Integrating Microfinance and Cooperatives for Jobs Creation in Tunisia

Although Tunisia has completed its political transition toward democracy, its economy remains fragile and faces huge challenges. Professional insertion of young people in the labor market is among the top economic priorities of the country. Sound public policies with the objective of creating employment opportunities on a short-term horizon have to support the implementation of structural reforms aiming at boosting the private sector, improving the labor market and restructuring the education system. This paper is a contribution to the discussions on short-term solutions to the youth unemployment, which may accompany structural policies over the long term. We propose a jobs creation program for the youth including several components. The implementation of the proposed program assigns an important role to the government in terms of training, incentives to involve the private sector and in terms of funding. The originality of the proposed program is in linking microfinance to cooperative structure; two efficient tools against social exclusion and which are underutilized in jobs creation in Tunisia. The financial participation of the government is proposed according to a specific funding mechanism of Islamic microfinance: decreasing partnership. This mode of financing allows for a full public financing of the cooperatives' capital with an exit strategy after several years, incentivizing the cooperators to generate sufficient profits to buy the government shares