Savings products in Hungary

EN-MARKT 2013 111 H

Tender– Savings in Hungary

Narrowing shape of saving opportunities in Hungary

Autonomia Foundation

Table of contents

1. THE HUNGARIAN CONTEXT: PROBLEMS AND CAUSES ..................................... 2

1.1. ECONOMIC ENVIRONMENT ................................................................................................ 2

1.2. CAPACITIES FOR SAVINGS IN HUNGARY ............................................................................ 3

1.3. SAVINGS IN NUMBERS ....................................................................................................... 4

2. SAVINGS PRODUCTS IN HUNGARY: POLICIES AND INITIATIVES ................... 6

2.1. SAVINGS PRODUCTS IN THE FOR-PROFIT SECTOR ............................................................. 6

2.1.1. List of the saving products in the For-Profit sector .................................................. 8

Long-Term Investment Account .......................................................................................... 8

Pre-Saving for Pension Account ......................................................................................... 8

Pre-Saving for Housing ...................................................................................................... 9

Baby Bond – Support for Life start and the Start Account ................................................. 9

2.2. SAVING PRODUCTS IN THE GENERAL GOVERNMENT SECTOR ........................................... 10

2.2.1. General government’s micro-savings opportunities before the Regime Transition 10

2.2.2. General government micro-savings opportunities after the regime transition....... 11

2.3. SAVINGS PRODUCTS IN THE NGO SECTOR ...................................................................... 12

2.3.1. How to fit the savings programs into the NGO sector? What kind of non-profit

actors deal with saving programs in Hungary? ............................................................... 14

3. CONCLUSIONS AND RECOMMENDATIONS ........................................................... 16

RECOMMENDATIONS ............................................................................................................. 18

BIBLIOGRAPHY AND REFERENCES ............................................................................. 20

1. The Hungarian context:

problems and causes

In Hungary households’ savings show a steady downward trend in recent years. Both the low

level of the propensity to save, and the uncertain, unpredictable economic and social

environment are responsible for it. On the one hand, a significant ratio of the Hungarian

population lives near or below the level of the living standard. On the other hand, those who

could afford to save but have to cope with continuous uncertainty every day, usually are

discouraged rather by short term risks, than those emerging in the long run.

In this chapter we draw a picture of the Hungarian economic environment and the saving

capabilities of Hungarian households. What are the conditions influencing the households’

decision-making? Is the “lack” or the low level of financial culture the main reason for the

low level of the Hungarian savings? How many people are there in Hungary living below the

level of the living standard? What is the volume of overall savings of the Hungarian

households at all? These are the questions we are going to give answers for in the first

chapter.

1.1. Economic environment Since the economic crisis the propensity to save has been getting worse. Saving money for

half a year is already an achievement – comments a banker on the financial positions of the

low-income households in an interview. Also for middle class households, it is difficult to

save: During the 2000s foreign currency mortgages (especially in Swiss franc) were

prevailing, and for about five years debtors have been amortizing their credits using up most

of their incomes. Moreover, the Hungarian forint had been deteriorated by 40% against Swiss

franc, what led to such high installments, that nobody (no bankers, no borrowers, even not the

Hungarian Central Bank) counted with before.

The last time in Hungarian history, when the government supported intensively savings was

in the socialist system. In the 2000s, the financial elite started to promote self-provision

programs,1 and the “Financial and Economic Knowledge” has become a part of the Hungarian

1 In the 2000s there were two significant foundations. Öngondoskodás – A Pénzügyi Kultúra Fejlesztéséért

Alapítvány (Self-Provision – Foundation for the Development of Financial Culture) was founded by the

Budapesti Értéktőzsde (Budapest Stock Exchange) in 2003. The advisory board's members were the Hungarian

financial and economic elite. Tudatos Pénzügyekért Alapítvány (Foundation for Conscious Financial Decisions)

was founded by the MNB (Hungarian Central Bank), Magyar Bankszövetség (Hungarian Banking Associaton)

National Curriculum (Nemzeti Alaptanterv). Because of the severe financial position of low-

income families and the consequences of the economic crisis, these programs has had only

moderate results. Moreover, the nationalization of the private pension fund’s wealth in 20112

made the attitude towards savings gloomy.

At the same time, the policy of the current Hungarian government does not promote the

savings of the low-income families, but does hamper it. Recently have emerged two important

objectives of the Fidesz-KDNP government: stimulating the economy with loans and reducing

the external financial dependency. Both of them are related to the saving habits and

opportunities. In the first case, government wants to stimulate loaning and it needs sources.

The Hungarian Central Bank tries to raise the supply of credit in a more or less EU-

compatible way, but the main source should be the savings of Hungarian population (recently

foreign owned banks in Hungary do not want to raise their capital with external sources).

Since the well-off people can save a bigger part of their income, the government’s tax policy

raise the general burdens (e.g. VAT), and lower the taxes on well-off people.

