Twists and turns – Main lessons
How to provide an option to a real way
out of poverty?
Petra Edina Reszkető
Budapest Institute for Policy Analysis
Brussels, June 2013 1
Subjects of our interest
Main lessons and CEE-specific recommendations
Issues to discuss
KIÚT Microcredit Programme
Sponsors The Polgár Foundation
DG REG Pilot Project Pan-European Coordination of Roma Integration Methods -
Roma Inclusion (co-financing)
Timing January 2010 – June 2012
Main goals Enabling people leaving in deep poverty to become self-employed
Promoting social mobility and integration of people in disadvantaged areas
(explicitly, but not exclusively Roma)
Tools Group-based, unsecured micro loans (Grameen model)
Support services: business development and administration services
Active community work and daily field work (task of group mentors:
community meetings, family visits, group meetings, business planning,
Screening: 202 settlements, 900 persons
Cliental: 44 settlements, 44 loan groups, 138 clients, EUR 1,825 average
WB survey – monitoring database
BI ongoing evaluation (esp, mid-term changes in targeting)
Lives in a small settlement in North Hungary
Is male, 36 years old, within a household of 4.5 people
Has a monthly household revenue of HUF 68.250 (ca. EUR 225)
Has no secondary or higher education
Is satisfied with his/her life though unemployed for long term prior to
Believes that he can do something to improve his life
Does not think of himself as being a ‘risk taker’
Has access to sewerage inside the home
The nearest bank branch is 18 minutes away
The nearest employment office is 32 minutes away
Runs a retail business, or manages animal husbandry, or cultivates
Source: WB survey, 2011-12
The representative client ...
Not everyone, get the targeting right
• Carefully assess entrepreneurial skills (self-confidence, risk-
propensity, endurance, creativity, diligence – Shane-
Venkataraman 2000, Taylor 1999, Shane 2003, Kopasz 2005)
• Test commitment to his/her own „business dream”
• Check credit history & last resorts (family support,
• Expand knowledge on local markets, supply networks
Shift to more „upmarket” clients and/or locations with access to
more market, turning away from the ‘poorest of the poor’
Provide ongoing training and information sharing – even after the
disbursement of the loan
Lesson 1: Born-to-be-entrepreneur
Necessity of local presence - „the impossible checklist”
• Social empathy
• Basic and practical financial/ business know-how
• Information broker
• Interest representation (when dealing with local and national
agencies and bureaucracies)
• Leveraging group pressure
• In sum: „mother and sister” at the same time
... plus, costly and time-consuming exercise
Freeride on existing networks of local mentors/ community
workers if you can
Cooperate with government / NGO stakeholders active in the
same districts / settlements
Lesson 2: Ideal mentor / community worker
With the business environment
• Information gaps
• Extremely high administrative burden compared to old MSs,
• Discrimination (entering public offices!)
With the public policy context
• Social transfers (strong disincentives, high opportunity costs)
• Taxation (competitive disadvantage on legalising incomes)
Lobby for business deregulation and simplification with special
focus on self-employed, primary producers. Hardly anyone else
will do that for your clients!
Provide a „welfare bridge” (cash transfer to facilitate initial
phase, HU: VVT)
Lesson 3: External coherence
Highly volatile local demand
• Dependence on incomes from seasonal/ temporary work,
public work programmes
Extremely limited local purchasing power
Ease access to regional business networks, markets
Find a local hero – capitalise on his/her networks
Cooperate with (central/ regional) development agencies –
crucial linkages to projects:
• Local infrastructure
• Mobility due to improved public transport services
• Geographically targeted capacity-building (esp. PES,
social services, and the administrative staff of
Lesson 4: Local market w/o integration
• Cash is necessary, but not sufficient
How to channel complex programmes into mainstream EU
• Isolated interventions are costly and not sustainable
How to encourage and enforce efficient cooperations –
G2G, G2C, C2C?
How to harmonise development efforst, geographical
targeting of various operative programmes?
• Political rationality is hard to overcome
How to commit national/ local politicians hunting for the
vote of the (often racist) median voter to the issue of
Issues to discuss
Autonómia – Autonómia Alapítvány 2008. Mikrohitelezési tapasztalatok. Autonómia Alapítvány,
Mikrohitel Rt. Kézirat.
BI 2010. Adminisztratív terhek Magyarországon – szektorális és vállalat-méret szerinti specifikus
elemzés. Budapest Szakpolitikai Elemző Intézet.
BI 2011. Background material for an EU Roma strategy framework, Hungary. Budapest Szakpolitikai
Elemző Intézet. Mimeo.
BI 2013. Impact assessment of SME-development measures within the Economic Development
Operative Programme, Budapest Institute, mimeo.
Kopasz Marianna (2005): Történeti-kulturális és társadalmi tényezők szerepe a vállalkozói potenciál
területi különbségeinek alakulásában Magyarországon. PhD értekezés, Corvinus Egyetem.
Lengyel György (2008): A vállalkozói hajlandóság hatása a vállalkozásra és a jólétre / A Magyar
Háztartás Panel néhány tanulsága (1992–2007). In Kolosi T. – Tóth I. Gy. (szerk.): Társadalmi
riport, 2008. TÁRKI, Budapest, 429–450.
Shane, Scott Andrew and Venkataraman, S. (2000): The Promise of Entrepreneurship as a Field of
Research. The Academy of Management Review Vol. 25, No. 1 (Jan., 2000), pp. 217-226
Shane, Scott Andrew (2003): A general theory of entrepreneurship: the individual-opportunity nexus.
Edward Elgar, Cheltenham, UK.
Szalai Júlia 2004/ 2005. A jóléti fogda I. és II., Esély, 2004/6; Esély 2005/1.
Taylor, Mark P. (1999). “Survival of the Fittest? An Analysis of Self-Employment Duration in Britain,”
Economic Journal, Vol. 109, No. 454, pp. C140-C155.
Disclaimer: Source of the portraits is the website of the KIÚTProgramm. They are only for illustration.
The characters are fictitious ones, though inspired by real-life persons, progamme clients.
References and disclaimers