The impact of microcredit financing on employment in Algeria

Numerous empirical studies show that microcredit is an important tool for poverty reduction and contributes to strengthening the health and education sectors. However, very few studies have examined the relationship between microcredit and employment creation at the national level, particularly in the context of employment structure. This study analyses the impact of microcredit on employment creation in Algeria. The study uses the Algerian Financial Social Accounting Matrix (AFSAM) multiplier in analyzing the impacts of microcredit on formal and informal employment in total, and by gender as well as skill level in the various economic sectors during the First National Employment Policy (NEP), Second NEP and Additional Microcredit. The results show that the most effective microcredit policies for employment creation occurred during the First NEP (2010-2014). The allocation of microcredit to the services and transport & communication sectors during the First NEP increased the growth of formal employment among skilled female, while the allocation of microcredit to the agriculture, forestry and fishery, and industry sectors in the Second NEP and Additional Microcredit increased the growth of informal employment among unskilled females. The results show that different allocation of microcredit in various sectors are very crucial to increase the employment of the target groups in Algeria. Further results suggest that microcredit has improved the structure of female employment despite the marginal changes in the overall employment structure. This study will be beneficial to policy makers and industry practitioners in evaluating the impact of microcredit on employment creation in Algeria. This study will also benefit other researchers in developing better linkages among various policy options through the development of a Financial General Equilibrium Model.