Mon –36 Poverty Reduction through support for income-generating activities/start-up businesses and socio-economic integration of Refugees
Swiss Agency for Development and Cooperation/German Foreign Ministry/The Netherlands’ Ministry for Development Cooperation :: € 620.000
:: REALISATION / BUDGET
April 2005 until December 2006
:: SHORT DESCRIPTION
The economical development of Montenegro shows first signs of improvement; in 2002 the gross national product reached again 63 % of the level before war (in 2000 it amount to 60 %), after a decade of regression. The real economical growth for 2003 is estimated at about 1,5 %. Among other things, beside a big budget deficit and high foreign debts inflation and unemployment are problems, which handicap economical development.
According to Montenegro’s Employment the number of people registered as unemployed amounted to 72.544 in November 2003 and 68.990 in May 2004, a quite important decline in contrast to the situation in 2000. In 2003, according to Montenegro’s Employment Office, 25.130 new jobs have been added. However, due to the change of law concerning the payment of social insurance contribution, independent observers are of the opinion that in most of the cases it is a legalization of already existing jobs of people, who used to be employed in the non-official sector before. The institution for strategic studies names the unemployment rate for the year 2002 with 23,25 and for 2003 with 21 %.
All in all in spite of the positive signals referred to above one can say that the economy of Montenegro is still in a critical situation. Especially the fact that most of the unemployed are young people, who are the most productive elements of the society, causes concern. The independent Research Institute for Strategic Study and Prognosis has found out that 70 % of the unemployed in Montenegro are younger than 30 years. The number of unemployed, born after the 08.12.1973, presently amounts to 29.610 according to the current figures of the Employment of Montenegro.
The critical economical situation of the country has also an effect on the living conditions of the population. According to the Institute for Strategic Studies and Prognosis (ISSP) poverty assessment, the national rate of poverty including, Roma, Askalia and Egyptians, refugees and IDPs, is 12.2%, while among the resident population it is somewhat lower (9.6%). The poverty rate is several times higher among RAE (up to 60%), refugees (up to 48%), and displaced persons (up to 46%) as compared to the resident population. Fully one-third of the Montenegrin population is very close to the poverty line. The percentage of economically endangered and those who are not materially provided for is significantly higher among RAE, refugees, and displaced persons (up to 69% for refugees to 76% for RAE).
Since the end of the war on the Balkans and the return of the Kosovo-Albanians to Kosovo altogether 13.000 refugees from Bosnia and Croatia still live in the Republic of Montenegro, as well as 18.000 persons who fled from Kosovo. Under the present conditions a return of the displaced persons from Kosovo is not feasible. Also, it is very likely that the bulk of the refugees will not return back to their homes. Therefore, especially the displaced Serbian part of the population tries to integrate itself into the Montenegrin society.
A Feasibility study realized by HELP Montenegro in January 2001 showed that employment opportunities and income generating activities are the most important chance to improve the socio-economic situation of refugees and IDP`s. This type of activities neetly fits into the strategy as outlined in the draft “Development and Poverty Reduction Strategy for Montenegro”, which the Government of Montenegro is about to finalise. The total costs for the realization of this plan amount to € 440 millions for the next three years!
Among other the strategic approach to poverty reduction in Montenegro envisages to create the preconditions for self-sustainable and balanced economic development that will reduce the rate of the economically endangered population and to ensure social stability. It also aims to reduce the poverty among the refugees and internally displaces persons, as well as the Roma population which as shown above is clearly above the rates of the native population.
Finding permanent and sustainable solutions for refugees and IDPs thus becomes one of the government’s objectives. Income generation projects constitute the most promising way to help their integration in Montenegro as already pointed out in the feasibility study carried out by HELP in January 2001 since they address one of the most urgent problems – employment. They enhance the self-reliance capabilities of people who in the worst case have been dependent on assistance for more than a decade.
Furthermore, orientation towards income-generating projects as one of the most important and feasible means to fight poverty is in line with the key UN Millennium Development Goals aiming to eradicate the worst forms of poverty by creating employment opportunities, improving health care, education, housing, and environmental protection, promoting gender equality, dealing with regional, rural and urban aspects of poverty, and by working towards the realization of basic human rights.
The objective of the project is poverty reduction in Montenegro. This will be achieved through material and other support for income-generating activies and start-up businesses. The provision of material inputs in combination with appropriate vocational and business trainings and legal advice will create much needed job opportunities for the impoverished segments of the population in Montenegro. The programme is directed towards the most vulnerable population groups (refugees, internally displaced persons, disabled persons, Roma, the rural population and uneducated persons) who want to become the owners of their own development with a clearly specified vision of their own future and a specific plan for the achievement of this goal. Enabling selected beneficiaries to better positioning themselves on the labour market and earning an income will boost employment opportunities and eventually reduce the level of poverty in Montenegro.
Due to the transition processes, tax burden, and other obstacles the gray economy in Montenegro is widespread and accounts now for some 30% of GDP in the country. The informal economy has taken almost all the possible forms characterising economies in transition and the underdeveloped economies. It is estimated that at least 50.000 to 70.000 persons are working illegally or in the sphere of the informal economy. While the gray economy has negative effects on the overall economic development with those participating in the informal sector directly reducing the competitiveness of those who are operating in the formal sector it must also be recognised that the gray economy provides the easiest (and in the case of refugees the only) access to the labour marked for the most deprived segments of the society. The challenge is therefore to bring the two sides together by convincing the newly-employed to eventually operate within the formal economy. For this reason all potential beneficiaries of this programme will be channeled and dealt with within an existing network of the Agency for the Development of Small and Medium Enterprises and Local Business Centers which are operated by public institutions (municipalities).
