In early April 2011, the European Commission issued a Framework for National Roma Integration Strategies through the year 2020. The framework comes at a time when Europe’s Roma population has been increasingly targeted by authorities in certain European Union (EU) member states. For example, as recently as last year, authorities in France forcibly removed some 700 Roma migrants as part of a crackdown backed by the president. Roma are four times more likely to live below the poverty line than individuals from other ethnic backgrounds, amplifying the effects of displacement.
Roma’s entrepreneurial potential
Researchers have also looked at entrepreneurship among Roma populations as a potential means for creating greater economic inclusion. Many studies, including a 2006 United Nations Development Programme (UNDP) study, have shown that due to both social characteristics and forced isolation, there is a strong desire for self-sustainability among Roma populations that in turn creates opportunities for entrepreneurship. Unfortunately, if poor Roma want to obtain capital they are currently forced to rely on informal moneylenders thus creating undocumented financial transactions. The UNDP study also demonstrated that Roma populations are frequent borrowers. A survey from the study broke down loan sources into six categories (as shown in Figure 1), and it became apparent that lending from friends and relatives was the primary source of Romani loans. While there may be immediate advantages to this type of lending, these loans are short lived and have no long term stability, ultimately hindering business development.
Figure 1: Source of Credit (based on the question ‘if your household is using any kind of credit, what is its source?) Source: Vulnerable groups survey conducted in Southeastern Europe by Gallup and UNDP
USAID’s Roma Microfinance Project
With the related goals of economic inclusion and poverty reduction in mind, USAID and various Eastern European microfinance institutions (MFIs), along with their respective governments, have joined forces to empower Roma and Sinti populations to evolve out of poverty cycles through capacity building and the development of necessary economic tools. In one such project, the Roma Microfinance Project, USAID worked with three non-governmental organizations (NGOs) between 2006 and 2008 to support Romani in Bulgaria. The project was implemented by Catholic Relief Services (CRS) and facilitated by Microfond AD and USTOI AD. The goal of the project was to promote entrepreneurship and provide economic opportunities for the Roma community.
Both MFIs have seen considerable success. Since 1998 USTOI AD has distributed 41,000 loans and assisted more than 15,000 people, 72 percent of whom are women, gain self-employment. Through Microfond AD’s involvement with the project, $23 million worth of loans were issued, 6,000 new jobs were created, 10 branches were opened, and 40 percent of beneficiaries were women.
The project mainly focused on the aspect of Roma economic integration, and it was successful in establishing a dialogue among stakeholders, who will continue to search for solutions to foster Roma economic empowerment. These stakeholders included Bulgarian media (local and national), NGOs, community leaders, Roma leaders, businesses, sociologists, local authorities, educators, and agencies dealing with ethnic integration. Because of the successes of the project, there have been great gains in awareness among the general public in Bulgaria on the achievements of Roma entrepreneurs. The project has proved that collaboration among Roma and non-Roma businesses has great potential as long as interaction is effectively facilitated.
Toward a new approach
Additional, more quantitative research has been conducted by the Open Society Institute (OSI) to determine the efficacy of microfinance development within the Roma communities. The report was part of the OSI project Decade of Roma Inclusion 2005-2015, an initiative set up by European governments to improve opportunities for Roma to participate in political, social, economic, and cultural spheres of their communities. Some of the interesting findings outlined in the report include:
- Romani are fully entrepreneurial, and small enterprise is consistent with Roma way of life and culture
- Roma populations are a resource to their local economies and not an obstacle
- The impetus for growth and change must come from within the Roma community
- Physical separation of the Roma communities is a constant obstacle to poverty reduction
- Credit risk for Roma has shown to be the same as non-Roma when adopting microfinance best practices
- Roma borrowers are able and willing to repay non-predatory loans
- Entrepreneurial programs have proven to work and encourage start-up businesses within Roma communities
- There is a perception that lending to Roma is more expensive due to lower loan amounts and the requirement for higher attention to follow-ups.
Regarding this final point, the report recommended that microenterprise organizations should not focus on Roma as a single base, but include them in the overall client base. According to David Meier, Program Manager for Eastern Europe at the Soros Economic Development Fund in Hungary, financial initiatives for the poor should be focused on mixed groups.1 More specifically, individuals should be targeted based on their financial levels and not by their ethnic origins. Meier strongly stresses the importance of portfolio diversification in financial packages geared at groups of people who are classified as lacking financial services and/or deprived of financial means. Meier suggests groups first and foremost need legal validation from government; then various financial institutions can penetrate the market to generate sustainable social change.
An economic boon
In 2010, the World Bank published a policy note on the subject of economic Roma inclusion in Bulgaria, Czech Republic, Romania, and Serbia. The findings determined that the lack of Roma participation in local markets is lost future revenue for local and national economies. The report predicted that each country’s GDP would increase by more than 3 percent, and the government budget would increase by more than 4 percent annually if the Roma were fully integrated. In monetary terms this means the total regional economic benefit from inclusion would be €5.5 billion (US$7.9 billion) annually and €1.8 billion (US$2.6 billion) in fiscal benefits (based on the UNDP census of 2006 where the Roma population was 3.1 million in the southeastern region of Europe). Furthermore the estimates for Central/Eastern Europe and the Balkans region as a whole are €3.4-9.9 billion (US$5-14.2 billion) annually in economic gains, and €1.2-3.5 billion (US$1.7-5.0 billion) annually in fiscal gains.
The Roma issue has been growing in major European capitals in recent years, and institutions such as OSI, Decade of Roma 2005-2015, and the Organization for Security and Co-operation in Europe (OSCE) (specifically OSCE’s Office for Democratic Institutions and Human Rights) have been instrumental in elevating the conversation through mass media outlets. In June 2011, the European Union introduced a new framework of Roma inclusion within the EU states. The framework calls for country specific targets that will be set by individual countries to meet their Roma population’s needs. The messages have been clear and consistent: the European Union, the Council of Europe, and the European Commission are all being called to serve as the driving forces for all future legislation concerning Roma communities. In turn, various financial providers need to work closely with other NGOs and social enterprise groups to collectively meet all the needs that are not addressed by local governments. Microfinance, while available, needs to be readily accessible to the various minorities in the regions of Central and Southeastern Europe. On February 5, 2012, Secretary Clinton joined members of the Decade of Roma in Sofia, Bulgaria, where the Secretary vowed her support and the U.S. government’s support as observers in the initiative in promoting and protecting the inalienable human rights of Roma everywhere.
 Interview conducted on September 21, 2011.
While most Notes From the Field feature USAID-supported work, occasionally we post Notes reporting on work that does not receive USAID support but that represents interesting innovation, good practice, fodder for discussion, or all three. The work featured here has not received USAID funding.
This publication was produced for review by the U.S. Agency for International Development. It was prepared by Maciej Chmielewski of The QED Group.
The views expressed in this publication do not necessarily reflect the views of the U.S. Agency for International Development or the U.S. Government.