In the second case, the government wants to lower the external debt that is to reduce the

volume of the foreign currency mortgages and to raise the internal finance of the government

debt (in order to reduce the external finance). These objectives could be reached by the fast

amortization of foreign currency mortgages and the diverting of the savings to Hungarian

bonds. Several steps have been taken to promote these aims, but we have to emphasize that

most new savings products have been constructed to attract middle class families, rather than

those with low incomes.

1.2. Capacities for savings in Hungary We can see from the above situation that there is a narrowing institutional framework in

Hungary which provides opportunity for the Hungarian population to do savings. It follows

that a relatively low proportion of the population do saving in Hungary. The saving activity

and capacity can be determined by several factors (institutional framework, attitudes,

and Diákhitel Központ (Student Loan Centre) in September 2008. The main objective of these foundations was

the financial development of students. Beside it, Tudatos Pénzügyekért Alapítvány wanted to support saving

promotion programs and a national strategy. Finally, in 2010 the latter transformed to Pénziránytű – Alapítvány

a Tudatos Pénzügyekért (Financial Compass - Foundation for Conscious Financial Decisions)

(http://penziranytu.mnb.hu/). Öngondoskodás was merged to it in the same year, and the claim of saving

promotion programs and national strategy lessened. Further information about the Pénziránytű:

http://www.penziskola.hu/content/penziranytu-alapitvany and Öngondoskodás:

http://bet.hu/data/cms76987/Hogyan_kell_okosan_banni_a_penzzel.pdf. 2 Further information: http://blogs.wsj.com/emergingeurope/2010/11/08/hungary-readies-to-nationalize-

mandatory-private-pension-funds/ and http://www.bloomberg.com/news/2010-11-25/hungary-follows-argentina-

in-pension-fund-ultimatum-nightmare-for-some.html.

historical entities, income, etc.). However, we think that it is necessary to determine a

threshold level below which the savings capacity of households significantly reduced

statistically. In Hungary, this threshold is connected to the yearly living standard.

The value of the living standard is determined by the Hungarian Central Statistical Office

(KSH) in every year since 1991. The concept of a living standard of households shows the

minimum income requirement under which a person can provide modest living conditions.

The amount of the living standard for 1 unit of consumption per month in 2012 was 85 960

HUF (275 EUR), which is 2.4% higher than a year earlier. The living standard is not

necessarily means poverty, but it is an income that can satisfy the person demands beyond

basic needs -such as saving activity.

The living standard’s calculation is based on several internationally recognized methods; in

Hungary the KSH uses the so-called “normative calculation”. Briefly, this method is based on

the calculation of the present value of food consumption and the necessary maintenance costs

of housing. The KSH uses the Food Basket calculations of the National Food and Nutrition

Institute. In addition the living standard calculation in Hungary also differentiates the amount

of living standard according to different household sizes, and also the number of dependents.

It uses the measurement of consumption-key units. Based on the consumption-key unit’s

measurement the first adult member of the family counted as 1 the other adult counted as

0.75, the first children less than 14 year counted as 0.65, the second children counted as 0.5,

the third children counted as 0.4.

According to Zsuzsa Ferge’s research in 2013, in Hungary nearly 4 million people live below

the living standard, it is 40% of the total population. The large number come from two factors,

on the one hand, the minimum wage and the amount of living standard are getting further and

further since the regime transformation. On the other hand the high level of unemployment

rate is further aggravating the situation.

1.3. Savings in numbers The personal savings are determined by households’ assets and by the households’ income

and these entity gives the sharp boundary of the saving potential. Since the period of the

regime transition the gross financial property of households has increased steadily. While in

the early 2000s, all financial wealth were not much higher than the 60% of GDP by the end of

2007 the ratio increased to 95%. However, beyond these figures it is true that in an

international comparison of financial property the Hungarian households’ property rate is still

rather low then other EU countries’3. While the Hungarian saving rate doesn’t seem too much

compering with the European standards, it’s around 6 thousand trillion HUF. However, the

picture becomes grimmer if we take a look at the net financial assets of the households and we

correct it with debt portfolio. In this case, the net financial assets of households stagnated in

the 2000s (hovered around 60% relative to the GDP) (Figure 1)4.

Figure 1

Households' net financial assets and liabilities as a percentage of GDP (Sources: MNB)

(blue line: gross financial liabilities, black line: net financial assets, red line: gross financial assets)

In addition another factor of saving capacity of household is the mental side, the financial

awareness of the households. The literature suggests that the percentage of those households

that are trying to prepare with saving for their retirement in Hungary (in addition to the

mandatory pension contributions as a tax) is less than the average in the EU countries. And

this pattern also can be observed if we take a look at the saving percentage for later life-stage.

According to the literature5 the Hungarian households can be characterized less with the term

of life-cycle savings than Western European or other Eastern European countries’ households.