The most successful participants of the programme will eventually hire more employees thus creating new jobs and providing a positive socio-economic impact to a larger number of indirect project beneficiaries. Eventually this will contribute to the overall reduction of poverty within the country.
This project is based on the experience of a number of income-generation projects implemented by HELP in the last three years in Montenegro as well as in Serbia and BiH. Most of those projects targeted individual beneficiaries, while an ECHO funded project implemented in 2002/2003 in Serbia targeted social institutions. The motivation and willingness expressed by the beneficiaries to take part in such projects proved to be extraordinarily high. The strategy to support their own income-generating ideas in order to enable them to become independent from governmental or humanitarian relief support proved to be viable and successful as was confirmed by the results of own and independent evaluations performed at the end of those projects. Additional multiple impacts were achieved on the municipal level, through the implementation of small-scale municipal projects and socio-economic integration of selected beneficiaries into the local community.
The demand for income-generation projects in Montenegro remains high given the present socio-economic situation in the country. Experience in the past years shows that demand by far exceeds available resources.
Implementation of this programme will draw on the experiences made by HELP supporting income-generating activities in countries of the Western Balkan as mentioned above. However, this does not imply that same activities will be carried out exactly the same way as in the past. Drawing on lessons learnt and changing conditions the strategy will be adapted and a system will evolve over time that best suits the needs of both beneficiaries and national development.
Most importantly, as already referred to above, is to bring the socially disadvantaged groups who want to become economically active closer and eventually within the formal economy. Exclusive access to the benefits of this programme is through the Local Business Centers in the respective municipalities. This provides a unique opportunity of first contact with the formal system and a platform for propagating formalisation and legalisation of economic activities as well as other business services available within the formal sector. Most important among those are information on credit/micro-credit facilities for successful participants of this programme as well as training opportunities.
Selected beneficiaries will be supported with an average amount of in-kind grants in the form of material inputs valued at EUR 1.200.
The target group comprises unemployed refugees, IDPs and other socially vulnerable people with sound income-generating ideas, motivation, basic skills and other necessary preconditions to start up or develop economic activities in order to become self-employed and this way provide a regular income for their families. Selected beneficiaries will be provided with material inputs; it is also intended to provide for specific groups of beneficiaries vocational and business training as well as professional advice and guidance through the form of one-on-one tailor made individual counselling. Expertise and support will also be provided with a view to legalisation of their activities helping them to choose the right mode of registration to best fit their specific situation. Special attention will be given to education on legal aspects of business – starting with registration, taxation duties, employment regulations etc.
All material inputs will be provided as grants, but HELP includes a strong ‘social repayment’ component. Beneficiaries will be obliged to repay 15 % of the value of the grant in cash. This repayment is generally to be done upon handing over of the material assistance provided within the framework of this programme. Part of the funds thus generated will be used for various training activities while the remaining funds will be used for the implementation of small-scale socio-economic municipal projects. Additionally, beneficiaries will donate labour inputs of 10 hours to communal works. Communal works will be defined in co-operation with the municipalities and other public institutions; they may include small repairs in public buildings such as schools, cleaning of communal areas, donation of certain products to institutions of public interest etc. Thus this project connects in an exemplary manner economic assistance for able and motivated persons with social involvement for those who can not help themselves any longer due to handicaps or for reasons of age or other reasons.
In general, all income generating activities (crafts and trade, services, agriculture) can be supported depending on the available resources and the economical potential in each individual case. Women-headed households with children will be treated as priority cases.
The programme will support persons with sound business ideas to start up or resume economic activities that are suitable to provide them with a regular income. These may be small repair work shops (for all kind of craftsmen’s trades such as metal work, carpentry, electricians and the like), fishing, tailor workshops, minifarms, production of cheese, drying of herbs, small bakeries, packaging and the like. A total of 200 beneficiaries, including refugees, internally displaced persons and socially vulnerable people in the local population will benefit from this project.
Beneficiaries will be selected in two steps. All applications are reviewed by the “Agency For the Development Of Small And Medium-Sized Enterprises.” This agency evalutates the viability of proposed economic activities from a purely economic perspective and also whether they are in line with national development perspectives for the respective areas. In a second step, HELP staff together with representatives of Local Business Centers makes home visits to those beneficiaires selected by the agency – assessing the household situation and further claryfing the proposed economic activity.
Cooperation with other partners
A close cooperation has been established with the Agency for the Development of Small and Medium Enterprises as well as the Local Business Centers in the municipalities covered. However, cooperation has been mainly limited to the selection process of beneficiaries as well as certain monitoring exercises towards the end of the project cycle. HELP proposes now to intensify this cooperation and include other partners in order to provide further assistance to its beneficiaries such as advisory assistance and guidance in order to empower them to eventually become sustainable and independent by developing to the maximum of their capacities.
Some of the additional services to be offered within the framework of this project are:
– Provide various vocational and business trainings designed in such a way to best suit the individual needs and capabilities of each beneficiary included in the project, based on an in-depth beneficiary assessment and knowledge on local business and market trends.
– Provide assistance in individual marketing operations and creation of market studies undertaken by beneficiaries who have registered their start-up businesses or developed existing ones.
– Help the start-up businesses to get a better insight and understanding of the local economy, as it will focus on the services from individuals to individuals, as well as general economic trends.
– Organise follow-up assistance for the businesses that encounter specific problems during the implementation of their activities.
– Study the conditions for the beneficiaries to register legally their activities and give them all the possible help and guidance through this process.
– Study the possibility for beneficiaries to access micro loans, if the development of their activities requires an additional investment.