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Monitoring and Support

By Sylvia Kennedy,2014-11-21 21:38
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Monitoring and Support

    FINANCIAL SERVICES

Szechenyi entrepreneurial programme Hungary

    Objective: Social and economic integration of Roma through SME promotion

    Target Group: immigrants/ ethnic minorities

    Key words: Roma, investment, role model, integration

IMPLEMENTING ORGANISATION: Hungarian Centre for Economic Development

    Váci út 83 The programme is implemented

    1139 Budapest by the Hungarian Ministry of

    Hungary Economy and Transport and

    E: info@magzrt.hu covers the entire country. In its

    T: +36-1- 465-8469 activities the Ministry is

    W: www.magzrt.hu supported by the Hungarian

    Contact: Sibak András Centre for Economic ------------------------------------------------------------------------------------------------- Development (Magyar Hungarian Foundation for Enterprise Promotion Gazdaságfejlesztési Központ) and 1115 Budapest the Hungarian Foundation for Bartók Béla út 105-113 Enterprise Promotion (Magyar E: info@mva.hu Vállalkozásfejlesztési Alapítvány). T: +36-1-481 4600

    The Hungarian Centre for W: http://www.mva.hu

    Economic Development (HCED) is Contact: dr. Nagy Estilla Virág

    a semi-public organisation that

    was established by the state-owned Hungarian Development Bank in order to channel development funds towards the entrepreneurial sector. In the programme the HCED assists the Ministry in defining the tender procedure and also evaluates the applications of the potential beneficiaries. On top of this, the HCED is responsible for the periodic monitoring of the activities of those entrepreneurs that have been awarded a grant. The Hungarian Foundation for Enterprise Promotion (HFEP) was founded as a public benefit organisation in 1990. In general it is responsible for the implementation of the government’s national work programme for the development of SMEs. HFEP’s current role in the programme is rather limited. In the near future HFEP will assist with the establishment of a business incubator in the eastern town of Mátészalka.

THE GOOD PRACTICE: Szechenyi entrepreneurial programme

    The Szechenyi Entrepreneurial Programme aims to encourage the social and economic integration of Roma in Hungary. In particular it seeks to improve the market position and competitiveness of small and medium sized Roma enterprises. The programme attempts to achieve this by partly financing the investment needs of both Roma-owned enterprises and entrepreneurs that employ Roma. This financial support is distributed by means of a tender procedure which is open to specific groups of entrepreneurs. The priorities in granting the support may very from year to year.

    Good Practices gathered by EMN Immigrants/Ethnic minorities - June 2009 1

    The project has been in operation since 2003 and is fully funded by its implementing organisation, the Ministry of Economy and Transport. The project does not rely on supranational funds. Table 1 gives an overview of the annual amounts of funds that were distributed to Roma entrepreneurs over the 2003 2007 period. In total the Ministry

    distributed around 1.2 billion Forint (? 4.6 million). The project’s running costs are included in the Ministry’s overhead. Specific figures on the project’s costs besides the amount of distributed grants are not available.

    Table 1: Distribution of funds to Roma entrepreneurs

    2003 77 203,042,000

    2004 102 278,600,000

    2005 79 218,293,000

    2006 74 249,969,000

    2007* N.A. 250,000,000

    Total 332 1,199,904,000

    * The HUF 250,000,000 for 2007 is the budgeted amount. Actual figures are not yet

    available.

    The programme’s main objective is to support developments and investments that improve

    the market position and the competitiveness of small and medium sized Roma enterprises in Hungary. More precisely, the goal is to promote these enterprises’ real estate developments as well as their purchases of machinery and equipment.

    According to the Ministry of Economy and Transport, the very existence of the programme creates new role models for Roma in Hungarian society. It also publicly encourages and legitimizes entrepreneurship among Roma by creating and promoting a more enabling environment for members of this ethnic group. As such the programme is expected to increase the entrepreneurial spirit among Roma. In the long run the programme should contribute to the social and economic integration of this socially and economically marginalised group in Hungary.

