IDA (Individual Development Account) - Investment in the Future Programme

1.  Introduction

 The Open Society Institute has engaged Autonómia, one of Hungary’s leading Roma development organizations, to implement a three-year Conditional Cash Transfer program targeting communities in Hungary with a high concentration of low-income Roma.

IDAs have a ten-year history in the United States, and the program has also been successfully adopted in a number of countries, proving that even the poorest people can save more or less money on a regular basis. The funds matching these savings under the program enable participants to have higher aspirations, including asset goals that would otherwise be beyond their means. In essence, the program encourages participants to save a fixed amount each month by matching these savings. Participants also receive financial education that can reduce their economic disenfranchisement and dependency, and increase their knowledge of money management and legal issues.

The greatest benefit of the program is that the participants take an active part in it and achieve their asset goals through their own efforts.

The short-term purpose of the program is to help eligible participants invest in their futures: to invest in the accumulation of assets, children’s education and family health. The long-term purpose of the program, however, is to demonstrate the superiority of conditional cash transfers over the existing Hungarian welfare system; to push welfare policy away from meeting the short-term subsistence of beneficiaries and toward helping beneficiaries reach financial independence.

The program’s success, in this regard, will not only entail helping a given number of participants reach their individual goals.  It will involve buy-in and acceptance by the Hungarian government of the conditional cash transfer philosophy – to re-think subsistence welfare policies that have failed to lift its beneficiaries out of poverty.

The program offers an opportunity for low-income participants to play an active part in improving of their own financial situation, and therefore indirectly allows them to achieve the following goals:

–    increase the market value of the real property they live in;

–    increase their mobility;

–    improve their chances for employment, increase and make their income more predictable.

The first three years of the program will offer an opportunity to adapt it to the Hungarian environment, and to develop and apply best practices. The Steering Committee will learn how the program operates, provide assistance in its introduction in Hungary, and, at the same time, explore ways to incorporate this initiative into the existing welfare system.  The program aims to recruit the help of not only the national government but also that of municipal governments, for-profit organizations and NGOs.

In addition to the key goals listed above, the program can also have other important results:

–    participants will become economically active through the start-up of small enterprises;

–    group-based training offers an opportunity for participants to establish social contacts beyond their segregated neighborhoods and communities;

–    participants will be motivated to join other programs and initiatives, and become accessible for other organizations (such as NGOs and municipal assistance organizations),

–    the groups created through the program can serve as the foundations of future group-lending programs.