That basically means that the Hungarian households prepare less with financial savings for

their future positions. This is evidenced by the fact that even if the incomes of households

grow at the macroeconomic level, the savings do not grow in parallel with this in the country.

An example for this is form the 2002‒2003 ‒ the year when despite of the significant increase

3 KSH 2009 4 Lengyel 2006 5 Kopint-Tárki 2010

in household income, the gross savings were stagnant6. Or another example from 2007 when

the nominal household incomes have grown the gross savings declined in nominal terms as

well. This picture confirms by a spring survey from 20067. According to that Hungary has the

highest proportion of those peoples who do not invest in anything in Central Europe. In

Western Europe 49% of the population, in Central Europe 29%, while in Hungary only 19%

of the population has short-term savings in bank deposits, and the other form of saving is

much less prevalent in Hungary. It concisely means that the households have low saving

activity, and they only set aside a small amount of money for saving purposes.

In summary, the net savings rate of Hungarian households reduced at a very low level in

recent years, and their debt – relative to the increasing gross debt – is above the EU average.

The unfavorable characteristic of net savings of households are due to the hectic fluctuations

of gross incomes (salaries, social benefits), and to the state-cuts, and also due to the impact of

the global financial crisis, and to the narrowing range of the saving opportunities.

2. Savings products in Hungary:

policies and initiatives

In our research we analyzed the last factor of low savings capacity (narrowing range of the

saving opportunities). We mapped and analyzed the savings products in the financial, general

government and NGO sectors. This threefold division seemed to be essential in our research,

because the three sectors follow different logic, and they target different social groups. In the

following we are going to present the results of our research and we formulate

recommendations to strengthen the savings programs in Hungary.

2.1. Savings products in the For-Profit Sector Financial institutions provide a limited variety of officially regulated financial savings

promotion programs. They are described in details on the website of Hungarian Financial

Supervisory Authority (PSZÁF). However, neither PSZÁF, nor the Hungarian National Bank

(MNB), nor private research institutions have reports about the actual efficiency of these

programs. We have conducted interviews with bankers, and researchers of financial

6 Kopint-Tárki 2010 7 Lengyel 2006

institutions, but many of them consider this information confidential. We have used the news

of economic websites, and we made conclusions for the actual target group from the

characteristics of the financial instruments, that are for whom is affordable to choose the

instrument. We also used the Hungarian central bank’s researches about the households’

propensity to save.

Two special Hungarian financial institutions exist, that can stimulate financial inclusion

through their transparency and security: saving cooperatives (takarékszövetkezetek) and

MagNet Bank (MagNet Magyar Közösségi Bank). In the first case, all the debitors are owners

at the same time, and they are the only owner of the cooperation. Nevertheless, credit can be

provided to anyone (although there is another type of saving cooperation, where just the

member could apply for credits: credit cooperatives // hitelszövetkezetek). In order to the

mentioned information, the control of the credit policy is dependent of the members

(debitors), and the details of the cooperatives’ operation are public for them.

MagNet Bank – the other case – used to be a saving cooperative till 2008, but it changed its

policies because of the economic crisis. It was transformed to a bank, but it retains some of

the advantages of the saving cooperation. Its clients are informed the profits and the costs (eg.

managing their accounts) what they cause to the bank, and they have choice to decide based on

environmental, social responsibility priciples, to which industry will be financed by their saving.

(The latter is just an option, and the client gets lower interest rates in exchange of their

decision.)

The ‘classical’ forms of saving promotion programs are subsidized by the government, and

are provided by the financial institutions. There are four major programs in Hungary (see it

below). The two typical stimulating tools: reduced taxes and governmental financial

subsidies. The prior in itself (as it is shown in the program of Long-Term Investment

Account) is not worth for the low-income families. The latter could be worth for them, it

depends of the program’s conditions. It can be calibrated to low-income families (there are

several variables: the length of the savings promotion program, the frequency and the volume

of the expected payments, the volume of the subsidies and its upper limit).

2.1.1. List of the saving products in the For-Profit sector

Long-Term Investment Account

Tartós befektetési számla (tbsz)

Its main advantage is the exemption from tax on interest income, and ‒ since August 2013 ‒

from the newly levied „contribution to the public health services” (egészségügyi hozzájárulás,

eho). These taxes are subsequently 16% and 8%. If the consumer does not break the account

for 5 years, will gain the whole exemption. (After 3 years, the consumer is eligible to reduced

taxes.) Because of the extension of „eho” to the interest incomes, its popularity rises on a

national level.

Even under these circumstances the instrument is not affordable for low-income families. On

the one hand, even in a high interest rate environment (as it was in 2011‒2012, when the

interest rates were 8‒11%), a saving of a small volume does not provide a significant interest

income, so the fees on it are much smaller. On the other hand, a long-term saving for a low-

income family is rather risky.

