Gender Equality National Report Hungary - European-microfinance ...

Fostering Gender Equality: Meeting the Entrepreneurship and Microfinance
Challenge
VS/2006/0424
István Kovács
Entrepreneurial Environment Study:
National Report of Hungary
Hungarian Microfinance Network
September, 2007
3

Executive Summary .............................................................................................................. 5
1. Introduction..................................................................................................................... 9
1.1. Project Background................................................................................................ 9
1.2. Purpose of the Study and Report ........................................................................... 9
1.3. Methodology .........................................................................................................10
1.4. Gender and Equality Concepts and Definitions .....................................................10
2. General Country Information: Hungary..........................................................................12
2.1. Basic Statistics Table............................................................................................12
2.2. Evolution of female share in total self-employment ...............................................12
3. ScoreCard......................................................................................................................13
3.1. ScoreCard Diagramme for Hungary......................................................................13
3.2. General National Context for Entrepreneurship.....................................................13
3.3. Gender equality in society.....................................................................................31
3.4. Gender equality on the labour market and in the access to programs supporting the
process of becoming self-employed ......................................................................37
3.5. Gender Equality in Entrepreneurship and Self Employment..................................48
3.6. Gender equality regarding enterprise supporting institutes....................................55
3.7. Equal rights for the genders in accessing finance .................................................59
4. Conclusions and recommendations ...............................................................................64
4.1. Conclusions ..........................................................................................................64
4.2. Recommendations ................................................................................................67
5. Sources .........................................................................................................................69
6. Experts and associates who helped the creation of the national report: .........................71
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Executive Summary 1
Women represent only 30% of entrepreneurs in Europe and cite access to finance as the
most significant constraint affecting the launch, growth and sustainability of their businesses.
With businesses clustered in the very competitive service sector, higher poverty levels,
greater unemployment rates and fewer assets than men, it can be difficult for women to
access traditional bank lending to start their businesses. Microfinance addresses this
challenge by offering business loans of 25,000 euros and less to persons excluded from
bank lending. Moreover microfinance providers often accept alternative or no collateral
guarantees and provide training and support services to their clients. In contrast to most
other regions of the world, however, most microfinance providers in Europe are reaching
women at a rate barely above national female entrepreneurship rates.
The EU funded project, Fostering Gender Equality: Meeting the Entrepreneurship and
Microfinance Challenge aims to address this shortcoming by improving the sector’s
understanding of women’s enterprise and by identifying and exchanging on good practice.
The project involves implementation and evaluation of a series of pilot projects, best practice
exchange visits and comparative studies carried out by 9 network members under the
coordination of the European Microfinance Network.
This report is part of the comparative studies carried out in the 8 countries represented in the
project. The purpose of the study is to evaluate the business environment for women
entrepreneurs in the following European countries: Belgium, France, Germany, Hungary,
Norway, Spain, Slovakia and the UK.
The 8 study teams have collected data on the following six dimensions which represent key
factors affecting female self-employment and entrepreneurship:
• General National Context for Entrepreneurship
• Gender Equality in Society
• Gender Equality in Labour Market Inclusion and Welfare Bridges to Self-Employment
• Gender Equality in Entrepreneurship and Self-Employment
• Gender Equality in Support Structures for Entrepreneurship
• Gender Equality in Access to Finance
The Hungarian national report presents the Hungarian ScoreCard Diagramme which
summarises the study results. The report explains and justifies the scores, highlights good
practice examples and provides short case studies on innovative gender equality and
entrepreneurship initiatives.
Entrepreneurship culture needs to be practically recreated in Hungary, while its quality needs
to be significantly improved. During the Soviet occupation, traditional small private
enterprises were not allowed to operate for about 40 years. Businesses established during
and after the transition years could not have an entrepreneurial past nor experience.
Entrepreneurs could not get the necessary knowledge from their parents, or in the school
system.
The official SME development strategy approved by the government has been around for
some time now, but it is usually accompanied by vivid professional debate because it does
not stand on a wide professional consensus.
