, because they devote many hours to the business, but their participation in their community had increased. The enterprise allowed them to mix with the members of the community and develop their social life. Their business capabilities had been strengthened thanks to their experience with the business. They were more familar with the financial system and their ability to negotiate had increased at all levels (banks, suppliers, customers). 94% of the rural women entrepreneurs had more confidence in the future than before receiving the microloan. This figure was higher than the average of the overall sample. They were also happy with their decision to choose self-employment: they would all create a business again, and 75% would set up the same one. 90% of the rural women entrepreneurs felt that the microloan had helped them, and the statistics showed that they had fewer difficulties in paying back the loan. In general, the responses of the women entrepreneurs interviewed showed that they had seen a positive impact on their lives since they received the loan, and 65

68 RURAL WOMEN, HIP AND that they considered it a useful tool for women who want to set up their own business. Requests for information received between January 2006 and May 2007 Comparison of requests for information and microloans granted Rural Total %Rural Rural Total %Rural % 5,87% Number of microloans granted Number of requests for information ,00% 5,22% OTHER WOMEN S WORLD BANKING STATISTICS ,22% 4,65% 3,03% Apart from the conclusions of the studies carried out throughout the world and the impact observed on the lives of the rural women entrepreneurs who had obtained a microloan in Spain, there is another indication that the microloan may be a valid option for rural women entrepreneurs. Analysis of requests for information and statistics on microloans granted show that the rural women who contact us for information are granted a microloan in a higher proportion than the average. This could mean that their projects are more viable than those of urban women. The following table shows the requests received for information about microloans between January 2006 and May 2007: During this period, we received 1,648 requests for information on microloans, of which 86 came from rural women, that is, 5.22% of the women that requested information were rural women. During the same period, a total of 50 microloans were approved, of which 4 went to rural women, accounting for 8% of the loans granted. If we compare the proportion of requests for information from rural women with the proportion of microloans that they obtain, we reach the following results: This shows that 3.03% of the total women entrepreneurs requesting information on microloans got approval for them. In the case of rural entrepreneurs, 4.65% of those requesting information obtained them. This means that the rural women entrepreneurs obtain microloans in a higher proportion than the total. However, in spite of this result, the proportion of rural women that receive a microloan in comparison with those that request information is still very small (4.65%). 66

69 Also, rural women represent only 5.22% of the women requesting information, when according to the statistics from the 2006 Municipal Census, 21.27% of Spanish women live in rural areas. There is still a long way to go before this figure is reached and, although it is true that not all rural women want to set up a business, previous studies have shown that they are prone to choose self-employment because it is more difficult for them to find paid employment in rural areas. The microloan has proved to be a useful tool in other countries for contributing to local development, be they developing countries or other European countries. In Spain, the rural women entrepreneurs who have received microloans also note that the microloan and the entrepreneurship had a positive impact on their lives and they value this type of loan very much. Even so, the statistics show that there is still insufficient coverage of the needs of rural women. Various questions should be posed. What is the reason for these results? How can we improve access to microloans for rural women? How should the current programmes be adapted to the characteristics of the rural world and rural women entrepreneurs? HOW CAN WE FACILITATE ACCESS TO MICROLOANS FOR RURAL WOMEN? In order to clarify the figures presented above, we decided to go beyond the impact of microloans on the lives of their recipients and enter directly into contact with other groups: on the one hand, rural women entrepreneurs who requested information on microloans from us and, on the other, women entrepreneurs who did not use microloans to finance the creation of their business. Delving deeper: other groups in the rural context Women entrepreneurs and microloans The women entrepreneurs that we interviewed for this study contacted Women s World Banking between January 2006 and May The objective of these interviews was to find out why these women had not contacted the organization again after receiving the information requested, in order to clarify whether they had simply 67