Pre-Saving for Pension Account

Nyugdíj-előtakarékossági számla (nyesz)

Since 1998, Hungary had followed the World Bank concept of a three pillar pension system: a

public pay-as-you-go first pillar, a mandatory private funded second pillar and a voluntary

private funded third pillar. However in 2010, then-newly-elected-government decided to

dissolve the second pillar, and practically nationalize the wealth managed by the private

funds. At the same time, the popularity of Pre-Saving for Pension Account – the third pillar –

dropped. It is really hard to sell them – tells a banker in an interview. The construction of this

account is flexible: there is no obligatory amount of the saving per year (except the initial

capital, but it is just 5 000 HUF, ca. 20 EUR). Each year savings are financially subsidized by

the government: 20% of each year’s additional payment is deducted from the personal income

tax, and it is added to the Pre-Saving for Pension Account. It means, if somebody has no legal

income, governmental support cannot be called down. Nevertheless, conditions of Pre-Saving

for Pension Account is really prosperous for the households with low income (even if they

have no permanent income). The upper limit of the support is 100 000 HUF, ca. 350 EUR per

year, what is equivalent to an annual payment of 500 000 HUF, ca. 1 750 EUR to the account.

For this reason target group of the program involves not only low-income households, but

also well-off groups.

Pre-Saving for Housing

Lakástakarékpénztár (ltp)

Pre-Saving for Housing program consists of two parts. The first is a savings promotion

program for housing. The volume of the monthly savings and the interest rates are fixed, and

the client can’t leave the program (without fees) for at least four years. After the end of the

savings period the program transformed to a financing project. The financial institution

provides credit beside the savings in order to accomplish the housing project. The savings is

subsidized and the interest rates of the credit are reduced by the government. The program’s

conditions are favorable, but it requires a sure income and a financial facility to save money

for at least four years. It could be hard for low-income families. Because of the safety of the

program, the savings are held in Hungarian bonds.

Baby Bond – Support for Life start and the Start Account

Babakötvény – életkezdési támogatás és Start számla

The Baby Bond program is devised to support both the childbearing and the purchasing of

Hungarian bonds. Each child under 18 years (who was born after 31/12/2005) is eligible of

42 500 HUF, ca. 150 EUR transferred to an account managed by the Hungarian State

Treasury (Magyar Államkincstár, MÁK). If the parents want to raise the support, the account

can be transformed to a saving account named ‘Start Account’ (Start számla). Treasury

supports new payments (support equals to the 10% of the current year’s payments, but its

maximum is 6 000 HUF, ca. 20 EUR) per year. The volume of maximum support suggests

that the optimal maximum saving is 60 000 HUF, ca. 200 EUR per year. The program

provides further supports in case of state care of the child.

Start Account popularity deceased significantly in the first half of 2013. It was claimed by

11% of the new owners of Baby Bonds, contrast to the 55% during the first half of 2012. The

Start Account would be prosperous, but its administration is unnecessarily difficult – said a

participant of the program. There is no option to make an account in the banks (as it used to

be until the end of 2012), now the Treasury and its local branches are the only institutions,

where the savers can manage their savings. The parents after every raising of the savings have

to decide again and again in which bond they want to put their savings. If they miss this

decision, their payment won’t be invested.

2.2. Saving products in the general government sector

2.2.1. General government’s micro-savings opportunities before the Regime Transition

Bank products

In the socialist system the Hungarian government supported the households’ savings activity

intensively. Although the government also determined, those directions that matched

ideologically, politically and economically to the political power. Due to the centralized

political system there were only just a few banks and also just a few bank products in the

country, mainly the “common” bank deposit was the only form of saving. For the Hungarian

population just the Saving Cooperatives (takarékpénztárak) and OTP (Országos Takarék

Pénztár) were the only available financial institutions.

There were also a few saving forms (saving stamps, saving books, saving stamps/books for

students, bank deposits, life insurances) in the Hungarian bank system. But due to the

ideological frame-work of socialism there wasn’t possible to collect great amount of savings

on these bank accounts or quasi-bank accounts. The most significant savings promotion

program was the saving stamp (takarékbélyeg) protram. Its aim was to collect a small but

regular amount of saving. Particularly they were sold at workplaces by stockiest. At the same

time, because of the growing interests in the development of students’ saving habits and

financial awareness, in 1952 student/school saving stamps (iskolai takarékbélyeg) was

created. They could be collected in banknotes. The pupils could collect the school saving

stamps in a one school-year saving period. At the beginning the interest rate was 1%, later it

raised by OTP on divers occasions. The promotion of school saving stamps was inspired by

competitions and personal rewards. Even so its popularity, it was ceased in 1992.

Another saving product was the saving deposit (takarékbetét) or savings book

(takarékbetétkönyv). It was launched in 1950 and its interest rates were 3%. The volumes of

the interest rates were defined by law till 1988.

