General Parameters

2. General Parameters

After conducting informal focus group discussions with Roma communities in Bonyhád, Korlát and Szendrőlád  (B-A-Z county), we have decided on the following program parameters:

• Site:  The town of Bonyhád has been selected as the Program’s pilot site.  Of the town’s 14,500 inhabitants, approximately 1,000 are Roma.  The town is attractive as a pilot site due to its available Roma Community Centre (Roma House) and the presence of two Autonómia staff, Csaba Boros and Vilmos Jakovics, who live and work in the community and are available to act as counselors for the Program.

• Participant Eligibility: The Program is open to residents of Bonyhád and the neighboring villages who are members of poor households, as defined in the Program’s Participant Eligibility Policy (see below). Because of widespread dependence on informal sources of income, Program staff will have to rely on proxies for income in determining participant eligibility.

• Partnership: Participants have to hold a sole account for the purpose of the program. These accounts will be held in the Branch Offices of Völgység-Hegyhát Savings Cooperative which is a contracted partner of the Program. The Savings Cooperative is open to provide favorable conditions (fees and interest) for the participants of the Program.

2.1.1        Asset Building Component:  

One component of the Program is to assist participants in the acquisition of assets that will help raise their standard of living.  Traditional asset goals in U.S. Individual Development Accounts, such as post-secondary education, are excluded from this program.[1]  The Program has therefore selected asset goals which can be reasonably judged “investments,” i.e. productive assets that increase wealth or create the possibility of social mobility.

Participants can change the original asset goal once with the approval of the program officer (they will have to consult the counselors in advance), and the new asset goal has to be an authorized asset goal under the Program (see below).

1. Personal development (including obtaining a Driver’s Permit or purchasing a home computer and accessories) up to HUF 250,000.
2. Home investment (including home purchase, repair, expansion, completion, building bathroom facilities or installing other amenities) up to HUF 550,000.
3. Start-up of an enterprise (including purchasing capital equipment, materials or inventory) up to HUF 350,000.  The program will not provide matching funds for “working capital.”

Additional goals will be added at the Program’s discretion.

• Financial Counseling: Participants in the asset-building component will receive personal money management counseling, and if applicable, assistance in purchasing a home or starting a small business.  The community counselor will receive applications, verify candidates’ eligibility, help participants develop a personal finance budget, provide basic financial education, track the participants’ saving activity, provide advice during financial emergencies, and ultimately issue matching funds.  The counselor will also conduct follow-up visits to track how the participant put the asset to use.  It is expected that the counselor will devote no less than 10 contact hours with each program participant.

• Account Structure:  Participants will be the sole holders of their savings accounts.  The program will be authorized to monitor account activity.  Matching funds, however, will not be deposited into the participant’s savings account, but tracked separately and released only after the participant has reached his/her savings goal.  Match “statements” will be provided to the participants each month either by mail or SMS.

• Match Rate: The program will offer the following match rates, match caps and time caps.  Match caps represent the maximum monthly deposit amount that is eligible for a match.  Time caps represent the period after which monthly deposits are no longer eligible for a match.  These restrictions seek to ensure that the accumulation periods are long enough to deter ineligible participants, yet provide sufficient incentive for participants to reach their savings goal as quickly as possible (see Annex A: Match Rate Calculation):

• Minimum Accumulation Period:  Regardless of asset cost, or participants’ savings rates, participants must be enrolled in the program for a minimum of six months before receiving match funds.

 Deposits: Participants set their own monthly savings schedule after analyzing their income and investigating the cost of their asset goal in conjunction with the program counselor.  The participant’s commitment is set out in a signed “savings agreement.”

• Missed Deposits: Participants who miss or underpay their scheduled deposits will be contacted by the program counselor.  Participants who regularly underpay will fail to reach their savings goal before the allotted time cap.  They may continue to save, but will no longer receive a match. Participants who do not meet their savings goal six months after the time cap will lose their matching funds altogether. The limit for the missing or underpaid saving depends on the length of the total saving period, the missing amount and the length of the failure. The program officer will inform the participant about the fact that he or she has missed a payment. If the participant does not solve the problem in 30 days, he or she will be informed again with another ten days’ deadline. If the missing payment is not paid by this deadline, the participant will lose the matching fund.

Participants will be allowed to apply for a grace period with respect to up to three missed payments. The application must be written and approved by the program officer. The rules concerning this procedure are the same as in the case of Emergency Withdrawal.

• Emergency Withdrawals: Up to three un-matched “emergency withdrawals” are allowed.  However, participants may not make a withdrawal without first consulting their counselor, and extensions of the time cap will not be permitted.  The counselor will work with the participant to personally help him/her find other solutions to the emergency.  The cap on emergency withdrawals is 50% of the amount held in the account at the time. The amount of the withdrawal must be paid back to the account in two months [60 days] at the maximum. If a participant fails to pay the amount back, he/she will lose the matching funds.

• Matched Withdrawals: Matching funds are not released to the participant until the participant’s savings goal is reached.  At the time of a qualified withdrawal, the Program will release matching funds directly to vendors in order to minimize leakage to non-eligible activities. The manner in which saved and matched funds can be used will be set out in the Participatory Agreement signed at the beginning of the individual program. This point can be later modified (on issues such as the vendor, the attributes of the asset etc.) but only in accordance with the preliminary asset goal and with the approval of the program officer.

• Financial Institution:   We have made initial contact with Völgység-Hegyhát Takarék, the Savings Cooperative that currently serves over 200 Roma clients in Bonyhád.  The Savings Cooperative is an ideal partner due to its contract with local residents who receive public assistance funds from the municipal and national government (of which many Roma are beneficiaries), its proximity to the Roma community in Bonyhád, and its branch network in other cities with a high concentration of Roma.  In preliminary discussions, officials from the Savings Cooperative stated that each participant would be subject to a HUF 70 fee per month, as well as a HUF 40 withdrawal fee. Interest rates are approximately 6% annually.  Projected inflation for 2006 is 3.6%.[2]

2.1.2        Asset Building Participant Eligibility Policy

The Asset-Building component targets poor residents of Bonyhád who receive some form of income, be it from public assistance, formal or informal sources.  Therefore, the evaluation of potential program participants begins with the following three questions:

1. Will this person reach his/her asset goal regardless of the program?  If the answer is yes, the program will waste resources and have little or no social benefit.
2. Will this person be able to save regularly?  If the answer is no, the applicant is ineligible to participate in the Program.
3. Does this person have an asset goal that the program can offer? If the answer is no, the program should not offer matching funds for an ineligible goal.

In other words, the eligibility policy ideally seeks to identify those individuals who will reach their asset goal with program assistance, but who most likely would not reach it without program assistance.

To that extent, potential participants must meet the following criteria:

• Reside in Bonyhád or in the neighboring villages
• Display strong motivation
• Identify a source of regular income
• Provide a realistic savings schedule, based on an analysis of spending habits and expenses

Participants must also meet the following minimum and maximum household income requirements depending on the candidate’s asset goal: