Nouvelle-Aquitaine, the expanding financial deserts

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Financial deserts are gaining momentum in the territories of France. They are therefore a major challenge that the government and the regions have been addressing in recent years. In addition, the health crisis focuses on the isolation of rural areas and therefore of companies in these territories. To help companies recover, the State is investing 100 billion euros in the Recovery Plan. However, according to theSofos Institute, Think Tank for the Competitiveness of the French Economy,most of the potential benefits of the device will not reach rural areas, due to a lack of sufficient legal, financial and organizational skills. The Think Tank has therefore published in 2021 a study on financial deserts, their causes and issues. As well as recommendations to structure ecosystems in rural territories.

seeking financing business consulting financial deserts rural areas
Financial deserts accentuate the desertification of rural areas, to the benefit of large metropolises.

Financial desert, a phenomenon accentuated by the redistribution of regions in 2016

Whether it is to develop a company, create a company, take over an activity, managers need to be able to surround themselves with the right professionals. They seek access to financial resources and skills relevant to their project. These interlocutors can be other entrepreneurs, venture capital funds, chartered accountants,business lawyers, wealth managers, organizational consultants, public actors, training centers, investors… (1) Moreover, in order to create synergies, all actors must be organised into a structured and dynamic ecosystem.

In contrast, these organized ecosystems are traditionally found in metropolises. A situation that has become even more accentuated with the wider redistribution of regions, intensifying centralization away from rural areas. Thus, on the periphery, in rural areas, companies are confronted with the small number of qualified actors able to support them for their development, their financing or even their current problems.

There are too few actors in the regions capable of taking risks alongside local actors.

2021 study by the Sofos Institute, Think Tank

Desertification of banks, indicative of abandonment?

In fact, in the territories, the bank is often the only interlocutor of the entrepreneur. Nevertheless, they themselves are closing their rural bank branches, again depriving businesses of local contact. Indeed, in 10 years, banks have eliminated 3,500 branches. This represents about 10% of the 36,000 agencies still in operation. To realize the desertification on the territory, it is possible to rely on the distribution of automatic teller machines (ATMs) (2). Which are, moreover, less and less backed by a counter with advisors.

distribution of ATMs in France financial deserts
Banque de France report,“Public access to cash in metropolitan France”,June 2019

Thus, in Nouvelle-Aquitaine, the least well-off departments are Charente (16), Dordogne (24) and Lot (46). At the opposite extreme, only the Gironde (33) and especially Bordeaux are very well equipped. On the other hand, according to Bruno Lemaire, the situation in France is “satisfactory”. And the bill against banking desertification in rural areas was not retained by the National Assembly.

The distribution of ATMs in France also strangely echoes the gaps of experts for companies. It reflects the map of financial deserts.

Apart from the Bordeaux metropolis and some active economic zones (La Rochelle, Pays Basque-Sud Landes, Agen, Poitiers, Niort, Limoges), the rest of Nouvelle-Aquitaine faces a lack of financial skills, in the former Limousin, Charente, South Gironde and North landes regions in particular.

Jean-Étienne Palard, lecturer and member of the scientific committee of the Sofos Institute

Household savings invest little in local economic development

However, financing opportunities are far from being limited to banks. In the territories, the savings of the population are also an underestimated and largely under-exploited economic reservoir. According to the Sofos Institute, financial deserts are also the consequence of “the inability of the financial system to direct household savings towards the financing of companies, especially SMEs”.

development of enterprises investment SMEs eti financial deserts
The savings and investment vehicles of the French are little varied and rarely turned to local companies.

In addition, the health crisis has led to a historic increase in the amount of savings in France (3). Thus, on average over the year 2020, the household savings rate rose by 6.4 points, to reach 21.3% of income in 2020, against 14.9% in 2019. According to estimates by the Banque de France, savings would reach 130 billion euros in 2020. This is already $30 billion more than the government’s Stimulus Plan budget. Moreover, projections estimate the amount of savings in 2021 at 70 billion. That’s 200 billion euros in 2 years.

However, this savings is mostly sterile by being either blocked on a current account, or simply placed in a savings account with a notoriously derisory return. As for investments in the real economy, they rarely benefit the local economy and the development of territorial businesses.

French savers prefer to invest their money in real estate or in euro funds, because there are not enough local savings products.

Study of the Sofos Institute

According to Boursorama, the financial wealth of the French consists of life insurance, retirement savings (40%) and cash (36% of current accounts and booklets). Securities (shares, bonds, etc.) represent 14% of the amounts saved. The remainder (10%) is invested in employee savings. (4)

The place of financing activities at the heart of the territories cannot be reviewed without rethinking in depth the organization of local architecture and its interactions with the social and entrepreneurial world. […] Beyond the taste for risk, it is necessary to reconcile savers and local businesses by making the company the lever of territorial growth… Attracting skills to the territories is another challenge.

Study of the Sofos Institute

For the Sofos Institute, involving the population in the financing of local companies implies above all to structure a network of actors capable of collecting and promoting information on local projects.

Structuring and enhancing the local financing ecosystem to reduce financial deserts

The lack of funds hinders the development of SMEs and mid-caps. As a result, they struggle to invest, recruit, and remain competitive on international markets. To remedy this, the Nouvelle-Aquitaine region is investing in measures to encourage the creation of new businesses; supports SMEs in their change of scale towards mid-caps to enable them to internationalise; help with business takeover, transfer, acquisitions…

coworking business incubator third-place network
About 1800 third places for companies in France and a national policy for rural third places to reduce financial deserts.

In rural areas, to overcome the financial deserts, the government and the regions are committed to developing third places. The basis to be able to animate a network and support local companies. According to the mission led by Patrick Lévy-Waitz in his report “Doing together to live better together” of September 2018, the number of third places amounts to 1,800 (1). They would thus be a little more than 220 in Nouvelle-Aquitaine. To boost the creation of rural third places, the State is releasing a budget of 15 million euros. To this is added the budget for the Digital Pass, to the tune of 10 million euros.

Examples of structuring at the local level include the initiative of the Communauté de Communes de la Haute-Saintonge (5). Which seeks to get involved in the economic development of its territory with creators or developing companies. To this end, it structures its assistance around 7 notable axes: advice for the creation of companies, the reception and follow-up of the file for the installation of the project leader; assistance and advice to SMEs/SMIs for investments or recruitment; the preparation of investment aid files for economic projects eligible for public aid; the search for investors and sources of financing; the creation of 4 business incubators, three of which are specialized, and 3 business hotels; the organization and management of business areas; the animation and networking of departmental, regional, national and European interlocutors.

Sources

  1. The State is committed to third places in the territories,Ministry of Territorial Cohesion, June 2019
  2. “Stateof play of public access to cash in metropolitan France”,Banque de France, June 2019
  3. “Thepurchasing power of households’ RDB increases in the fourth quarter of 2020″,Insee, 26 February 2021
  4. The wealth of French households,Boursorama, 1 June 2021
  5. Accompanies Entrepreneurship and Success, Haute Saintonge
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