György Molnár (Kiútprogram)

Lessons learnt and policy recommendations from the self-

employment and microcredit programme

With support from the EU

From pilots to outcomes. Evidence-based lessons on socio-economic inclusion of Roma communities

Conference organised by the European Commission15 March 2013, Brussels

What is Kiútprogram?

Social microcredit programme targeting the poor and socially excluded Roma communities in Hungary

Initiated by a private foundation in 2009

2010-2012: a pilot project of Pan-European Coordination of Roma integration Methods – Roma inclusion: self-employment and microcredit, EU DG Regio.

After September 2012 continued from private sources (without Hungarian governmental support).

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Inclusive social microcredit

Mission

Enable people, mainly Roma, living in poverty and social exclusion, to become self-employed, by providing them with information, social assistance, financial and business services.

Aims Job creation via self-employment in the formal economy. Create sustainable micro-enterprises. Promote social mobility and Roma inclusion.

Main tools

Providing unsecured loans of relatively small amounts.

Intensive and permanent support by well-trained fieldworkers.

Group-formation (without joint financial liability and sequential lending).

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Special features of inclusive social microcredit

Compared with traditional 'stand alone' microcredit

Different target group welfare bridge is needed. No collateral, small amount (max 3500 euros). The lending activity can't be profitable in business sense. (In

Kiútprogram experience 1 year survival rate of the new enterprises is around 60%; lending losses are around 30-40%)

Essential that field workers unite the activities of social workers and loan agents within one person.

Inclusive social microcredit programmes should contain both financial and social elements in integrated form: lending, saving and other banking services; personal mentoring and community building; different kinds of training: communication, financial, business

administration and professional; mediating networking capital.

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Main lessons learnt

Inclusive social microcredit is an adequate self-employment generating tool for poor Roma having entrepreneurial dreams and skills, while traditional microcredit schemes are insufficient.

Promotes social mobility by creating sustainable micro-enterprises. Social mobility is enhanced by giving self-confidence to the Roma

and decreasing discrimination simultaneously. Social microcredit is not inexpensive, however - within the target

group of potential entrepreneurs - it is much more efficient than public work and other active labour market programmes.

Social microcredit can be a profitable investment at the level of the national economy.

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Main lessons learnt, continued

Integration of clients as primary producers into existing agricultural production networks is a very efficient form of social microlending. In this case entrepreneurial skills are less important.

Social microcredit, supplemented with production network building, appears to be capable of strengthening social cohesion and advancing integration.

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Policy recommendations – EU-level

Specific initiative for inclusive social microcredit is needed. Existing microfinance schemes (e.g. JASMINE, Progress Microfinance Facility) are tailored for 'normal' microcredit activities.

Inclusive social microcredit programmes should be multifaceted, containing social and business elements and supported by financial facilities which recognise the relatively high operational costs and lending losses.

Modifications in the regulation to allow for tax exemptions to agricultural primary producers, at least in the disadvantaged regions.

EU-level pressure and support is needed to include social microcredit in the national Operational Programmes.

Financial services by the banks available to the poor should be encouraged also on EU-level.

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Policy recommendations – national level

Inclusive social microcredit should be included in the national Operational Programmes.

The provision of normative financial support is essential for the long-term unemployed to launch entrepreneurship.

Tax benefits or other incentives to strengthen the employment (including self-employment) of people with low educational level.

Reduction of administrative burdens of becoming an entrepreneur; removing entrance barriers for micro- and small enterprises.

National regulation should be harmonised with the legal and financial requirements of social microcredit.

Strengthening the organisational structures and tools that could secure efficient counteraction against discrimination of the Roma.

Specific training programs meeting output (and not input) indicators. Financial services by the banks should be available for the

marginalised communities.

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Thank you for your attention!

György Molnár

Kiútprogram and Institute of Economics RCERS HAS

molnar.gyorgy@krtk.mta.hu