Hard to reach but not excluded

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Hard-to-reach but not excluded EQUAL provides business support to hard-to-reach people

Contents

Encouraging entrepreneurship among the disadvantaged

Approximately half as many women as men set up a business[1], and the proportion of self-employed young people and ethnic minorities[2] is lower than that for the population as a whole. Some EU Member States also report that start-up rates are 10 times lower in their worst performing areas than in their best.[3]

One reason why the potential[4] is not realised is because, for many disadvantaged groups, the risks of losing income (from benefits, casual work or the submerged economy) by becoming an entrepreneur often appears greater than the likely gain, especially when they have a dependant family and/or a precarious legal status (for example, they have just arrived from another country).

Business support providers can be helpful in controlling or reducing the risk for these groups. However, they usually have little information on the business needs of the people that face discrimination on the labour market and likewise, social economy enterprises rarely have any contact with business support providers. This means that disadvantaged groups as well as social economy enterprises often do not receive appropriate guidance from business support services.

In addition, potential entrepreneurs from disadvantaged groups often see little reason to trust or identify with traditional business support providers. And the fact that the disadvantaged tend to have few role models or contacts with successful entrepreneurs from their peer group distorts their perceptions of the risk involved in setting up a business.

Finally, entrepreneurial attitudes and skills are not sufficiently addressed by training and education establishments.

EU pledges long-term commitment to developing small business

The European Union, through both the European Regional Development Fund (ERDF) and European Social Fund (ESF), plays a leading role in shaping the nature of business support in Europe. Around a third of the total EU budget for SMEs is directed at different kinds of business support[5]. The ESF dedicates around €8 billion - or 14% of its total budget for 2000-6[6] - to a broad package of measures to develop entrepreneurial skills, business start-ups, business networks and the promotion of enterprise. This commitment will be maintained and possibly increased. Action to support entrepreneurship is raised under all three proposed priorities for the ESF and the three new objectives proposed for the ERDF for the period 2007-13[7].

The rationale for public policy intervention in the field of business support services is based upon three main arguments. Firstly, the European Employment Strategy recognises that "some 22 million jobs need to be created to reach the Lisbon employment rate target in 2010."[8] The strategy accepts that it is not possible to achieve these goals exclusively by increasing employability or adaptability, particularly in lagging regions.

Secondly, the Commission's Green Paper on Entrepreneurship argues that "entrepreneurship should be widely promoted with a particular focus on women and other underrepresented groups." By way of illustration, the UK states that there is a loss of €8 billion per annum, 88,000 firms and thousands of jobs as a result of lower start-up rates in inner city areas[9].

And thirdly, the Green Paper on Entrepreneurship recognises that "business support services available seem to respond less well to their (ethnic minorities and disadvantaged groups) specific needs." Improving these services is often far more cost-effective than keeping people unemployed.

At EU level, it is recommended that these business services should meet a series of priorities that include putting users needs first, improving outreach and communication, stressing the importance of role models, improving entrepreneurship education[10]. It is also argued that "creating awareness of support services among micro, small and sole proprietor's businesses seems to be the most important challenge for support service providers in the future" and recommends that "business support places an emphasis on initial diagnosis of SME needs prior to assistance being granted"[11]. Indeed, the European Commission's DG Enterprise has developed a methodology for analysing SME needs and gaps in relation to the existing support available to them[12].

Building bridges between local communities and new business

From the perspective of disadvantaged groups or areas, key elements of success have come from:

Research to develop clear information about the target public. Providers of business support services participating in EQUAL have undertaken extensive research to acquire better intelligence about the specific business support needs, profiles and opportunities of disadvantaged groups, areas and sectors (i.e. the social economy). In other cases, the kind of business support that works best for specific groups and contexts is systematically analysed and monitored.

The results of this research have been directly used:

to increase the quality of business support strategy and procedures in national and regional programmes (for example, the content of programmes, specific targets and monitoring arrangements which take into account the needs of specific groups, contracts specifying when, how and how much specialist outreach services intervene, when they hand over to mainstream support services, and quality guidelines for specific services, such as women-friendly "business incubators") to improve operations of both general and specialist business support services by training employees to take into account the differences between potential entrepreneurs (for example, by providing guides on routes out of benefit dependency into entrepreneurship that analyse the major hurdles faced by disadvantaged people and by all those in the submerged economy when trying to move from social security benefits into self-employment). On the basis of international comparisons, a series of policy recommendations for improvements to benefit systems and practical hints that should be taken into account when providing business advice have been formulated in some countries. to allocate considerable resources to business support programmes and schemes, targeting under-represented groups (up to 30% of the budget for entrepreneurship). Business start-ups have been shown to increase by up to 20% per annum in regions where the above approaches have been undertaken.

