Microcredit as a policy instrument (the example of Hungary)
Authors: Peter Futo, Marton Gosztonyi, Mehdi Hasan
Social inclusion. It is the duty of every society to provide opportunities for members of disadvantaged or vulnerable social groups such as people with disabilities, the elderly, families with many children, ethnic minorities, poor families, people living in economically depressed areas, unemployed people and migrants. Such groups, especially the female and juvenile members of the families, have fewer opportunities in life, compared to the majority of society. The policy area aiming at the integration of such social groups into the society is called social inclusion. Poverty is closely connected with segregation in schools, discrimination on the labor market and in housing. One of the most important goal of microcredit programs is to promote social inclusion of poor and disadvantaged families.
Hungary: the challenge of Roma poverty. Hungary is a country of approximately 10 million inhabitants in Central Europe, where more than half million people citizen live in a situation of deprivation, and the majority of them is member of the Hungarian Roma community. Roma live everywhere in the country, but the proportion of Roma is much higher in urban ghettos, in the crisis stricken regions of the country and in small villages without any job possibilities. On the other hand, in those areas of the country, which are endowed with more favorable economic- or employment indicators, the Roma are underrepresented. Many Roma households can only partially fulfill the households’ basic needs, because their income is not sufficient to be able to adequately feed the household’s members. Sociological surveys show that in settlements with poorer social infrastructures and higher unemployment rates, the level of social exclusion of the Roma is higher than in better endowed settlements. In particular, in poorer settlements school segregation and residential segregation is more frequent than in better off settlements.
Range of microcredit programmes in Hungary. While Hungary has implemented a wide range of commercial microcredit programmes for middle-class borrowers for the last 30 years, social microcredit is a relatively new tradition. In the typical social microcredit projects of Hungary non-profit organizations support Roma families with microcredit, so as to assist these families in agricultural activities. Most of these projects are experimental and short-lived, characterized by low interest rates and informal, trust-based guarantees. Programmes offer a wide range of associated services provided for the beneficiaries, such as consulting, training, accounting, assistance in marketing and transportation, and administering bureaucratic procedures of the local authorities.
An example of a microcredit programme in Hungary. There is a functioning social enterprise that manages an agricultural microcredit project in Hungary. The name of the programme is “Kiút” (meaning: “The way out”) the name indicates that the programme’s ambition is to offer a way out from poverty. This is a cucumber cultivation project, which in 2015 supported about a hundred Roma families in several small towns and villages in Eastern Hungary. The micro loans finance the basic infrastructure necessary for cucumber cultivation (such as piles, nets, irrigation hoses and wells) and periodical, seasonal expenditures (seedlings, pesticides, fertilizers). The size of the microcredit, the timing, and the duration of each phase of the projects have been adapted to agricultural seasonal needs. The repayment schedule is flexible: it depends on the solvency of families, and also on the results of the harvest. There are intensive contacts between the program’s field-workers and beneficiaries. Beneficiaries have permanent access to consultancy services offered by agricultural experts, and obtain help in transporting and selling the harvested cucumber. Evidence shows that many Roma families have succeeded to work autonomously in this model and have become small-scale farmers subsequently.
Impacts of microfinance. Microfinance programs that were implemented in Hungary measured their impact systematically. These measurements were made by comparing the beneficiary groups with similar, comparable groups of households, who did not benefit from any microfinance programme. The latter groups were called "control groups". Based on data collection covering project inputs and project outcomes, it can be said that microfinance programs have widened the local financial security for the participants, and also have provided solutions to cover the sudden or greater amount of spending of the families. For example, a positive change was seen in being able to pay household utility bills. A positive change could be also observed in repaying bank loans and increasing the number of people who are actively saving money. Experiences of microcredit programs show that microfinance groups improve the money management capabilities of low-income households. Participation in microfinance-groups enable local residents to take their destiny into their hands. Microcredit experiences can show to participants that they are able to improve their own situation and can save money despite difficult socio-economic conditions.
Microfinance as an instrument used by other policy areas. Some examples of other policy areas that rely on the instrument of microcredit are as follows.
· Agriculture constitutes an important part of the economy of developing countries. When farmers need crucial resources to fund their agricultural activities, far too often they must turn to informal sources such as moneylenders, traders, or the extended family. For the extremely poor rural households, even informal sources are unattainable. Microcredit can play an important role in agricultural development through financing the purchase and use of farm inputs such as certified seeds, chemicals of plant protection, fertilizers and livestock. In such cases microcredit serves as the financial component of some agricultural programme.
· Tourism. Tourism is a dynamically developing sector and recently more and more emphasis is put on those types of tourism that contribute to the well-being of local communities and to the preservation of the natural and built environment. In particular, eco-tourism is directed towards tourists getting acquainted with natural environments by supporting conservation efforts and observing wildlife. Millions of small businesses in the tourist industry have been financed by microcredit.
· Reducing unemployment of the young. In some countries microcredit serves as a tool of youth policy. For example in Bangladesh there are Government-led microcredit programmes to facilitate self-employment of young people. Other microcredit schemes support entrepreneurs employing young people.
A mikrohitel mint a fejlesztéspolitika eszköze- Magyarország példája (HUN)