Loans granted by MicroBank facilitated the creation of 21,321 jobs in 2015, according to an ESADE study

The financing granted by MicroBank, a social bank wholly owned by CaixaBank, decisively contributed to the creation of 21,321 jobs in 2015, according to a report by the Institute for Social Innovation at ESADE Business School commissioned by the financial institution. ‘Since it was founded in 2007, the support that MicroBank has provided in the form of small loans has played a key role in the creation of 155,000 jobs’, underscored Antonio Vila, president of MicroBank. ‘This has had a significant impact on family well-being and economic growth.’

One of the main conclusions reached in the ‘Report on the Impact of Microcredits’, which was drawn up based on a survey of MicroBank loan recipients conducted for the sixth consecutive year, was that this type of financing has facilitated job creation, both through the incorporation of new companies and the expansion of existing ones. In fact, around 93% of the entrepreneurs to receive financing still work at their own business, and 29% have hired at least one employee since receiving the microcredit.

‘The relationship between microcredit and the creation or consolidation of jobs is reflected in the fact that 93% of microloan recipients work at their own business, and 29% have hired one or more employees since the microloan was granted’, explained Mar Cordobés, a researcher at the ESADE Institute for Social Innovation and the author of the report. Significantly, 43% of the surveyed entrepreneurs said they plan to hire one or more workers in the next 12 months. In these cases, the average expectation was two new hires per microbusiness.

Reasons for starting a business

Entrepreneurs by necessity, i.e. people who decide to start their own business due to a lack of better options in the job market, account for 20% of the entrepreneurs granted a loan by MicroBank in 2015. These are entrepreneurs who were previously either unemployed or afraid of losing their job.

Entrepreneurs who said they had started their business to take advantage of a clear business opportunity accounted for 24% of the total. The percentage of entrepreneurs seeking to continue a family business or drawn to entrepreneurship by vocation was also significant.

Optimism about the future

Loan recipients are optimistic about their future. Some 70% believe their business will grow quite a lot or moderately in the coming months, whilst 26% believe it will remain steady. Only 1% thought that sales would drop and they would have to close. Based on their business’s current performance, 57% thought their business was doing well and 12%, very well. Additionally, a majority of the respondents who had expanded an existing business reported that their business was doing better than the previous year, compared to only 6% who said it was doing worse.

The surveyed entrepreneurs are convinced that opening their own business allows them to take on new challenges and develop new professional skills, although 92% also said they are aware that it involves longer hours and less security and stability than working for someone else.

Developing the business sector

According to the ESADE survey, 67% of the microloans granted in 2015 were used to expand an existing business, whilst the other 33% were used to launch new initiatives. Some 72% of the businesses do not have a separate legal status, and the people who run them are self-employed. A limited liability company was the most common legal status, accounting for 21% of all cases, whilst other types of companies accounted for only minor percentages.

Most of the new businesses have just one (72%) or two (22%) owners, which is consistent with the preponderance of freelancers.

Professional services and retail

One important finding refers to the sectors in which the microcredit recipients choose to conduct their business. Some 48% of the businesses fall within the category of professional services, followed by retail (29%), and the hotel and catering industry. The percentage of businesses related to new technologies was slightly higher than in previous years (4% of the total). The professional services category included a wide range of businesses, from beauty salon and hairdressing services to law firms, consultancies, taxis, transport companies and photography studios.

Profile of recipients

An analysis of the profile of the surveyed entrepreneurs offers important insight into the types of clients who take out a microloan to finance their business. Men accounted for 50% of the total and women for 31%; the remaining 19% consisted of loans to legal entities.

As in previous editions of the report, the largest group consisted of entrepreneurs between the ages of 36 and 49 (42% of the sample), followed by those between the ages of 26 and 35 (20%). The average recipient of a MicroBank loan is 40 years old.

Most microloan recipients have a secondary education (42%). This group is followed by recipients with higher education (32%), which account for a larger share than in previous reports. The share of entrepreneurs with no education remains very low and does not exceed 1%.

With regard to geographical origin, as in past editions of the report, 75% of all recipients were Spaniards. They were followed, at a significant distance, by recipients from the Americas (17%) and other European countries (6%). Recipients from Asia or Africa barely accounted for 1%.

Some 65% of all recipients were already working as freelancers prior to being granted the microcredit, whereas 19% worked for someone else. A total of 15% of the surveyed entrepreneurs had been unemployed before receiving the loan, a lower percentage than in past reports. This improvement could be due to the economic recovery.

The role of microcredit

The importance of microcredit and its role as a tool for fostering financial and social inclusion is reflected in the fact that 50% of the respondents said they would not have been able to start or expand their business without the microloan. An additional 27% believed they could have, but that it would have been very difficult.

Contribution to household income

Special attention should be paid to the economic dependence on the businesses started with the microloans. Income from the microbusiness was the main source of income for one person in 30% of the cases and for two people in 27% of the cases. These figures underscore the crucial importance of business success not only for the entrepreneurs themselves, but also for their families.

In 30% of the cases, the entrepreneur’s income accounted for more than 75% of household income, whilst in another 29%, it accounted for between 50 and 75%. Only in 14% of the entrepreneurial initiatives did it account for less than 25% of household income.