1. 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 Commission 15 March 2013, Brussels

2. 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). 2

3. 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). 3

4. 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. 4

5. 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. 5

6. 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. 6

7. 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. 7

8. 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. 8

9. Thank you for your attention! György Molnár Kiútprogram and Institute of Economics RCERS HAS molnar.gyorgy@krtk.mta.hu