70 RURAL WOMEN, HIP AND given up the idea, or whether the problem stemmed from the treatment they had received or from the terms for the microloans. Age range of the women entrepreneurs = 60 years old3% years old3% The women interviewed currently live in different Autonomous Regions throughout Spain: A specific questionnaire was designed. The interviews took place during the months of May and June of 2007 using different methods: years old 43% 35% years old 16% years old A total of 33 interviews with rural women took place. 27% of them lived in towns with less than 2,000 inhabitants, and 73% in towns having between 2,000 and 10,000 inhabitants. The profile of these women entrepreneurs was that of a 38.5 year-old woman (the same age as the recipients of the microloans studied previously). The proportion of Spanish women is lower than in the microloan recipient sample (52% as opposed to 63%). Almost half of the women entrepreneurs who contact Women s World Banking to request information about microloans are immigrants. Country of origin of the women entrepreneurs Spain 52% Latin America 39% Rest of Europe 9% Their level of training is quite low. 55% of the women interviewed had basic or intermediate studies, although 31% had studied at university. POST-GRADUATE BASIC Level of education of the women entrepreneurs UNIVERSITY VOCATIONAL TRAINING INTERMEDIATE 8% 14% 14% 25% 41% 0% 10% 20% 30% 40% 50% 68

71 As for their family situation, almost 3/4 of the women entrepreneurs live with their husband and children. According to the responses received, their decision to become self-employed was because they had detected a good business opportunity or because they wanted to stop working for somebody else, rather than because they needed to get out of a situation of unemployment. What led you to think about setting up your own business? Opportunity 64% Family situation Live with their family (husband and/or children) 74% Are supported by family members13% Live with and support other people 9% Live alone 4% Need 36% When they requested information about microloans, 68% of the women entrepreneurs were thinking about an activity in the services sector, mostly in the hospitality sector (32% of the total women interviewed). Sector of business activity Education training 8% Others services 68% Commerce 12% Miscellaneous 12% The amount of the investment they considered necessary was higher than the amount of the microloans that are usually granted, 29,636 Euros. But women entrepreneurs usually contribute part of the investment and reduce their budget depending upon the money they expect to receive, so this data on its own does not allow us to conclude that their silence stems from the unsuitability of the amount of the microloans offered. According to the responses obtained, since they contacted us, the majority of the women continued working on their project, while only 15% had been able to actually set it up and the remaining 18% had given up the idea. The women entrepreneur and her project since the request for information Still working on the project 67% The business is starting up 15% Is not going to set up the business 18% Women entrepreneurs and business financing To study the situation of women entrepreneurs who live or work in rural areas and set up their businesses without using microloans, we contacted two different groups: A group of 27 women entrepreneurs who participate in one of our projects in the Principality of Asturias. They all had a business in rural areas of Asturias and participated in a project called the Casa de Comercio Virtual, 69

72 RURAL WOMEN, HIP AND which aims to help them expand their businesses and find new markets, by means of a virtual portal ( where each of them has a virtual shop and can sell their products and offer their services. The interviews were carried out by the coordinator of this project, who visited the businesses. A group of 9 women entrepreneurs who are members of FADEMUR, Federación de Asociaciones de Mujeres Rurales (Federation of Rural Women s Associations). This organization distributed the questionnaire among its member associations and these, in turn, interviewed some of their entrepreneur members. The main objective of these interviews was to determine how these women had obtained financing to start up their businesses, if they were familar with microloans and if they had considered them in their search for finance. Almost all the women interviewed were Spanish, as shown on the following graph. Country of origin of the women entrepreneurs Spain 92% Again we observed that their level of education was rather low: 47% of the women interviewed had basic or intermediate education. In the case of the rural and urban women entrepreneurs who had obtained a microloan, this figure was only 32%. POST-GRADUATE UNIVERSITY Level of education of the women entrepreneurs VOCATIONAL TRAINING INTERMEDIATE 3% Rest of Europe 8% 22% 28% 28% Almost 80% lived with their husband and children, but the proportion of women who live alone was approximately 15%. Family situation Live with their family (husband and/or children) 78% Are supported by family members3% Live with and support other people 5% Live alone 14% Their motivation for self-employment was quite similar to that of the other women entrepreneurs, although a smaller proportion of decisions was based on the detection of opportunities. What led you to think about setting up your own business? Need 39% BASIC 19% 0% 10% 20% 30% Opportunity 61% 70

73 Participation in the enterprise by family workers was quite significant. 58% of the total companies were family concerns. On average, 1.89 people worked in the company, in addition to the entrepreneur, which places these businesses above the average for the businesses described in the general study (2 jobs per microloan granted). Rural tourism 36% Sector of business activity Others 14% Craftwork 20% Agriculture 8% Agrifood 22% Agriculture and cattle farming. Agrifood: processing of agricultural products. Sources of the financing used to create the enterprise 60% 50% 40% 30% 20% 10% 0% 50% Banks 20% 13% Subsidies Friends/ Family members 9% 8% Microloans Others The company was generally located in the same town where the entrepreneur lives (78%), but some women entrepreneurs turn to smaller towns (19%) or bigger towns (3%) to set up their business. This high proportion of women who work and live in the same place can be explained to a large extent by the activity of the businesses covered by the study, because 36% of the enterprises work in the field of rural tourism. With regard to the investment made, the amount was much higher than the average for the microentrepreneurs, and this again was linked to the activity of the businesses: the businesswomen had had to invest in buildings and land. On average, this investment amounted to 168,774 Euros. The rural women entrepreneurs had found financing through different channels, mainly banks (50% of the investment), but also subsidies (20%). It should be pointed out that most of the businesswomen interviewed were from Asturias, where many subsidies are available, financed with European funding. Given the high level of investment necessary, the amount of the loans requested from the banks was very high: 47% exceeded 30,000 Euros, while only 28% was similar to the average amount of a microloan (up to 15,000 Euros). The repayment periods were in line with these high amounts: 79% were longer than 5 years. The loan served to finance both fixed assets (61%) and working capital (39%). The investment amount in rural areas is higher than the average for the microentrepreneurs. 71

74 RURAL WOMEN, HIP AND Problems detected After these interviews and a meeting with Teresa Lopéz, President of FADEMUR (Federation of Rural Women s Associations), we were able to pinpoint some problems that explain the specific difficulties faced by rural women for financing their business projects and their scarce participation in microloan programmes. The rural context and its consequences on entrepreneurship and financing The characteristics of the rural environment often limit entrepreneural possibilities for the women living there. We observed in the responses from the women entrepreneurs that they considered their personal and family situation to be the primary reason behind the stagnation of their projects (29% of responses). Personal & family situation Fear of debt Reason for not setting up the business Administrative bottleneck Impossible to find financing ML paperwork is complicated Business idea was not good 6% Own decision 6% 11% 14% 17% 17% 29% 0%5%10%15% 20%25% 30%35% The illness of a family member often becomes an unsurmountable obstacle, as there is no infrastructure for providing care. Children are another difficulty for women entrepreneurs, who cannot travel to see to all the necessary paperwork. It is also difficult for them to accept the risk of investing in a business activity without knowing if it is going to be profitable, because they place top priority on their children s future. In their quest for financing, rural women entrepreneurs turn first of all toward the public sector, being unaware of the possibility of obtaining private financing. FADEMUR has observed this for many years and finds it difficult to convince rural women entrepreneurs that their businesses cannot be based exclusively on aid and subsidies which, moreover, take a long time to obtain. In fact, they calculated that only about 30% of the investment is usually obtained through public financing, and only when such programmes are available (Leader, Proder, Regional Labour Ministry, Social Security discounts). This figure is even higher than the results we found by interviewing the women entrepreneurs from Asturias involved in the Casa del Comercio Virtual project and those from FADEMUR, who had obtained only 20% of their financing through subsidies. Their initial inclination toward public financing can be explained in part by their fear of loans: they fear falling into debt, so are reluctant to ask for a loan. The above graph shows that fear of debt is the second reason given for not having set up their business (17% of interviewees). 72

75 Relations with banks is another basic element for rural women, in locations where relationships of trust and proximity are very important. This was the second most important difficulty faced by the women entrepreneurs (the responses from the two samples were consolidated), as shown on the following graph. In general, people living in rural areas turn to organizations or people they know when they have a problem or need. They turn naturally to the savings banks or banks where they have accounts when they need a loan, because they have Difficulties in access to banks (women entrepreneurs) Lack of collateral 53% Relations with bank 28% Others 19% established a relationship of trust with the people working there. But when such a relationship of trust does not exist, obtaining finance for setting up a business becomes more complicated. This is even truer for microloans: if the people to whom potential women entrepreneurs turn are not aware of microloan programmes, they are unlikely to be told about them. Microloans: Are they an appropriate tool for all rural women entrepreneurs? A distinction must be made between the real unsuitability and the perceived unsuitability of microloans to meet the needs of women entrepreneurs in rural areas. This study has showed that microloans, despite the impact observed in the first part of this document, are not suitable for all businesses in rural areas, or at least not to the same extent. We identified two main types of business, according to their activities and the investment needed to set them up: First, rural tourism companies, which have multiplied over the past few years. The investment in property required by this type of business entails a very high need for financing, so microloans are not a good option. The example of the women entrepreneurs participating in the Casa de Comercio Virtual and the members of FADEMUR illustrate this point: 36% of them (13 women entrepreneurs) opened a rural tourism enterprise, with an average investment of 302,455 Euros. While if we analyse the whole group of 27 rural women, the average investment amounts to 168,774 Euros. The other group is made up of companies, mainly for services, small shops or craftwork, which require a much smaller investment and have characteristics similar to those of microloan recipients in urban areas. For example, the investment considered by the rural women entrepreneurs who requested information about microloans amounted to 29,636 Euros. This amount is closer to that offered by microloans. 73