Another saving form was the Premium Bond (Nyereménybetétkönyv). Following the Soviet

Union’s practice, Hungary launched it in 1951. It didn’t have any interests, but the clients had

opportunity to win cash quarterly. The participation in the program was connected to a

monthly saving amount. The Premium Bond’s last draw was in January, 1994. After the

1960s, several different Premium Bond appeared in the market, one was the Motorcar

Premium Bond which was launched in 1961 and it still exists.

Workplace savings

Another way of savings was connected to workplaces, and typically to the big, socialist

companies or to the members of the trade unions or other unions.

Mutual Aiding Savings Banks (Kölcsönös Segítő Takarékpénztárak ‒ KST) was formed in

1954. KST worked as local mini-organizations (KST groups) which were established at

workplaces by workers, employees. The members could make monthly savings, and get short-

term (max. 4 months) loan which was maximized on the 50% of the employees’ own monthly

wages. The KST was leaded and controlled by the local Cooperative or OTP branch. By 1960

the number of KSTs become 4.472, and by 1985 it was 5.665. When the two-leveled bank-

system appeared in Hungary, the popularity of the KSTs pushed back progressively, and after

the period of transition the KSTs ceased.

Another workplace saving form was connected to the Unions. The union’s members had to

make monthly or systematic savings, or they had to have willingness to save. These kind of

savings mostly realized as a membership fees, which were collected by the unions. Instead of

getting the savings in a future moment (in one amount), the members got extensive financial

help in difficult life situations, such as death case in family, divorce, school-start in

September, baby birth etc., or get some kind of social services (low fare holiday, monthly

financial support for widows, one-parent family’s support).

2.2.2. General government micro-savings opportunities after the regime transition

The role of the general government sector in the micro savings categorically changed after the

regime transaction. Our research was targeting to examine the narrowing shape of these

opportunities. These part of the research was based on desk research in the internet and

personal half-structured interviews with former state workers. The semi-structural interviews

were extremely important because the desk research did not lead to success. There wasn’t

enough published information, about saving opportunities supported by government or any

other labor-unions or other organizations. These opportunities are almost just privately

available in a closed and small circle in Hungary. Thus we also had to face with the problem

of publicity in these issue. There for it was essential to make interviews, and from that it can

be stated that those diverse form of saving opportunities that was offered by the state before

the regime transaction mostly disappeared after the Transition.

Nowadays those kind of programs that are supported by the Hungarian government are mostly

life-starter programs and not saving programs in a classical way. They can provide financial

help in housing (Housing Support – Lakásépítési és vásárlási támogatás) or manage everyday-

life of the households, but can’t change saving-attitudes or doesn’t raise periodical saving

activity. The Swallow House program is one refreshing exception, although it was just a local

pilot state program. It is started in the late ’90-s. Young people/pairs, less than 35 years can

rent this kind of apartments for max. 5 years (the contract must be renewed annually.) The

conditions were: they didn’t have any own property, they had a job (or any kind of regular

income) and they made monthly savings at a pre-saving account for housing.

The low monthly rent (20.000- 40.000 HUF; 68-136 EUR) usually just only included the

heating and water fees. With this small monthly rent the state helped to the young people to

save money on their pre-saving housing account. The apartments’ equipment quality were

highly variable. The House of Swallows program was subsidized up to 2003, but the

government revoked the funds in 2002.

2.3. Savings products in the NGO sector In order to obtain a complete picture about saving programs in the Hungarian civil sector it is

essential to briefly review the sector’s structure, characteristics, and main activity.

In Hungary the NGO sector started growing rapidly from the beginning of the 90's, and for

now it reached that about 55 thousand non-profit organization functioning in the country.

However, it should be noted that a third of the operating organizations’ annual revenue do not

exceed fifty thousand forints (183 EUR), an additional one-third of the organizations’ annual

income is less than 500 thousand HUF (1666 EUR)8. It is understandable that most of the

sector’s organizations are extremely small organizations with low amount of capital and the

majority of these organizations implement local and short-term programs. This situation is

exacerbated at the recent years because of the strong political and economic centralization,

and the withdrawal of funds from the sector. These facts further limited the opportunities and

activities of the organizations in the sector and it further strengthened the pressure of the state-

role in the sector.

If we want to determine the definition of non-profit organizations - after the size of the sector

- we also do not face an easy position. Therefore it seems obvious to use a combination of

several definitions. If we would like to define the Hungarian civil sector or “third sector” – if

we localized the NGO sector in the state-market-civil horizon - in the first sight, it is worth

define it along those values and value-choices that are selected by the organizations

themselves. Along these values we can find organizations, associations and foundations in the

8 Győrffy Gábor A Nonprofit szervezetek ismérvei és tevékenységük

sector, that profess the value of the civil initiative and independent action, citizen

participation, respect of diversity, innovative and unusual approach of social problems,

flexibility, anti-bureaucratic and idealistic - often ideological – aims and philanthropy.

