This employment aid programme, which was set up in 1994 and is managed by the Labour Administration Department, is used to finance small-business projects through small-scale repayable loans.

The administrators of the "support fund for the informal sector" (FASI) accompany small businessmen and thus provide them with access to the traditional banking system which is not normally interested in financing such operations; as a result of this mechanism, benefiting businesses have become more structured and have moved beyond the informal sector.

The fund became independent in 1998⁽¹⁾.

One of the main reasons why self-employed workers remain within the informal sector is that, due to a lack of financial security, it is impossible for them to gain access to the banking sector. The State therefore proposed financing the start-up phase of small-business projects with small-scale repayable loans and, in a second phase once the project is functioning effectively, guaranteeing a link with the banking sector.

This mechanism originates partly from an analysis of the reasons for the failure of the Employment Aid Fund for SMEs and microbusinesses (FONAPE) in 1991: that endeavour, which offered loans to young people, often students, in order to finance their return to and establishment in the countryside in a pilot village, failed owing to its very interventionist character and hasty implementation.

It was, however, necessary to try new measures which would help to find a possible way out of the informal economy in Burkina Faso, and in particular in Ouagadougou.

The support fund for the informal sector (FASI) was therefore set up initially as a financial aid programme; its main aim was to provide help in the form of repayable loans to businessmen operating in the informal or "non-structured sector".

The aims of the Fund

The FASI programme had both educational and economic objectives: on the one hand, for small-businessmen to familiarize themselves with modern credit tools and to try to make their activities financially viable and, on the other hand, for Burkina Faso to take steps towards strengthening the economic fabric whilst reintegrating economic players into the structured economy.

The following strategic objectives were defined:

increasing national production and improving the quality and competitiveness of that production;
increasing the absorptive capacity of the workforce and stabilizing actual existing jobs in the sectors concerned;
increasing the contribution of the informal sector to national production with the aim of replacing imports;
promoting better distribution of income for the benefit of poor and vulnerable sections of the population of Burkina Faso;
accelerating the modernization process of a number of minor trades, the activities of which are placed above or below the modern sector, in order to facilitate the transfer of these trades into the sphere of the SMEs/SMIs.

Specific objectives relating to economic, sectoral, technological or commercial concerns were defined with a view to:

improving productivity, notably in the manufacturing industry;
increasing the rate of employment of informal sector players in the urban or semi-urban environment;
creating conditions for developing the export of products specific to Burkina Faso;
encouraging the use of local materials and the recycling of by-products;
promoting the use of basic technologies that are better adapted to local conditions;
modernizing and rehabilitating large consumer commodity production sectors (shoe-shiners, broilers, restaurant owners, fruit-sellers).

The role of the different players

The FASI was established following a meeting between the Head of State and those responsible for the social and professional sector of Burkina Faso in June 1994. The Ministry of Employment, Labour and Social Security was chosen to supervise the technical aspects, while the financial aspects came under the jurisdiction of the Ministry of Economics and Finance.

The FONAPE was first chosen to implement the FASI programme. However, after three years, the FASI needed its own structure, principally because the FONAPE was no longer able to ensure its own stability (due to the non-repayment of loans to which it had agreed), and thus put the FASI programme at risk.

During 1998, the FASI was in the process of becoming legally established⁽²⁾ after having operated for three years as part of the FONAPE; it became independent from the FONAPE (which has since stopped operating) on 18 March 1998 and has its own Management Board and Budget Committee.

The social partners, who essentially represent the formal sector of the economy, have not been involved at all either with administering the fund or with defining its objectives, but were very much in favour of such a mechanism being established.

The FASI aims to develop a partnership with already operational ground structures (to oversee the implementation of projects) and joint, public or private bodies operating in fields which are of interest to the FASI, as well as with financial backers who may regard the FASI as a way of achieving specific objectives.

FASI resources

The procedure for preparing, filing and processing applications is intended to be simple and instructive. A model showing the steps to be followed when presenting a project document is sent to the applicant. The following information is attached to the application:

field of intervention of the FASI;
interest rate according to the area of activity;
maximum amount of intervention from the FASI according to whether the project is presented by one or more people, or an association;
deferred repayment deadlines;
credit allocation period.

A project promoter files his project document with the FASI which duly acknowledges receipt thereof.