76 RURAL WOMEN, HIP AND These figures lead to the conclusion that the potential customers of microloan programmes in their current form are rural women from the second group, who require a small investment. Messages about microloan programmes in rural areas should therefore target such women. The rural tourism women entrepreneurs do not reject the idea of using a microloan, but to expand their business in the future rather than setting it up. The problem is that, for the time being, microloans are available exclusively for entrepreneurship, or for businesses that have existed for less than one year. Also, they target people who are excluded from conventional financial services, which is not usually the case of women entrepreneurs who have been able to finance a large investment to start up their enterprise. We also clearly noted the perception on the part of the rural women entrepreneurs that the microloan programmes are not suited to their needs, even when their profile, the characteristics of their business and their investment are similar to those of the usual beneficiaries of these programmes. This perception is the consequence of lack of information as to what microloans are, how they work, and who can apply for them. The entrepreneurs from Asturias who were interviewed participate, as stated above, in a Women s World Banking programme, this being an organization that works in the microcredit field in Spain. But even this group, which should be familiar with this topic, does not have a good understanding of what this is all about, because 37% say that they are not familar with or do not understand this type of programmes very well. Are you familar with the microloan programmes? Yes 63% No 37% If we add the data on the FADEMUR women entrepreneurs, we observe the same tendency: 36% of the rural women entrepreneurs are not familiar with this type of programmes. Of those who are familiar with them, 43% had not considered microloans as an option for financing their enterprise, for a number of reasons: because they had already found the necessary financing (45%), because they did not meet their needs (22%), but also for reasons that demonstrate a misunderstanding of how microloans work (33%). These reasons are linked to the conditions for obtaining a microloan: the women entrepreneurs believe that they cannot request one because they do not fulfill the required profile. The women entrepreneurs who had requested information about microloans and who were interviewed also showed very little understanding of microloans. To the question about why they had put a stop to or abandoned their project of setting up a business, 75% of them showed through their response that they did not understand how microloans work, 74

77 mentioning, for example, their lack of guarantees, their nationality or their family situation as obstacles for obtaining a microloan. They also mentioned the complex paperwork, and the excessive time it takes, because they did not even understand the process for obtaining this type of loan. FADEMUR had noted this lack of information: Microloans are a big mystery. Entrepreneurs have little understanding of them and are confused by them. They usually look for information about enterprise creation and financing in a variety of places: internet, local administration, banks, etc. The following table shows the consolidated results of the information sources used by the women entrepreneurs interviewed. Sources of information about entrepreneurship and financing. Mass media (Internet) 30% Public local administration 15% Business development centre 15% European programmes 13% Banks 7% Chambers of Commerce 6% Friends / acquaintances 5% Labour Unions 4% Others 5% Many regret that a one-stop shop does not exist where they can find all the information. It is difficult for the information to reach them because they go, in the first place, to entities acting in their local community. The organizations whose headquarters are in Madrid do not advertise much in such areas, and it is difficult for them to establish the necessary relationships of trust with women entrepreneurs, because of the geographic distance. It seems that local entities are not very familiar with microloan programmes either, since they do not tell local entrepreneurs about them. The information does not reach them or is not transmitted, even when it could open up interesting opportunities for rural women. The women entrepreneurs interviewed would like to obtain this type of information on entrepreneurship, financing and microloans from the following organizations: Business development centres. Town councils 39% Internet 25% Local development agencies 14% One-stop shop 11% Banks 6% Others 5% This indicates the importance of information sources at the local level. 75

