Details of the Kiútprogram

Where does the Kiútprogram work and who are our clients?

We are present in about 15 settlements in the North-East of Hungary, with high density of Roma population. We work with 80-100 families every year, each year about half of them are new. Many of our former clients are already acting on their own. In the settlements where we are present, every poor person can be our client. Thanks to the social structure of these areas most of our clients are Roma, but we do not use ethnic selection.

Do clients have to be an expert in agriculture?

No. They learn the principles and the practice of plant cultivation during their own work. Our integrated training approach is more effective than traditional state-sponsored adult training programs. Our clients who often haven’t ended even primary school get a significant practical knowledge over a year.

Is it just the training which your clients need to be able to get in cucumber cultivation systems?

For our clients, it is unavailable to create an investment of about 150 thousand HUF necessary for the production. This program solves a small amount of unsecured credit. Moreover, most of the so-called production integrators – they provide seedlings, chemicals, and buy cucumbers – they would not contract with the Roma. The Offshore Program now works as an Integrator, not only financing the investment, but also seedlings and chemicals in the form of commodities.

Will these loans be repaid?

As with all lending activities, the return would only be achieved if the defaulting customer’s losses were to be charged to performing clients as a risk premium. As a social enterprise, this would be contrary to our basic goals.

Why the program lends money then?

For two reasons. One is that the credit has no market distorting effect. It is more important that credit reflects our trust in our partners; we believe that they will return and be able to repay it. This has a strong impact on overcoming the so-called learned helplessness nad enhancing their own efforts. Opposite to this, capital inflows intensifies dependence and pushes back activity.

What other costs does the program have to account with?

The overwhelming majority of our expenses are the salary of the fieldwork workers and its direct costs, and the remuneration of the training experts and the accountants. We provide our customers free of charge the agricultural, entrepreneurial and accounting skills as well as contact capital.

What kind of economic form does the program have and who finances it?

The Kiútprogram is a private non-profit limited company, its main shareholder is the Polgár Foundation for Opportunities. Among the owners are András Polgár, founder of the Polgár Foundation, Péter Felcsuti, former president of the Hungarian Banking Association, and Molnár György, senior research fellow at the Hungarian Academy of Economics. In the first two years of operation (2010-2012), most of the costs were funded by a European Union pilot scheme. During this time, our customers could start any business-based entreprise. The experimental phase was considered successful by the EU, it has been suggested to continue, but the Hungarian authorities decided not to support it anymore. Since then it has been operating exclusively from private sources.

Why does it worth to support the program?

Our program is more efficient than public work, and for a period of five months, it generates a higher income for customers at a lower cost. The co-operating customers receive an average of HUF 350,000 extra income after paying the costs for this five month work, but there was somebody who generated 1 million HUF net income. On the opposite, the monthly net salary of 52 thousand forints of public work is only 260 000 for five months. We don’t know another comparable labor market program.

What are the non-financial social benefits of the program?

  • Our program is an evidence that – in contrast to majority beliefs – providing proper conditions (ie, if fish are put into the pond) people in poverty, including Gypsies are capable of effective value-creating work. This proved to be suitable for solving the prejudices on the spot.
  • Wherever we started, people thought that the Gypsies would not repay the unsecured loan. The opposite experience greatly increases the appreciation of the people in the village and improves their social position. (In one of the villages, for example, who has repaid the loan for us, next year received an interest-free loan at the grocery store.)
  • There are settlements where the Roma involved in cucumber cultivation became a factor in municipal elections, their social vulnerability within the settlement diminished.
  • We use an innovative, work-integrated training method, which can be an example for the adult training system. We can convert knowledge to customers and make them able to produce other crops in the garden around the house.
  • Our customers’ confidence and performance increases. There are many who, after working with us, can find a permanent job in the formal economy.
  • The over-income earned through the program finances important goals for our clients. The winter fuel costs for example, and a lot of people pay for the school start-up expenses for their children, some of them in secondary education.

Professional papers: 

OECD Policy Case Study

A way out of poverty CRESSI Working Papers No. 472018