However, this definition could be true to the third sector but also to the civil society itself,

thus we have to involve other definition or aspects as well.

The legal definition of the nonprofit sector compresses the range of certain legal entities, e.g.

foundations, associations, non-profit companies, public bodies and charitable organizations.

With this definition, we only narrowed down the sector’s definition from the formal side, so it

is worth to use a third approach in the definition process and define the sector with those

activities that are done by the sector9.

Thus as the third definition we are focusing for those tasks or activities that are managed by

NGOs in Hungary. Based on these it can be seen that a wide range of activities are managed

by the Hungarian civil sector; charity, fundraising, human services, community development,

mediation, protection of interests and values. From all of these tasks it can also be seen that

some of the tasks are overlapping with the task of the general government sector for example

in the social-transfer redistribution and in social services the general government sector and

also non-profit sector are also can be found. Furthermore other activates of the NGO sector

are common to the business sector’s activates10. All of this shows us that we cannot give an

exact definition to the NGO sector, and we can found overlaps in multi-point with the general

government and the business sector. But in summary, we can conclude that all the activates

remains to the non-profit sector’s organizations that cannot take place between the relatively

narrow limits of market rationality or state responsibility.

However, if we take a look to the distribution of percentage of the main activities that are

conducted by the third sector’s organizations in Hungary, it can be seen that the

overwhelming activities in the sector are targeting the area of culture, education and research

(61%), and activates of social services (25%). Social service activates in the NGO sector

basically means that the sector takeover activates from the state social system.

9 Győrffy Gábor A Nonprofit szervezetek ismérvei és tevékenységük 10 László Harsányi: A harmadik szektor

Activities of Hungarian NGO sector11

Description %

Culture, recreation,

education, research 61%

Healthcare 1%

Social services 25%

Advocacy of business and

professional entities 10%

Other activities 3%

Summa 100%

All of this distribution of activates goes back to the time when the sector formed, till then it is

continues to grow its role in the research area or in the service area mainly in the field of

social and human service. Because of the Hungarian narrowing scheme of short-term funds

(usually one year) we cannot talk about these activities they were complementary and long-

term but rather as a particular structure of activities, that are mainly short-term long.

2.3.1. How to fit the savings programs into the NGO sector? What kind of non-profit

actors deal with saving programs in Hungary?

Turning to the savings and financial education programs, it can be seen from the above table

that these programs can be placed at the edge of “education activates” and “other activities” at

the activity level in the NGO sector.

However, due to the small amount of available funds, and the different focus of the sector

these programs rather drop out from the horizon of the Hungarian NGO sector. Although the

financial development is an important issue among the Hungarian population the NGO sector

mainly focused on debt management or energy efficiency or long-term green investments as a

saving program. Neither of these directions can be called as a savings program in a classical

way. Those NGOs that are implementing debt management programs mostly founded by state

grants and they could also finance their projects form EU grant (although till now only one

grant implemented from EU fund in 2010)12. These programs rather focusing on rise of the

financial awareness and reduce existing debt, than the constant savings. The energy efficiency

trainings and long-term green investments, are basically dealing with the saving from the

11 Kuti Éva: A harmadik szektor helye és szerepe a magyar társadalom és gazdaság szerkezetének

átalakulásában. A nonprofit szektor Magyarországon (Tanulmányok), Nonprofit Kutatócsoport, Budapest 1992

12 Number of the Eu grant: TÁMOP-5.1.3-09/2-2010-0048

long-term cost-cutting side so these programs doesn’t implement permanent saving activates

as well.

For this reason during our research we included those NGOs in our research, which

implemented program with a specifically focus of saving in Hungary. Our research is relied

on two methods, primarily on a desk research and secondly on semi-structured interviews

with the management of the program. We collected data about those NGOs that implemented

saving programs in Hungary with snowball method based on these interviews. Although we

had to face with the fact that during our research the scope of those organizations that

implemented saving programs - and not just a program that tangentially related with the

concept of savings – were narrowed down. For this reason, we dealt only in passing with the

Maltese Charity Cross’s S-Credit program, whose focus is to rise financial awareness, but

mainly with debt –management’s, financial planning’s and social mentoring’s approach and

not with permanent saving activates. The program of Habitat for Humanity Hungary also rose

tangentially in our research, because it’s mainly aimed to strengthen the financial literacy

between the participants but just with providing trainings and not with permanent saving

activates. The overall conclusion is that due to peripheral situation of the saving programs in

the focus of third sector in Hungary, we could just involve savings programs occasionally in

our research.

Specifically savings program were implemented by Autonomia Foundation in the sector.

These projects were implemented in disadvantaged micro-regions and the projects’

participants were peoples who living in deep poverty. The methodology of the savings was

IDA methodology (Individual Development Account) as a permanent saving methodology

and it was completed with matching at the end of the saving period. The IDA methodology

were combined with financial- and energy efficiency trainings. Our research mainly covers

analytical description of these programs of Autonomia Foundation because the other

programs that are lunched by Hungarian NGOs didn’t specifically implemented permanent

saving activates. On this basis, it should be noted that the Foundation has implemented its

programs for disadvantaged populations, which is narrows down the analytical opportunities

of the potential savings programs in Hungary.

3. Conclusions and recommendations

Neither the economic crisis, nor the well-off people supported governmental policy help the

savings of the low-income families. Although there are four savings promotion products

provided through the financial institutions (regulated and financed by the government) and,

in principle, they have no particular target groups, they are, in effect, constructed to the

middle class. Some programs’ conditions are preferable to other social groups, but it is rather

open in the upper end of the middle class, than the lower. The only exception is the Baby

Bond, but its genuine objective is not savings promotion, but the stimulation of childbearing.

Nevertheless, these programs have lots of variables, and they can be calibrated to the low-

income households. New and innovative methods (e.g. conditional cash transfer, IDA etc.) are

missing from the social policy. There is no cooperation between NGOs (civil organizations) –

who could reach, involve, motivate and support the clients with low social and economical

status.

The strengths of the General Government saving programs are definitely the financial and

bureaucratic resources that it could use in a saving program implementation. The government

could not just use its social system to raise awareness towards savings but could use the self-

government network to implement them. The weaknesses of these programs are the lack of

publicity or the lack of information. In Hungary, although these programs are opened for

every citizen, basically just a small circle can achieve information about these programs. The

external threats are the macro-level threat of the economy (high unemployment rate, high

poverty rate) and these factors establish the low saving capacity of the households. Finally the

opportunities of these programs are in the structure of the state system mainly a state saving

program could operate parallel at the state and at the local level.

The savings programs that are implemented by the Hungarian civil organizations are

embedded in contextual framework which contains a wide range of different factors. The

program's strengths are mainly due to the local character of the programs and to the flexible

and innovate way how they responding to the financial problems of Hungarian households.

Moreover, they actively involve local actors in the implementation phase and they employed

local mentors to build the knowledge and skills that are available locally. In addition due to

the active connections with the program participants they provide opportunities to participants

to give feedback about the programs.

In addition the "size" problem appears as their weakness as well, because the adaptations to

the local conditions raise doubts in front of the possibility of the implementation of the project

at the national level. The small numbers of project participants and the local character can

also be their weaknesses and defined a lot of question about the possibility of implementation

of a national network or a national bureaucratic system. Beyond that, the small number of

savings program that has taken place in Hungary only reached a special circle of

disadvantaged people, and because of that it is hard to determine how such a program would

be implemented in other kinds of target groups.

***

Before we formulate recommendations based on our research we take a brief look at the

factors that determine the Hungarian savings side’s supply character. First, we want to focus

on the time factor. There is a temporal lag behind the neighboring Eastern and Western

European countries in the shaping of saving initiatives in Hungary. The expansion of saving

and micro-financing opportunities can be traced back further in time in both of the eastern and

in the western countries. In Hungary, these financial forms only recently entered into the

public consciousness.

For this reason, especially the general government and the NGO sector can be characterized

by a lack of savings programs. Those programs that have been implemented in the sectors

were mainly small, locally based programs, with small numbers of participants. However, all

this is closely related to the fact, that in Hungary due to low household wealth, it is difficult to

implement savings incentive programs.

If we summarize the saving context from the legislative side, it can be seen that the legislative

framework of the programs are not well developed or it doesn’t suit to the implementation of

a saving program.

In addition, it appears that neither the general government nor the market sectors are open to

the lower income classes in the savings programs, they rather targeting the middle class or

upper-middle-class income groups. Furthermore, these programs address too long time span,

and if we take into the account the economic situation of the country, these programs offers

too high risk.

Recommendations

We see the overcome of the above shortcomings that the role of all the three sectors

should be strengthen during the implementation of savings incentive programs

We consider that co-operation between sectors is essential to a successful savings

program implementation. Thus, the savings program should be based on a kind of a

synergy, that is implement a close inter-sectorial collaboration

The savings capacity of the Hungarian households is very-low so the implemented

programs should include high incentives

It should be developed various different savings products and services for different

target groups

The potential savings of migrant should be taking into account, and a special program

should be developed to encourage their savings

Any financial development program must combine several elements in order for it to

offer a chance of success. Therefore, in addition to financial crisis management, such a

program should also offer a debt management plan, financial training, incentives for

savings, individualized micro-lending that is adapted to the given situation, as well as

community building initiatives

Any financial program need a nationwide network and a monitoring network that

works with regional centers and helps to design and implement programs that appear

to be the most efficient in a particular community (through the application of the best-

suited development methods)

The program implementation must have an intensive and officially supported media

campaign to earning the trust of the participants

We considered that the conditions for a successful implementation of a saving program are

summarized in the following diagram:

During the preparation phase, the target groups should be defined properly

The program should cover a short time span (1-3 years)

The program should be flexible or variable (by income and place of residence)

The program has to ensure lane state support along to the household income. Those

households that can be characterized with lower income can get higher government

support than those households that has higher income

In the savings program the matching is only available under a certain income level,

thus there is a "ceiling" or a support limit in the program

During the program, the matching are linked to certain financial goals and these goals

narrowing as increases the income of the household

The program should be implement with different additional project elements (low cost

of bank account, mentoring and financial education). The rolls of these project

elements continuously decreasing as the income of the household grows

The program should be combined with a nationwide support and monitoring system. Such a

support system of professionals would participate in the design of the programmes, and there

would be ongoing interaction (and not supervision or audits) between the sponsor and

management organisations throughout the implementation of the project.

Bibliography and references

KSH: Magyarország 1989-2009 Változások tükrében 2009 (online)

Downloaded: http://www.ksh.hu/docs/hun/xftp/idoszaki/mo/mo1989_2009.pdf (2013.07.31.)

György Lengyel: Megtakarítási normák, gazdasági attitűdök, pénzhasználati módok

Downloaded: http://www.tarki.hu/adatbank-h/kutjel/pdf/a883.pdf (2013.07.31.)

Kopint-Tárki: Lakossági megtakarítások 2010-2012

Downloaded: http://www.kopint-tarki.hu/tanulmanyaink/2010/Takbank/Takbank_megtak.pdf

(2013.07.31.)

Árvai Zsófia – Vincze János (2001): A magyar háztartások megtakarításai 1995 és 2000 között. In:

Közgazdasági Szemle, 48(2), 93‒113.

Csak minden kilencedik gyereknek nyitnak Start-számlát (2013). In: Világgazdaság Online,

2013.07.31. Downloaded: http://www.vg.hu/penzugy/penzugyi-hirek/alig-nyitnak-mar-a-szulok-start-

szamlat-a-kisbabaknak-400621 (2013.07.31.).

Erste Group (2012): Megtakarítási szokások országszintű áttekintés: Reprezentatív felmérés a 15 év

feletti lakosság körében. Downloaded:

http://www.erstebank.hu/static/internet/download/121031_Country_overview_savings_2012.pdf

Lakossági roham – Ide menekülnek az adófizetés elől (2013). In: Portfolio.hu, 2013.07.31.

Downloaded:

http://www.portfolio.hu/befektetesi_alapok/ongondoskodas/lakossagi_roham_ide_menekulunk_az_ad

ofizetes_elol.5.187334.html (2013.07.31.).

Moizs Attila – Szabó G. Gábor (2012): A szövetkezeti hitelintézetek története, jelenlegi rendszere és

sajátosságai Magyarországon. In: Hitelintézeti Szemle, 11(1): 67‒85.

Zsoldos István (1997): A lakosság megtakarításai és portfóliódöntései Magyarországon 1980‒1996

között. In: MNB Füzetek, 4.

A lakossági megtakarítási formák fejlődése In: Bankó. Az OTP Bank ügyfélmagazinja. XVIII.

ÉVFOLYAM, 2. SZÁM, 2010. ÁPRILIS, p. 6. Downloaded:

https://www.otpbank.hu/static/portal/sw/file/Banko_201004.pdf (2013.07.31.)

Még mindig sorsoljáka gépkocsinyeremény-betétkönyveket. 2013. Május 11.

Downloaded: http://gazdasagiradio.hu/cikk/90836/ (2013.07.31.)

Downloaded: http://ongondoskodas.linkpark.hu/ (2013.07.31.)

Jó hír, fizet a kormány. 2010. Szeptember 24. Downloaded:

http://hvg.hu/ingatlan/20100924_fecskehaz (2013.07.31.)

Gábor Győrffy: A Nonprofit szervezetek ismérvei és tevékenységük (ONLINE) Downloaded:

2013.08.01

http://www.3sz.hu/sites/default/files/uploaded/gyorffy_gabor_-

_a_nonprofit_szervezetek_ismervei_es_tevekenyseguk.pdf

László Harsányi: A harmadik szektor (ONLINE) Downloaded 2012.08.01

http://www.3sz.hu/sites/default/files/uploaded/harsanyi_laszlo_-_a_harmadik_szektor.pdf

Éva Kuti: A harmadik szektor helye és szerepe a magyar társadalom és gazdaság szerkezetének

átalakulásában. A nonprofit szektor Magyarországon (Tanulmányok), Nonprofit Kutatócsoport,

Budapest 1992