; Financial support

    The programme’s main component consists of direct financial support. Through a tender procedure the Ministry offers financial incentives for the investment needs of the targeted enterprises: Roma-owned enterprises and enterprises employing Roma. To each of the various entrepreneurs winning the tender the Ministry provides a non-reimbursable grant. This grant currently amounts to 65 % of the value of the total investment. Good Practices gathered by EMN Immigrants/Ethnic minorities - June 2009 2

    The programme has a matching-fund requirement. That is, the entrepreneur has to finance the remaining 35 % of the proposed investment himself. The 65 % - 35 % requirement has been in place since 2005. In 2003 and 2004 the Ministry only financed 50 % of the proposed investment. The maximum grant that the Ministry awards per entrepreneur is 5 million Forint (? 19,000).

    In its initial conception the Ministry did not have an outspoken preference in terms of the type of investments or the type of industry that it would support. Annually the Ministry determined on which sectors the programmes would focus in the next call for proposals. In 2007, for instance, priority was given to enterprises proposing investments in real estate, machinery, appliances, commercial vehicles, and information technologies. Interested entrepreneurs can apply for the grant through the Hungarian Centre for Economic Development (HCED). The HCED analyses all application packages and makes recommendations to the Ministry. The Ministry itself has the final decision in awarding the grants. The HCED, in turn, is responsible for monitoring the entrepreneurs’ use of the funds over a five-year period.

; Non-financial support

    As a part of the programme the Ministry also organises various information sessions and forums as a way to strengthen participants’ understanding of the project and to encourage networking among the participating entrepreneurs. These sessions serve to explain the various steps of the tender procedure and to assist entrepreneurs in filing the necessary paperwork. The sessions also serve for networking since both Roma and non-Roma entrepreneurs are participating; a first step in fostering cultural understanding.

    In the near future the project will take on an extra dimension through the launch of a business incubator in the eastern town of Mátészalka. This town was chosen for its high

    incidence of disadvantaged Roma. At the incubator, commercial space will be available for both Roma and non-Roma enterprises. The premises at the incubator will also serve as a training-centre for entrepreneurs of both groups. In this way, the programme will further promote networking and information sharing between Roma and non-Roma. Rather than isolating Roma through another “Roma-only” support, this new part of the

    programme intends to assist the social and economic incorporation of Roma into Hungarian society. The Hungarian Foundation for Enterprise Promotion (HFEP) is a strategic partner in this part of the project.

TARGET GROUP

    The project specifically targets the Roma ethnic group. In particular all micro, small and medium sized Roma and non-Roma enterprises that employ Roma are targeted. However, only already operating enterprises can participate. Supporting starting entrepreneurs, even if the new entrepreneur would be a Roma, is beyond the scope of this project.

RELEVANCE

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    The programme was designed to facilitate the integration of Roma, a minority group with a long history of severe social and economic exclusion. Historically, Roma are facing higher than average unemployment levels because non-Roma are reluctant to hire them. Unfortunately, self-employment is not an easy option either as Roma generally lack sufficient financial capital to compete with non-Roma firms. Through this policy measure the Ministry intends to tackle these issues. First, by means of financial support the Ministry hopes to improve the market position of Roma entrepreneurs. Secondly, by giving non-Roma financial incentives to employ Roma the Ministry intends to break with current labour market patterns. The latter is an example of positive discrimination. Accordingly, given the long history of social exclusion, one could interpret this policy as a strategy for “redressing present and past injustices” towards Roma.

    The Ministry considered it essential that non-Roma would not interpret it as another Roma aid scheme. The latter would have resulted in resistance from the part of non-Romas. According to the Ministry, during the programme’s actual implementation process there was neither an explicit nor a hidden resistance towards this policy. On the contrary, the programme could directly count on substantial interest and support in the regions where Roma live in significant numbers.

