György Molnár Policy Recommendations Based on the experience of the Kiútprogram With support from the EU A Way Out – and a Possible Way Forward Social Microcredit, Financial Inclusion and Self-Employment Kiútprogram Closing Conference 4 September, 2012 Brussels

Main lessons learnt  Inclusive social microcredit is an adequate self-employment generating tool for poor Roma having entrepreneurial dream and skills. However, it is not universally conducive to reduce poverty  Capable of promoting social mobility and creating sustainable micro- enterprises. Its efficiency is better than the efficiency of public works.  This type of intervention, supplemented with production network building, appears to be capable of strengthening social cohesion and advancing integration.  Such programme is impossible to be implemented without the intense, continuous presence of field workers. 2

Lessons learnt in group formation  The original group based model works only in the case of very strong community  Without strong community sequential lending can be dysfunctional  However, group lending has great advanteges to individual lending even without seqentiality: Group provides security and protection Helps exchange of experiences Facilitates field workers' activity 3

Lessons learnt in lending process  A microlending project can only be successful if the bank/the institution technically administering the loans is fully cooperating  More flexible loan products are needed  The one year long duration of the loan is sometimes too short  Retailers would need classic current assets loans following the initial investment  Saving is crucial 4

Policy recommendations 1 Efficient social microlending is only possible with committed state involvement. To successfully operate a social microcredit programme, a predictable regulatory environment is needed. It is necessary to provide normative support to become an entrepreneur to previously unemployed new business owners. It is necessary to provide an allowance for taxes or contributions payable when people with low education level are employed – including self-employment. European and national regulations must be modified in order to also extend support for social contribution / tax allowances to agricultural entrepreneurs (primary producers), at least in the disadvantaged regions. 5

Policy recommendations 2 Financial services by the banks available to the poor should be encouraged. Social microcredit should be harmonised with the national regulation of the financial and stock market. The national states must encourage large corporations to support social microcredit as part of their corporate social responsibility (CSR) programmes. It would be necessary to further strengthen the organisational structures and tools that could secure efficient counteraction against discrimination of the Roma. The administrative burdens of becoming an entrepreneur should be reduced; the entrance barriers should be removed especially for micro- and small enterprises. Specific training programs meeting output (and not input) indicators 6

Policy recommendations 3 A specific initiative for inclusive social microcredit should be announced at EU-level. Inclusive social microcredit programmes should be multifaceted so that they can also provide social and networking capital in addition to traditional micro loans, including: –Continuous mentoring. –At least basic professional training opportunities; –Training in community development and networking; –Financial and business administration training; –Business network development. Before scaling up the programme in multiple countries, conducting pilots are essential, for which the tender framework needs to be setup by the EU. Monitoring and impact evaluation built into operating procedures and supported / audited by an external party are necessary for both pilots and regular operations 7

Thank you for your attention! 8