78 RURAL WOMEN, HIP AND The interviews carried out with women entrepreneurs in rural areas, as well as with the Federation of Rural Women Associations (FADEMUR), enabled us to identify the difficulties faced by rural women in gaining access to financing and groups of potential beneficiaries of microloan programmes. Lack of infrastructure, fear of debt, distrust of banks and other organizations that are not local, distance from structures providing information and support for entrepreneurs - these are some of the problems that rural women face. Lack of information is an important difficulty and the main obstacle preventing access to financing without collateral and with better terms which might help women entrepreneurs from rural areas create their enterprises. Lack of information is an important difficulty and the main obstacle preventing access to financing without collateral and with better terms. 76

79 CONCLUSIONS ON MICROLOANS FOR RURAL WOMEN Throughout the world, research is being done on microfinance in rural areas, for the purpose of recognizing the validity and importance of this alternative financing tool in areas in which it is not easy to use. The Spanish women entrepreneurs who received microloans are very satisfied with their experience and consider that this tool has helped them. Their quality of life has improved, above all in psychological aspects, despite the stress and the reduction in the amount of time that they can devote to their personal needs. They have more confidence in the future than they had before participating in the microloan programme, and expect to continue improving the situation of their businesses and the material conditions of their families. This positive impact shows that this tool can be used to promote both employment for rural women and rural development by helping stop women from leaving the countryside. Nevertheless, the microloan is not the perfect solution for all groups, but targets can be segmented to focus on the women entrepreneurs who want to set up small shops, service or craftwork enterprises that require little investment. In any case, it continues to be necessary to overcome the real and imaginary barriers existing with regard to microloans, bearing in mind the difficulties on the part of rural women entrepreneurs when it comes to understanding how these products work, their fear of debt and their lack of confidence in organizations that are unfamiliar to them or far away from where they live and work. Only then will it be possible to really help rural women and give them proper access to alternative financing programmes. Recommendations Rural women face numerous difficulties for setting up their enterprises. Some are difficult to resolve, such as the lack of infrastructure, which prevents rural women from developing their business initiatives as they might in areas with more services. However, it is possible to act at other levels to contribute to rural development by, for example, promoting microloans, so that women who are interested and have the necessary profile can access this type of programme. What is needed is a strategy based upon three premises: 1.Adaptation of products to the needs of rural women. 2.An extensive campaign to provide information on these products. 3.Action at the local level. 77

80 CONCLUSIONS ON MICROLOANS FOR RURAL WOMEN 1. Adaptation of products to the needs of rural women This is the basis for any action. It is very important to take into account the specific characteristics of rural women entrepreneurs and of their businesses, in order to help them more. Greater flexibility is needed in the management of loans to take into account the seasonality inherent in certain businesses (agriculture, for example). We have also seen that many women entrepreneurs would like to obtain a microloan, not for initial investment in their enterprise (which they have been able to set up with an inheritance or with personal savings) but to develop it, to make changes or to expand the business. No such microloan product exists at present. Changes also have to be made by the advisers who help women set up their projects. Business activities are often specific to the rural environment in which they take place. It is therefore important for advisers to be aware of such differences and to be able to identify and understand the specific needs which might arise. In other countries, the same conclusion has been reached, and work has begun with specialized collaborators who have professional skills related to the rural activities. 2. An extensive campaign to provide information on these products. A campaign must be carried out to provide information about microloans, reaching the rural women who could benefit from them but are still not aware of their existence or have an erroneous idea about their objective and operation. The purpose would be to teach rural women about what microloans are and how they can help, and to show them that this tool is suitable for them and has already been successfully used by other women. Since we have noted that women often do not understand the current promotional material very well, more direct language must be used, providing specific information. The advertising brochures, as well as the written material used to give advice and process microloans must be made clearer. The content must be adapted to the reality of rural women, so they can identify with it. Readers need to understand who can apply for a microloan and that a bank guarantee is not needed. The paperwork must be clarified and an explanation given about the different organizations involved in the process. The counselling provided at any point during the process is also important. It must be made clear to the woman entrepreneur that she can easily and quickly access assistance (by telephone, Internet, visits) and that, despite the geographical distance, she is not alone in promoting her project. 3. Action at local level It is also essential to act at local level, to set up a relationship of trust with the rural women entrepreneurs, and to work closely with them, because these women particularly value these two concepts. Information about microloans must be channelled through the local organizations to which women entrepreneurs usually resort for information about creating a business and financing, such as the Town 78