    In order to remain tuned to the needs of the target population the Ministry organises regular meetings with entrepreneurs all over the country. As a result of these meetings adjustments in the annual calls for tender are made. Examples of such adjustments include the introduction of financial support for information technologies, for marketing, and for quality assessment and assurance. Another way in which the programme proves its power in adapting to the needs of entrepreneurs is through the size of the awarded grants. The Ministry, based on the quality and nature of the applications, may vary the amounts allocated to individual enterprises. In this way the programme suits enterprises of a range of different sizes. The relevance of this programme for the target group is also illustrated by the demonstrated interest from entrepreneurs all over Hungary.

    However, at least in theory, some concerns with regard to the programme’s setup exist. In particular, the programme may fail to include the most deprived Roma in the least developed regions of Hungary. This is due to the fact that the economic elite in such areas have easier access to scarce resources, economic networks and, accordingly, the grants themselves. As such these elite groups may block the access of the less well-off to the programme. The matching fund requirement, stipulating beneficiaries to finance a part of the investment from internal sources, may also inhibit the most underprivileged Roma from applying. Furthermore, the more affluent firms can apply for higher grants than others can. As a result the programme may actually widen the gap between the haves and the have-nots rather than narrowing it. However, due to the fact that the programme has not yet been officially evaluated, it is too early to draw conclusions on these theoretical drawbacks.

ACCESSIBILITY

    Good Practices gathered by EMN Immigrants/Ethnic minorities - June 2009 4

    The financial support an entrepreneur can receive is based on “matching” funds: the Ministry supports an important part of the costs of the investment but the entrepreneur has to finance the remaining 35 % himself. Therefore, in order to qualify for the programme potential candidates will have to demonstrate sufficient liquidity to cover the residual 35% of the proposed investment. Furthermore, each participant is required to pay a registration fee of 20 euros. Although the tender procedure and all training sessions are carried out in Hungarian the programme does not suffer from language limitations as most Roma speak Hungarian.

    The programme is promoted in various ways. The call for tender, for instance, is publicly announced on the webpage of the Ministry of Economy and Transport. Moreover, the tender is also advertised in the national and local media and through a large number of local activities, so-called citizenship forums, meetings with entrepreneurs organised by local authorities and minority self-governments all over Hungary. Additionally, in one of the regions of Hungary, the Ministry has a permanent representative who is responsible for informing entrepreneurs, distributing material about the project and collecting feedback from interested and involved entrepreneurs.

INNOVATIVENESS

    In Hungary itself, the programme is innovative as it is the first project which supports businesses based on their ethnic background. On an international level the programme ties in quite well with other existing positive discrimination schemes.

IMPROVEMENT

    The project is externally monitored by the Hungarian Centre for Economic Development (HCED). The HCED observes how the beneficiaries are using the financial support and how their businesses are performing over a five-year period starting from the date of receipt of the funds. To facilitate this monitoring process participating entrepreneurs are required to send annual reports to the Ministry, which subsequently forwards them to the HCED. At the end of the five-year period the HCED will carry out a final audit at each of the participating enterprises.

    In its evaluations the HCED monitors whether beneficiaries are complying with their commitments. These commitments, which are stipulated in individual contracts between the Ministry and the beneficiary, may cover a wide range of issues from turnover targets to the number of new jobs created. Beneficiaries that violate these commitments will have to reimburse the entire grant, including interests, to the Ministry. Hitherto, based upon the annual reports, the Ministry expects few, if any, violations of these commitments. The first round of final audits, however, took place in 2008.

EFFECTIVENESS / EFFICIENCY

    Good Practices gathered by EMN Immigrants/Ethnic minorities - June 2009 5

    The programme has been in operation since 2003. The results presented in table 2 indicate that annually around 80 to 100 enterprises, out of about 600 to 700 applicants, receive support to finance their investments. Unfortunately, Hungarian law does not permit storing data on ethnic background. For this reason the exact portion of Roma-owned recipient enterprises, as opposed to non-Roma, cannot be given. The Ministry however, believes that the majority of grants are awarded to Roma entrepreneurs. This belief is based on the fact that potential beneficiaries have to submit a letter of recommendation from either local authorities or the Roma local minority self-governments. As local authorities are better informed about the entrepreneurs’ ethnic background, this strategy minimizes the scope for abuse.

