For a better employment and social inclusion of Roma High level event on Structural Funds contribution to Roma integration in Slovakia 23 May 2011, Bratislava György Molnár KIÚTPROGRAMKIÚTPROGRAM The objectives and results of Kiútprogram Self-employment and microcredit program in Hungary

Kiútprogram – way out from poverty Kiútprogram is a pilot project of Pan-European Coordination of Roma integration Methods – Roma inclusion: self-employment and microcredit, EUROPEAN UNION REGIONAL POLICY, June May Kiútprograms mission is empower people living in poverty – mainly of Roma origin – to improve their situation with dignity, by providing them with financial services, information and social assistance. One of our central goals is to demonstrate: under or non-employment of people living in extreme poverty is not a welfare optimizing choice, but the absence of possibilities. Business profit is not targeted. Social impact is targeted (incomes on social level + saved social costs > direct costs of the program). 2/8

Characteristics of Kiútprogram To achieve our goals Kiútprogram provides unsecured loans for years relatively small amounts (max Euros) to people living in poverty (upper income limit: 60% of the median) to create income-generating ability through self-employment Group-based lending no joint financial liability peer pressure instead of collateral sequential lending encouraging saving behavior, group saving 3/8

Characteristics of Kiútprogram, continued Fieldagents in central role. Working in the formal economy. Our clients become sole proprietors or licensed primary producers. Free of cost book-keeping for the clients enterprises. Welfare bridge in the form of support to the new entrepreneurs Sites Villages with high Roma population in the area of collapsed heavy industry of Northern-Hungary. Agricultural villages with high Roma population of the Great Plain. An urban crisis area in Budapest, with ethnically mixed population. 4/8

KIÚTPROGRAM PLC RAIFFEISEN BANK EXPERTS, SHAREHOLDERS Government POLGAR Foundation Loans and savings Loan guarantee IT system Advocacy Feedback Networking Field work Accepting business plans Client and program administration Loan agency Monitoring & evaluation Quality control EU connections Main owner Civil connections Analysing social impact Financing welfare bridge and other related costs Regulation, laws World Bank/UNDP Impact evaluation Monitoring support Advocacy EU DG Region Roma integration pilot project Finance (1.43 mill. Euros) Control Institutional structure 5/8

Stages First loans: September 2010 September 2010 – January groups 39 group-members 31 loan-takers Euros Activities: vendors, mainly mobile (food, vegetables, clothes); woodcutters; cleaners, animal husbandry (pig, poultry); welder; hairdresser; bricklayer; craftswoman January and February: redemption problems March-April: partial rethinking of the model 5 malicious clients excluded from the program May 4 new groups with 8 starting loans 2 new loans for old clients who have repaid their first loan Euros arrears 6/8

Main lessons learnt In our target segment self-employment is preferred to employment. About half of our potential clients are formalizing former informal activity diminishing vulnerability. Trust is a central element of the whole process, we offer more than just capital. Roma clients living in integrated areas (in the village) achieve better results than clients living in extremely segregated circumstances. Dangers of trading activities. Importance of entrepreneurial dream and skills. Welfare bridge may have destructive effects. Our greater obstacles: bureaucracy and over-regulation 7/8

György Molnár Kiútprogram, Member of the Board and Institute of Economics, Hungarian Academy of Sciences