81 Councils, local development agencies, but also Internet and banks. Articles in local newspapers may also be a way of getting the information to them. In addition to the information targeting the final recipients (rural women entrepreneurs) directly, it is necessary to inform the organizations acting as intermediaries, so that they can recommend the microloan programmes to people requesting information. Specific tools have to be developed to help inform and support rural women in the processing of their microloans. the entities that manage microloans. Apart from identifying such people, the creation of informative documents designed for them for the purpose of helping them in their relay work would be very useful. A possibility is to begin with a network that already exists, somewhat like the visitor network existing in the region of Asturias called Ese-Entrecabos (Leader Magazine, no. 35, March 2007), whose aim is to galvanize the social initiatives of the rural environment of this region. Collaboration might be set up with this entity to draw up a pilot project. Apart from the official organizations, relay networks in towns may be a possibility. This method has been used, for example, in France, by the ADIE microfinance association. Relays are people to whom the inhabitants of the towns turn when they are looking for advice or an opinion. They may be doctors, mayors, local development agents, etc. and are people who have a certain importance in their town and are capable of directing people to the right information, for example, to Such measures should result in extended use of microloans among rural women to facilitate the creation of enterprises, helping them remain in their towns and thus contributing to the development of rural areas. It is essential to act at local level, to set up a relationship of trust with the rural women entrepreneurs. 79

82 CONCLUSIONS MAIN CONCLUSIONS This study has permitted us to better define the profile of Spanish women microentrepreneurs, as well as the impact of microloans on their working and family life. They bring numerous improvements so appear to be an efficient tool for helping these women. At the same time, difficulties and negative aspects remain, and solutions should be found in order to optimize the positive impact of microloans. The microloan recipients interviewed, in general, were Spanish or Latin American. They were approximately 38 years years old at the time of requesting the microloan, lived with a partner, and their household comprised 3 people. They had university studies but had not attended any course on entrepreneurship. They had received a microloan to set up their business for an amount of 15,000 euros, which they will have to pay back in a period of 5 years. The tendency toward the services sector follows the national trend and demonstrates that microenterprises fit in the national business context. These new sectors of activity (such as business services) have good prospects for the future but are more complex to manage. We note that the women promoting them have a higher level of education than the average, but did not obtain the necessary financing from a classic credit entity because of their inability to submit bank guarantees. With regard to their motivations for setting up a business, we observed two tendencies. Some of the women chose selfemployment as a way of entering the labour market and leaving behind a more or less long period of unemployment. Such women, in general, were older and had little training. They depended to a great extent on family members and having their own job allowed them to obtain economic independence. The study indicated that each microloan had allowed the creation of 2 jobs, so it can be stated that the microloan is a good method for fighting against unemployment. Others, above all those who had worked before, chose self-employment for more psychological reasons. 55% used to work in the same sector of activity, but for someone else, so what has changed is their position they have become self-employed workers. We noted that the most valued improvement, after receiving the microloan, was for them to have their own occupation, to work for themselves. Overall, the psychological aspect was the one that had improved the most, and was also the most valued. Although they had not fulfilled their material expectations, 57% of the women entrepreneurs considered that their quality of life had improved since they obtained the microloan and started up their enterprise. The self-confidence and self-esteem of the women entrepreneurs had greatly improved, as well as their empowerment in the home. It is difficult to compare different countries because gender equality has developed differently. In a country such as Spain, where almost 49% of the working population is made up of women 80

