György Molnár


Budapest, HU


Household economics


Kiútprogramme - social exclusion of Roma in Hungary

By György Molnár

The complexity of tackling marginalisation

by György Molnár and Attila Havas, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

The Roma have faced social exclusion in many European societies for centuries – and still do. As the EU framework for National Roma Integration Strategies states: “Many of the estimated 10-12 million Roma in Europe face prejudice, intolerance, discrimination and social exclusion in their daily lives. They are marginalised and live in very poor socio-economic conditions.”

The Roma population has always been marginalised in Hungary, too. The last two fundamental transitions – the introduction of central planning and a one-party system in the late 1940s and then the transition to market economy and parliamentary democracy in the early 1990s – had only changed the causes and mechanisms of their marginalisation, but not its severity. Roma integration remains a major political, societal, and economic challenge, in spite of various – half-hearted or dishonest – government strategies launched in the last seven decades by the Hungarian government.

Trade-offs: lessons from Kiútprogram

Fundamentally different approaches are needed to find a way out of this trap. Kiútprogram, a non-profit corporation provides unsecured loans and mentoring primarily to socially excluded Roma people in Hungary to alleviate their marginalisation through setting up their own business or becoming self-employed vegetable producers. This is a specific form of social innovation: social innovation for the marginalised (SIM).

We have analysed the Kiútprogram to better understand both marginalisation and SIM processes, and thus being able to distil practical implications for underpinning more effective SIM-promoting policies and improving SIM practices. We believe that the lessons derived from this case – especially the dilemmas (or trade-offs) identified – can be generalised, that is, would also be relevant for those SIM practitioners, policy analysts, and policy-makers who work outside Hungary, trying to tackle challenges unrelated to microlending or the social exclusion of the Roma.

1) The more marginalised vs. the less marginalised

A thorough analysis of marginalisation in most cases reveal a complex power structure, not a dichotomy: the division of the society into powerful and powerless people is a rather simplified description, indeed. Differentiating between the less marginalised and more marginalised (even socially excluded) people is of utmost importance for SIMs. If a given SIM only targets the most disadvantaged, it is more likely to fail, and thus it becomes less appealing for practitioners and potential clients, reducing its potential to be diffused. In contrast, when only the less disadvantaged groups are assisted, the social exclusion of the most disadvantaged may be aggravated.

2) Ethnic targeting

A special form of this tension is the issue of ethnic targeting, that is, the trade-off between exact targeting and building inter-community connections. Although socially excluded Roma people were the explicit target group of the Kiútprogram, ethnic selection would have hampered, or even completely prevented the strengthening of inter-community connections. As the latter is an essential component of social inclusion, it would have been a grave mistake. In brief, ethnic targeting should be avoided when inter-community connections are crucial factors to tackle marginalisation.

3) Paternalism vs. empowering: differences between the short and long-term effects

Building trust between the participants and the SIM practitioners is a prerequisite for maintaining participants’ determination, reinforcing their self-esteem, and overcoming the problem of learned helplessness. Providing unsecured loans can be a very strong and effective signal of trust, but this method has also significant cost implications.

The Kiútprogram has clearly shown that in the case of socially excluded groups a loan in itself is not sufficient to support the establishment of viable businesses in the formal economy and promote social inclusion in this way. The most important causes of entrepreneurial failure among the Kiútprogram’s client have been insufficient knowledge, including practical knowledge acquired via learning by doing, and weak business connections. The smaller the initial endowment the project participants possess, the more effort and resources need to be provided to enable them to run their own business. In short, different forms of capability building are indispensable for a successful SIM.

Knowledge transfer and building networks, especially inter-community bridges are crucial factors in the empowerment process. Yet, the more a given SIM supports the integration of participants into production and sales networks, facilitates knowledge absorption and assists in meeting administrative and regulatory requirements, the less it contributes in the short run to developing skills needed for self-determination, in other words, capacity to act. Clearly, there is a trade-off between the degree of help and the short-term empowerment effect. But it also important to fully understand the differences between the short and long-term effects: a seemingly more paternalistic approach in the short run can increase the chances of starting a viable own business at a later stage, which leads to a very strong empowerment effect.

4) The degree of marginalisation and the costs of SIM

Another trade-off can be identified between the degree of marginalisation of the participants and the costs of the SIM. In the case of highly marginalised target groups the quest for profitability or at least financial sustainability of a given SIM can lead to serious mission drift, and even to the deterioration of the relative position of the most marginalised. The dogma of financial sustainability can severely hamper the long-lasting empowering effects of SIMs targeting socially excluded groups. However, the removal of financial sustainability as a requirement may lead to irresponsible spending of public funds. This danger can be reduced by involving private funders who are likely to have a strong interest – in most cases coupled with the necessary experience and expertise – to check if resources are used in a sensible, effective, and efficient way.

Implications for social innovation policy-making

Social innovation, just like business innovation, is a cumulative, path-dependent, and interactive process, involving different types of actors, whose knowledge and accumulated experience are crucial for the successful introduction of new solutions. The implementation, and especially the diffusion, of these new solutions are learning and adjustment processes: accumulating experience of a SIM, including systematically sought feedbacks from its participants, needs to be analysed and reflected upon continuously, most likely leading to modified internal rules and methods. The likely changes in its external circumstances, especially the regulatory environment, also require flexibility from SIM practitioners.

Social innovation policy-making also needs to be understood as a learning process, and thus the usually rigid rules of the support schemes would need to be eased to allow for more flexible implementation of SIMs, making them more effective by giving them an appropriate level of flexibility to reflect upon internal learning and react to external changes. Of course, this must not compromise the original, fundamental objectives of SIMs, and those of the SIM-supporting policies.

National authorities are often responsible actors in the process of reproducing marginalisation. Therefore, bypassing the national political to the more detached EU level for direct investment into the social inclusion of the most marginalised may be an alternative, more effective, option. EU-level bodies could create an economic space for social innovation for the most marginalised, such as the Roma, without involving the national administrations.

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