Strategies for getting out into hard-to-reach communities (outreach). Disadvantaged groups will rarely take the first step of coming into a business support office. Therefore a number of approaches have been developed to overcome this problem:

First approach: offices are set up in the middle of the hard-to-reach communities, while at the same time creating a style attractive to the target public with good referral networks from both social services and representative groups (ie. youth groups). In Germany, it was calculated that such a service to young people costs around €6,000 in an inner city location and €8,000 in a rural area. Given unemployment benefits of €750 a month, this means that the costs are covered after eight months self-employment in the city and 11 months in rural areas. A variation on this approach, when the region is very large, is to create mobile offices; Second approach: subcontract part of the service in a "hub and spoke" model to specialist agencies more firmly enrooted in the communities supported and therefore able to engage far better with its client group by providing tailor-made services. Users are, however, to be referred to mainstream support agencies at an agreed point. One region involved in EQUAL has used this model to create 700 companies and 1,400 jobs among hard-to-reach groups; Third approach: train local NGOs to provide business advice themselves, thereby building on the trust they have acquired within their communities. In some cases, this training also allows these NGOs to acquire recognised professional qualifications.

Building bridges between local needs and entrepreneurship.

Local and social economy support services no longer restrict themselves to waiting for entrepreneurs to come into the office with a business idea for an existing market. Many take a far more proactive role by creating data bases of potential business ideas and actively promoting certain market niches (e.g. for rural tourism or particular craft products). Social Economy Projects often play a similar role of broker between unmet social needs, the public sector and unused human potential. For example, projects may train and qualify immigrant women providing care services in the informal economy, use voucher schemes, open up public contracts and promote their services directly within the community.

Promoting positive role models of entrepreneurship among local communities. EQUAL partnerships have tested effective ways to promote positive role models of entrepreneurship by:

disseminating promotional leaflets, posters and by organising publicity campaigns in the media. All promotional images show people who are confident, energetic and fashionable. organising contests and competitions for entrepreneurship among particular groups to reinforce the idea that the businesses are far from marginal. to make a wider impact, some EQUAL partners have pooled resources[1] [2] with various actors to achieve larger scale initiatives, such as TV series. Support for teachers and trainers to build entrepreneurial attitudes and skills. Besides promoting entrepreneurship in secondary schools and training centres via the use of tools, such as simulated business games, EQUAL has also developed support tools for teachers, influenced the mainstream curriculum and had an effect on training institutions with a particular focus on groups that face disadvantages.

Policy recommendations

The good practices tested under EQUAL reinforce the policy orientations and priorities at EU level by addressing the business needs of under-represented groups. Business support services can benefit from:

  • increased take-up among disadvantaged groups and more start-ups by using demographic profiling of business needs and the demographic monitoring of the effectiveness of all stages of business support in order to adapt their services to real needs. This can be done to complement the existing methodology developed by the European Commission's DG Enterprise (see above).

improved effectiveness towards disadvantaged groups by making a clear analysis of the barriers that prevent people progressing along routes out of benefit dependency.

  • increased creation of viable businesses in deprived communities by assuming a brokerage role in opening up public and private sector markets and connecting unmet social needs with unused human resources. This is where the social economy and its support structures can generally go further than conventional businesses.
  • changed "mindsets" of disadvantaged groups by increasing the visibility of successful projects and communicate positive role models. There is considerable scope for national and transnational cooperation in this area for both disadvantaged groups and the social economy.

The objectives of social affairs and employment policy-makers would be within easier reach if they recognise that schools (and training establishments) are central players in inclusive entrepreneurship strategies. Adjusted curricula and support for teachers can ensure that entrepreneurship education also addresses the needs of groups that face disadvantages in the labour market.

  • National and regional funding programmes (specifically those that fit within the relevant EU policy frameworks, such as the European Employment Strategy, the Structural Funds, the European Charter for Small Enterprises, the Multi-annual Programme for Entrepreneurship and the Entrepreneurship Action Plan) that incorporate entrepreneurship objectives could improve their effectiveness and efficiency by better co-ordinating between relevant government departments, agencies responsible for business support and regional actors like development agencies and business organisations.

Notes and references

[1] Global Entrepreneurship Monitor. 2002. See also Strengthening women's entrepreneurship. The ADAPT and EMPLOYMENT Community Initiative. Innovations No 4. 1998

[2] Diversity and Equality for Europe. European Monitoring Centre on Racism and Xenophobia. Annual Report 2001.

[3] Small Business and Government. The Way Forward. SBS. Department of Trade and Industry. 2002

[4] According to the third report on economic and social cohesion (A new partnership for Cohesion EC 2004) "these disparities contribute to lower levels of income and employment than can potentially be achieved and lower the growth potential to the detriment of all not just those directly affected."

[5] Creating an entrepreneurial Europe. The activities of the European Union for small- and medium-sized enterprises. COM 2003 21 + 26. EC 2003.

[6] A new partnership for social cohesion. Third Report on Economic and Social Cohesion. E.C. February 2004.

[7] Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund (Com 2004) 495 and on the European Social Fund (COM (2004) 493.

[8] Joint Employment Report 2003/2004. European Commission.

[9] Small Business and Government. The Way Forward. UK Small Business Service. 2002

[10] The following are key references to EU policy recommendations in this area: EC Strategic Evaluation of Financial Assistance Schemes to SMEs; EC Report on Support Services for Micro Small and Sole proprietor businesses; EC Action Plan on Entrepreneurship; EC Staff Working Paper "Creating Top Class Business Support Services"; Report of the Employment Task Force chaired by Wim Kok; the Joint Employment Report 2003/4.

[11] Strategic Evaluation of Financial Assistance Schemes to SMEs. Commissioned by DG Budget. Final Report. 2003

[12] Support Services for Micro Small and Sole proprietor businesses. DG Enterprise (2002)