Download Kiútprogram – A Social Microcredit Program for the Roma in Hungary

With support from the EU
György Molnár
Kiútprogram – A Social Microcredit Program
for the Roma in Hungary
A Way Out – and a Possible Way Forward
Social Microcredit, Financial Inclusion and Self-Employment
Kiútprogram Closing Conference
4 September, 2012 Brussels
Motto
With adequate social opportunities, individuals can effectively
shape their own destiny and help each other. They need not
be seen primarily as passive recipients of the benefits of
cunning development programs.
Amartya Sen: Development as freedom
The vision of the program
 Enable people living in deep poverty, primarily Roma, to become
self-employed, by providing social assistance and financial services
 Promote social mobility and Roma inclusion
 Microcredit as a tool
 Social impact vs. business profit
 Benchmark: job creation, employment expansion programs
 Aim: to create sustainable micro-enterprises
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Why we choose microcredit?
 High employment level before system change, also for Roma
 The Roma are the main losers of system change
 Low education and employment level
 Social exclusion, strong prejudice against Roma, segregated Roma
areas
 No investment in underdeveloped areas and for poorly educated
 Failure of state initiated job creation programs
 Low share of services and micro-enterprises in the whole economy,
especially in underdeveloped areas
 In this situation development of micro- and small businesses
could be a viable step  national Roma strategies
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The subject of the pilot – what can we learn?
 To test the adaptation possibilities of the Grameen Bank model
 Significant differences in the environment:
• Premature welfare state
• The capital demand of a new business is higher
• High level of taxes
• High level of bureaucracy
• Lower density of the poor
• Distrust in lending financial institutions
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The launch of Kiútprogram
 Initiated by Polgár Foundation in 2008
 Feasibility study in 2009
 Contracts with the Hungarian government
 Kiútprogram became a pilot project of Pan-European Coordination
of Roma integration Methods – Roma inclusion: self-employment
and microcredit, EU DG Regio, 2010-2012.
 Field workers’ training started at the beginning of 2010
 Three areas
• collapsed heavy industry
• agricultural
• crisis area of Budapest
 First loans: September 2010
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EU DG Region
Institutional structure
Roma integration
pilot project
Finance
(1.43 mill. Euros)
Control
POLGAR
Foundation
RAIFFEISEN
BANK
EU connections
Main owner
Civil connections
Analysing social impact
Loans and savings
Loan guarantee
IT system
World
Bank/UNDP
KIÚTPROGRAM
PLC
EXPERTS,
Advocacy
Feedback
Networking
SHAREHOLDERS
Field work
Accepting business plans
Client and program administration
Loan agency
Monitoring & evaluation
Quality control
Impact evaluation
Monitoring support
Advocacy
Government
Financing welfare bridge and other
related costs
Regulation, laws
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Main features of the Kiútprogram model
 Unsecured loans of relatively small amounts (max. 3500 EUR)
 Real interest rate around 10% (yearly), weekly repayment, 1 year
loan period
 Encouraging saving
 Groups of 5 loan recipients, sequential lending (2 – 2 – 1)
 In the formal economy: sole proprietors or licensed primary
producers. Important difference from other models in the region.
 Field workers play a much bigger role than in the original model
– Support in preparing business plans, administration.
– Support in the bureaucratic process  reduces discrimination
– Support in debt management. Financial and business education.
 Free of cost book-keeping
 Welfare bridge
We provide not only financial, but also social capital. The role of trust.
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The correction of the model
 Target group
• more attention to entrepreneurial capabilities ("entrepreneurial dream")
• previous informal business acitivities
• social connections
more self-confident and optimistic clients
 More flexible group formation
 Shorter waiting time in sequential lending
 More flexible loan period – but not enough, institutional constrains
by the bank
 Decrease in the amount of the loans
 Introduce network building activities  good examples
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Base performance indicators
Settlements screened
202
Persons screened (personal connection with field workers)
900
Number of intake questionnaires
447
Pre-groups
60
Groups formed
44
Settlements with formed groups
38
Group-members
192
Number of loan recipients (clients)
138
Entrepreneurs
75
Licensed primary producers
63
Number of loan disbursements a
Value of total portfolio
153
252 000 EUR
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Performance indicators by batch
1st batch
2nd batch
3rd batch
Total/average
Groups formed
12
26
6
44
Loan recipients
41
74
23
138
13
59
23
95
49
81
23
153
2 528 EUR
1 832 EUR
550 EUR
1 825 EUR
52 weeks
43 weeks
26 weeks
Still operates as
entrepreneur
Loan
disbursements
Average loan per
person
Average duration
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Repayment indicators
for clients who received the loans before March 2012
Arrears per payments due, %
Currently
At the 120th
day after
borrowing
At the 180th
day after
borrowing
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62
28
33
39
31
39
12
20
80
44 (95)a
52
20
27
Persons
Still operates
as
entrepreneur
1st batch
41
2nd batch
Total
a
All clients of the 2nd batch not listed here and clients of the 3rd batch still
operate their businesses.
Estimated survival rate: 60-70%
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Estimated costs in the case of continuous
operation
o
o
o
o
o
300 clients
20 field agenst and 5 other staff members
continuous tranining, legal support, external communications
bookkeeping for the clients
transportation, communication, etc.
 gross operation costs: 210 euros per month per client
 net operation costs (without taxes): 130 euros/month/client
o estimated lending loss 30%, average loan 1800 euros
 total net cost of continuous operation: 175 euros/month/client
The cost per client is basically equal to the cost per person in the
public work programmes.
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Thank you for your attention!
[email protected]
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