83 (according to INE statistics for the 3rd quarter of 2007), the possibility of going shopping without asking for permission is greater than in other countries where women depend upon their husbands. We therefore noticed little improvement at this level, because the majority of the women interviewed affirmed that they made these decisions themselves or with their partner. The most significant evolution was noted with Latin American women, the main people to benefit in this respect. Another very interesting aspect was that the business skills of the women interviewed had greatly improved with their selfemployment experience. They felt more at ease negotiating with suppliers and customers and understood the financial system better. The evolution in their relationship with the banks was very positive, so the objective of facilitating access for women to these entities was fulfilled to a great extent. The results varied more in material aspects. 69% had reached the minimum income necessary to cover the needs of their household. 31% still needed more money to live on but the businesses studied were still young so income may improve with time. 52% still did not receive a wage from their business, because revenue was limited and only served to pay the expenses, make the debt repayment and meet other unforeseen expenses. At the beginning of the business, the family at times had to maintain the business instead of living off it. 85% of the women entrepreneurs stated that they had had to give up some aspect of their life since they set up the business, in general personal relationships and leisure time. They worked an average of 61.2 hours a week, which made it difficult for them to have a social life, to reconcile work and family life and to participate in the life of their community. The aspect of their life that had been most affected was the time they dedicated to their personal needs. Material improvements were late in arriving; they can only be considered in the middle and long term. In spite of this, figures for satisfaction were very good. 57% of the women entrepreneurs stated that their quality of life had improved since they received the microloan and opened their business. 79% had more confidence in the future than before because they had new aspirations, and 94% were still convinced that they had done well by choosing self-employment. 96% considered that the microloan had helped them. It is obviously too soon to reach definitive conclusions. The majority of the enterprises studied have existed for less than three years. A follow-up on these businesses and the women entrepreneurs is necessary in the medium and long term. As for the businesses that had closed down, the factors leading to the closure were varied and complex. The countries of origin of the women entrepreneurs were more varied than the average, the women entrepreneurs were older and more were alone. The sectors of activity of the businesses were more traditional (commerce, hospitality) and the loan repayments were higher than the average. The level of education of these women entrepreneurs was higher, but they were possibly not up-to-date. In fact, none of these elements alone explains why the 81

84 CONCLUSIONS business had failed, this being due to a combination of factors. A complicated personal situation and a business that is not running smoothly may lead to closure of the business, but in some cases the decision has little to do with the difficulties, but is rather a personal choice. In general, the businesses had had difficulties from the very beginning. RECOMMENDATIONS The conclusions reached by this study about the current impact of microloans on the life of Spanish women entrepreneurs and their opinions about the current programmes allow us to establish a list of recommendations and courses of action for the future. 1.Improve the context for entrepreneurship The responses of the microentrepreneurs about their experience highlight a number of limits for entrepreneurship. First, the difficulty of any working woman, even more so if she is self-employed, to reconcile her job with her family life. The time dedicated to personal needs is the aspect most affected, and working almost 61.2 hours a week does not permit a mother to be with her children as much as she would like. It is essential to create infrastructures for child care, and to consider reconciliation of the working and family life of self-employed women. Another important topic is business legalization. Most of the women interviewed were willing to do the necessary paperwork but the process may be slow and the shortage of resources does not allow women entrepreneurs to wait until the business is legalized before opening it. The same thing happens with workers. Women entrepreneurs want to take on help but the lack of flexibility in employment contracts and the high costs of social security are prohibitive: to legally hire workers would be more of an obstacle than an advantage for these new businesses. It is difficult to find solutions to this problem, because these are legal issues. We need to keep working to make things easier and to achieve flexible conditions for new businesses. Many women entrepreneurs have been through complicated situations associated with their status as self-employed workers. An illness can hinder the opening of the business and, without income, the entrepreneur gradually gets into debt. Fortunately, the laws adopted over the past year have taken these specific difficulties into account. Thus, the Law on Equal Opportunities makes reconciliation a priority topic and the new Dependency Law foresees the creation of structures to facilitate integration for caregivers. The Self-Employed Workers Statute also recognizes the rights of self-employed workers in the case of illness, unemployment, maternity leave, etc. The main challenge now for improving the context for creating businesses and supporting the projects of women entrepreneurs is the actual enforcement of these laws. 82

85 2.Improve access for women to microloan programmes In Spain, only 58% of microloans are granted to women entrepreneurs, well below the world average of 84%. Therefore, it is necessary to continue working on improving their access to microloan programmes. The women interviewed stated that the current level of microloan advertising is insufficient. Many women entrepreneurs are not aware of these programmes or do not know they can apply for them. The geographical distance between the offices that administer microloans and women entrepreneurs place of residence or work is another barrier for accessing the financing they need. These two elements are certainly true in the case of rural women, who are isolated from information centres. It is therefore essential to increase the dissemination of these programmes and to diversify the means of communication used. The new technologies represent an interesting opportunity: as we have seen, Internet is the first source of information used and allows us to reach groups which are far away in geographic terms. Communication through entities that can offer recommendations is also an option. Women entrepreneurs usually seek for information from organizations that are close by, such as town councils, local development centres, banks, NGOs and foundations, so collaboration with such entities should be promoted. 3.Increase programme flexibility and speed up paperwork The microloan programmes put into operation in Spain all have similar characteristics: an amount of up to 15,000 Euros, 5 years to pay it back, with a current interest rate of about 5%. But not all businesses are alike, nor do they have the same needs in terms of investment and repayment. Therefore, microloan agents should consider how they can adapt the terms of their loans to the actual needs of each business. The change most requested by the women interviewed for improving the current programmes was possible extension of the microloan, to upgrade the business created or to face temporary cash problems, when financial pressures endanger the survival of the business. Currently, the majority of microloan programmes does not include this possibility or limits it to enterprises that have been open for less than one year, on the assumption that the enterprise should already be profitable. But this position does not take the reality of women entrepreneurs into account, since most of them are still unable to gain access to a loan in the conventional financial system. Refinancing of the debt should also be offered more systematically when the entrepreneur has difficulties in repaying her microloan or has no choice but to close down her business. This tool would be advantageous for the different players involved: it unburdens the entrepreneur, who sees a way out of her situation and can focus on her work (whether making her business prosper or working for someone else) and, above all, it permits the bank to recover its money, although 83

