Employment impact assessment of parts of the NASIRA risk-sharing facility

For a summary of the report and its main findings, please see the Information Brief below.

A central task of the ILO STRENGTHEN2 project is to conduct employment impact assessments of public investments in sub-Saharan Africa, with the goal of promoting the creation of more and better jobs. Among the mandates of the project is to conduct a series of in-depth employment impact assessments on investment projects supported by the European Union (EU).

The EU's involvement in Africa encompasses a range of initiatives, from direct investment to the provision of financial instruments. One of the most frequently utilized instruments is the credit guarantee scheme (CGS), which provides assistance to local banks in leveraging loans. In this regard, the NASIRA project is a particularly relevant example of this kind of intervention. NASIRA is a risk-sharing facility designed to provide a second-loss guarantee covering up to 95 per cent of the losses of the underlying portfolio of loans. It is funded by the EU and the Dutch Government. This innovative facility encourages banks to extend loans to individuals and businesses that are typically deemed too risky, such as micro, small and medium enterprises (MSMEs), young entrepreneurs, women, and migrant entrepreneurs. Since its inception under the European Fund for Sustainable Development (EFSD) in 2019, NASIRA has aimed to support MSMEs across Africa and the European Union’s neighbouring countries. Over the past few years, the facility has demonstrated significant progress, leveraging valuable lessons learned to inch closer to its ambitious target of mobilizing a portfolio of €500 million in loans to underserved MSMEs by August 2024.

An ex-ante employment impact assessment (EmpIA) of parts of the NASIRA portfolio is conducted in this study. The portion of the NASIRA facility included in this assessment concerns the funding to three banks for the support of MSMEs, of which two are in Kenya and one in South Africa. Given the available information, this assessment provides only estimates for non-direct employment. These employment effects are defined as the employment generated from the purchase of inputs required for scaling up production, after the loans have been granted, together with the jobs created due to increased income of employees.[1]

The two first banks received from the Dutch Entrepreneurial Development Bank (FMO) a total of €89 million in the year 2020, whereas the third bank received around €14 million in 2021.To consider these values in relative terms, new investments made through the NASIRA programme in 2022 amounted to €78 million, after €82 million in 2021.
This assessment estimates the creation of around 12,900 jobs, considering the indirect and induced effects of the loans granted to individual firms. Considering the structure of labour demand resulting from these loans, and using the input-output multipliers, a positive bias in job creation for women and skilled workers is estimated. On the other hand, the analysis also finds evidence of a negative bias against formal and youth employment.

1. The traditional input-output related literature would refer to these as indirect and induced effects. Here they are interchangeably referred to as either "non-direct" or "indirect" effects.