    Table 2 also shows that the distributed grant value of ?4.6 million has led to a total

    investment of approximately ?7.9 million. According to the Ministry the programme has resulted in 400 newly created jobs up to 2006.

    The programme is widely publicised through information sessions at hundreds of meetings, the aforementioned citizenship forums, per year. Given the large variation in the number of participants per activity, ranging from a mere 20 to an overwhelming 1500, the exact outreach of these citizenship forums is unknown.

    Table 2: Results

    2003 77 778,000 50% 1,556,000

    2004 102 1,067,000 50% 2,134,000

    2005 79 836,000 35% 1,286,000

    2006 74 957,000 35% 1,472,000

    2007 N.A. 958,000 35% 1,474,000

    Total 332 ?

    4,596,000 ? 7,922,000 400

    According to the Ministry the programme has both resulted in an increase in the entrepreneurial spirit among Roma and an increased tendency among non-Roma enterprises to contract Roma employees. The programme’s short-term results are promising as

    hundreds of Roma and Roma-employing entrepreneurs have benefited. However, there is no evidence yet that the willingness of non-Roma enterprises to employ Roma will hold after the contract with the Ministry expires.

    ADAPTABILITY / REPLICATION

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    As long as sufficient public funds are available the Szechenyi Entrepreneurial Programme seems replicable in other regions where specific groups of society are being excluded. In neighbouring Romania for instance, a country in which the Roma people also constitute an isolated ethnic minority, similar initiatives are already being 1deployed.

SUSTAINABILITY

    The future of the programme itself seems safeguarded. The Ministry of Economy and Transport currently cites the programme’s cost-benefit ratio as a reason to keep and

    possibly extend the programme.

    With regard to the sustainability of the results however, it is not yet possible to draw definite conclusions. The programme supports non-Roma entrepreneurs willing to employ Roma for the five-year period that they are monitored. To evaluate whether the programme leads to a long-term improvement in the situation of Roma a longer time horizon is needed.

USEFUL LESSONS

    1. A positive discrimination scheme towards socially excluded groups yields promising short-term results. However, to judge the long-term sustainability of its results a longer timeframe is needed.

    2. Adapting a programme’s definitions in response to new demands from

    entrepreneurs can be beneficial. Part of the Szechenyi Entrepreneurial Programme’s

    success, in terms of the number of awarded grants, is attributable to its flexibility towards the changing needs of the market.

    3. A policy measure that involves the distribution of government grants to finance enterprises’ investments needs to be well-defined and closely monitored in order to

    prevent abuse.

    4. A grant scheme with a matching-funds requirement may increase social inequality. There may be a bias towards more affluent entrepreneurs since the most underprivileged may not possess sufficient financial resources to qualify for receiving a grant.

Sources

     1 The Szechenyi Entrepreneurial Programme also shows some similarities with the Kansenzones project in The

    Netherlands.

    Good Practices gathered by EMN Immigrants/Ethnic minorities - June 2009 7

    This Good Practice was taken from the study ? Entrepreneurial Diversity in a Unified Europe - Ethnic Entrepreneurship/Migrant Entrepreneurship”, by IMES and Triodos

    Facet on behalf of the European Commission, DG Enterprise and Industry (Brussels, March 2008).

Interviews:

    ; Mr. Sandor Lakatos, Ministry of Economy and Transport

    ; Ms. Ildiko Szilagyi, Ministry of Economy and Transport

Websites:

    ; Ministry of Economy and Transport

    http://www.gkm.gov.hu/archivum/_elemzesek/__elemzesek/roma_programme.html?query=KKC-2007R

Documents

    ; European Commission, Triodos Facet and Universität von Amsterdam (2008), Entrepreneurial diversity in a unified Europe

    Good Practices gathered by EMN Immigrants/Ethnic minorities - June 2009 8

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