86 CONCLUSIONS over a longer term. Above all, the primary objective of the microloan is maintained, which is to help women improve their life, through self-employment. In these two cases, the key is speed. An enterprise that is having difficulties requires a quick solution. If not, it may be impossible to save it. For an optimal effect, refinancing of the debt and/or an increase in the loan should be organized as soon as possible. It is necessary to speed up the paperwork, to analyse these situations and provide the necessary help quickly. Lastly, the women entrepreneurs mentioned the possibility of taking out insurance in case of difficulties in the business. They made special mention of the problem of managing the business in the event that they are off work, when an illness can lead to closure of the enterprise and to a situation of heavy debt. They would also like to take out loan insurance. 4.Prevent risks in management of the business In their experience with business creation counselling, the professionals are able to identify elements that may represent a risk of failure for the business activity, or at least important problems. Active prevention programmes against such risks should be put into operation. In their daily work, the specialists who process the microloans should step up their efforts to detect possible risks and search for solutions. Possibilities include: Additional counselling for people who are alone or for immigrants, who cannot count on assistance from those around them Questioning the validity of the business activity. In the case where personal problems exist, it might be appropriate to wait a little and if the business sector chosen entails a lot of competition, the time allowed to achieve a competitive position should be extended Pointing women entrepreneurs who show limited knowledge about management and accounting toward organizations offering this type of training. Even when the project viability is demonstrated by the business plan, identification of risk factors should entail greater efforts in follow-up and counselling. It would be appropriate to make women entrepreneurs aware of the risks they might take in their business activity, through specific programmes. This information is usually provided but women entrepreneurs often think they are not going to be affected by such difficulties. It would be a good idea to find other ways of getting this important message across to them and of transmitting to them the importance of some elements, such as the support of their family environment and being willing to adapt to the needs of the business, in terms of work schedules, activity, etc. It would also be appropriate to break down certain myths. Many women entrepreneurs believe that, if they can organize their workday as they wish, they will have more time to be with their children, although the statistics show that they end up working more than 60 hours a week on average. 84

87 5.Diversify activities to avoid problems in financial and business management Working in the microloan sector does not mean just processing loans. The various Spanish organizations are aware of this and, many years ago, set up training and counselling programmes. But follow-up is not limited to the creation and development of business initiatives. Microentrepreneurs may have difficulties and even have to close down their businesses, in which case it is often difficult for them to find the support they need. The risk of over-indebtedness is inherent to the obtaining of a loan. In the case of the microentrepreneurs, repayment of the debt may be complicated when the enterprise does not generate much income. Risky attitudes are sometimes adopted: the first reaction of some of the women interviewed in the case of not having money saved up for unforeseen expenses would be to go to their bank to request a loan. This could be the first step in a spiral of debt. It is important to give warnings to this effect and to carry out follow-up, particularly during the first few months of existence of the business and the grace period, in order to detect payment difficulties as soon as possible and provide solutions. A system of integral counselling is lacking in the event of closure of the enterprise. At these times, the women entrepreneurs are often completely alone and do not know what to do. They need advice about winding up their enterprise and possible refinancing of their debt, help to find a job after the closing and a solution to their situation of indebtedness. They also lack moral support, recognition of their experience as an entrepreneur and of the know-how acquired during the period of self-employment. The organizations that work in the microcredit field should diversify their activities to include these new issues 85