The project document is processed depending on the field of activity envisaged by an expert, who gives an opinion after having studied the document.
The experts together form the internal technical committee: this committee preselects the applications which meet the requirements regarding form and substance defined by the FASI and prepares them for the budget committee.
The budget committee selects the applications approved for funding.

When the financing of a project is agreed, a legal and administrative file on the promoter is compiled (identity, Burkinese nationality, no financial commitments with local financial institutions, certificate of approval for associations):

the conditions of the loan which he may receive are explained;
together with the promoter, a disbursement schedule (each instalment depends on the gradual implementation of the project) and the repayment conditions (length, delay, frequency of repayments) are fixed;
a minimum security for the project is settled: joint surety bond and notorial deed for the loan.

Labour, material and financial resources of the Fund

At the beginning, the FASI programme functioned with one person in charge of monitoring operations under the responsibility of the Director General of the FONAPE together with four collection officers in the provinces. Applications were studied and on-site visits were carried out with technical support from the other divisions within FONAPE which, in 1997, comprised approximately twenty officers, four of whom were government officials provided by various administrations pending the establishment of a specific statutory framework.

Some officials have been employed specifically for this programme on the basis of a recruitment test. However, due to a lack of funding, it has not been possible to implement a training programme. It should be noted that the lack of a regulatory framework within the FASI has made it difficult to evaluate the performance of individual officials (who come from different administrations).

The lack of specific office and computer resources has probably limited the large-scale development of the Fund's activities, but is not a major problem with regard to its objectives. There is, however, a software programme for calculating loan repayments. A study of investment into software programmes is currently underway (for accounting purposes, managing loans and assisting project studies) in order to be able to process information reliably and reduce the time needed to finance a project, thus increasing the credibility of the project with external partners likely to finance the FASI.

The continuing funding of this scheme is a crucial problem: the first (and to date only) stage of the Fund was guaranteed by the state budget within the context of co-operation between the State and China (Taiwan). The structure currently being established anticipates the discontinuation of state funding, with the Fund being financed with the aid of the repayment of the loans that have already been granted. A triennial budget should be implemented.

Evaluation of and prospects for this scheme

Run by some twenty people, seven of whom have managerial status, the FASI programme was given an initial sum of CFA 350 million francs; this money financed 166 micro projects at the rate of CFA 2 to 7 million (FRF 20 to 70 000, or US$ 4 to 13 000 per operation), giving rise to the actual creation of 600 jobs.

The rate at which the loans granted during the first stage are being repaid is a good indicator of the success of the scheme; after one year of operations a third of the monies lent have already been reimbursed. However, a large number of applicants for this type of loan come up against the limited resources of the Fund. Thus, 1 900 applications were awaiting funding in 1997.

Given the lack of previously fixed criteria regarding success, FASI officials are often asked questions relating to those benefiting from the scheme as well as to the financial integrity of the FASI. However, the insufficient financial and institutional backing of the Fund makes a precise evaluation difficult.

Nevertheless, questions concerning the services provided by the Fund, its financial capabilities and customer satisfaction were examined and gave rise to the following responses when the FASI was restructured in 1998:

gradual implementation of statutory and institutional instruments;
downward revision of the maximum amount of aid provided;
need to develop information technology using adapted business software;
strengthening of the collection and legal department;
creation of an internal supervisory authority.

Moreover, the FASI Management Committee has adopted a procedural manual as part of the current restructuring of accounting procedures, expenses, client payments, asset management, the granting and management of financial aid, and human resources management.

The scheme run by the FASI is therefore interesting in that, like other micro-finance schemes in other parts of the world, it shows that it is possible to supplement individual initiative and to consolidate it at low cost, thus enabling individuals to stabilize their personal situation and permitting them to become more established in the formal economic sector.

The risks hanging over the continuation of the scheme are the result of insufficient public funding due to the narrow margins within which the government may operate, even if the method by which the scheme operates appears to guarantee a sufficient rate of repayment from benefiting businesses. Moreover, within the present context, the FASI does not foresee a link with the implementation of a scheme to provide minimum social protection which could well complement the project.

1. This report has been compiled mainly from information prepared at the request of the ILO by M. Zaïda, the current head of FASI.

2. Decree n 98053 of 24 February 1998.