Tag ‘Audrius Zabotka’
Microfinance is gaining growing recognition as a cost-effective tool for both social inclusion and regional economic growth in Europe. In 2010, the Lithuanian Government used part of its European Social Fund (ESF) allocation to promote entrepreneurship in the country through a financial instrument, called the Entrepreneurship Promotion Fund (EPF). A total of €14.48 million in ESF funds was distributed as low-interest loans and loans with favourable terms to SMEs and start-ups in Lithuania. The SMEs were also offered free training and consultations on how to strengthen their business.
“The combination of different measures – guarantees, training, interest rate subsidies, and compensation for employee salaries – was very important, not only for financing SMEs, but also for ensuring their sustainable development in the future. Together with experienced partners we ensured that the emerging market gap was immediately addressed and that the instrument was flexible enough to satisfy the demands of young SMEs,” said Audrius Zabotka, General Director of INVEGA, the guarantee institution established by the Government of Lithuania and supervised by the Ministry of Economy.
The EPF aims to address the market gap in access offering low-interest loans (up to €24,907) at better-than-market conditions, in combination with free training, to micro and small enterprises that have been operating for less than one year, as well as individual entrepreneurs and business-oriented social enterprises. Priority is given to disadvantaged groups, including the unemployed, disabled, youth (under 29 years of age) and individuals over 50 years old.
The combination of loans and training is a very important aspect of the strategy. Although training is not obligatory, it is very popular among the SMEs. Providing training on different aspects of business development improves entrepreneurial and management capacities. It also increases the scope for creating jobs and reduces the probability of loan defaults by the entrepreneurs.
Zabotka continued: “We believe that we have reached the primary aim of this financial instrument – to promote self-employment and entrepreneurship as a sustainable way of keeping people active in business and the labour market. Moreover, by the end of 2014, due to the re-investment nature of this instrument the value of loan agreements with final recipients was 27% higher than the total amount of the total fund. In other words, 27% of funds were already re-invested.”
The EPF issued its first loan in November 2010. Since then, the EPF has supported over 1,100 new businesses, which have created almost 2,600 new jobs.
Supporting youth in finding their first job
From 2013, INVEGA implemented its ‘Support for the first job’ instrument, which seeks to promote youth employment. Using this instrument, a part of the salary of a young employees (16-29 years) in their first job, is reimbursed to the employers. This instrument represents a new kind of support, allowing young people to gain work experience, and encouraging employers to invest in young people. There is currently €9.27 million allocated to this instrument from the ESF.
Zabotka said: “Usually it is hard to find your first job just after your graduation as young people don’t have much experience in the labour market. On the other hand the employers say that is too expensive to train young specialists and they tend to change jobs frequently. Thus, this measure aims to bring real benefits for both sides. At the moment we have more than 2400 companies investing in over 16 000 young people.”
Support under this instrument is available to both private and public legal entities (excluding budgetary institutions), branches and representative offices of foreign companies in Lithuania, and natural persons employing staff under 29 years of age.