György Molnár Policy Recommendations Based on the experience of the Kiútprogram

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

2. 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.

3. 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

4. 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

5. 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.

6. 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

7. 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

8. Thank you for your attention! molnar@econ.core.hu