In their rhetoric all governments so far have emphasized the support for the SME sector and
the improvement of finance terms; however it has not entirely been realized in practice nor at
the required professional standards.
1 Parts containing the general overview of the project were taken from the French national report.
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The professional apparatus of the administration, which is responsible for enterprise
promotion, did not always devote the necessary attention to SME development programs,
they fail to sufficiently appreciate the indirect ways of supporting enterprises and the
significance of mediating and service providing institution.
In the recent period, the administrative and financial burdens of starting, operating or
liquidating a business were significant. After recognising this, the government introduced a
reform in the area, which resulted in setting up an enterprise becoming much simpler and
faster from September 1, 2007.
All types of institutes aiming to assist enterprises have already been established in Hungary:
• Organizations of the state administration and authorities
• State-owned organizations aiming to develop SMEs
• Non-profit development agencies (NGOs)
• Chambers (of commerce and industry, agriculture and special fields etc.)
• Entrepreneurial business federations, trade associations
Although the institution of enterprise development has been long established, it does
not seem to operate efficiently. The operation of the individual organizations is not efficient
enough; it has not helped sufficiently to strengthen the Hungarian SME sector or to make it
more competitive. The target is now to improve the efficiency of the existing
institutions, to enhance the specialization and professionalism of the organizations.
The main reason behind the problem is the parallel finance of the enterprise
promotion programs and that they were made to compete in the past decade. Their
operations were significantly limited by the flaws in the professional preparation, control and
the finance of their programs.
Among the institutes that help and promote the development of enterprises we must
highlight the LEA network consisting of agencies in the counties and in Budapest,
which was specifically established for the development of micro- and small
enterprises by the EU PHARE program. The basic activities of the LEAs, financed by
PHARE, are counselling, training, providing properties (business incubators, industrial
parks), providing microcredit as well as generating development programs.
The obtained experience and the market failures have made it clear that the intermediating
function of the LEAs is necessary. By today, the LEA network has developed its
integrated enterprise promotion program, in which there are several micro-finance
programs building on each other, in addition to training and counselling programs.
Although the external financial sources of enterprises have expanded in the past years, the
companies within the country utilise fewer outer resources to finance their expansion than
their counterparts in the developed countries. Almost 80% of Hungarian enterprises work
without using loans, while in developed countries the proportion is 15-20%.
Even today the notable under-capitalization and lack of resources of micro- and small
enterprises still remain a problem.
Although the competition of credit granting financial institutions has increased in the previous
years, the development of micro-enterprises is almost worrying despite the strong increase in
2006. The total number of loans reaching over the end of year is still much lower than it was
in 2002 and 2003, and it is infinitesimal compared to the number of micro-enterprises.
Micro-finance of micro-enterprises that are not bank-worthy has a long history in
Hungary. The members of the Hungarian Microfinance Network, the local enterprise
agencies in the counties and the capital city ® (LEAs) - for the first time in Hungary and
among the first in Europe - started their micro-finance activities with professional and
financial support from the PHARE SME program in 1992.
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From the beginning the LEA Network made over 26,000 loan contracts and provided
over HUF 45 billion ( ca. EUR 180 million ) worth Micro-credit and Micro-credit Plus for
the micro-enterprises, even though its operation was often hindered by lack of
resources or shortcomings in central regulations.
Gender equality is also declared in the Hungarian law.
The first point of the 66 th Article of the Constitution prohibits gender discrimination, 70/A
declares the provision of equal rights without discrimination. To extend the regulations
included in the Civil Code and the Labour Code, a law about equal treatment and the
promotion of equal chances was passed for the sake of total harmonization of community,
legal norms and unified regulation. To support this law, the Parliament also created an
administrational body with nationwide authority called Equal Treatment Authority.
With Government Decree 1089/2006 (Sept. 25th) the government created the Council for
Social Equality of Men and Women, which is a body of consultation, estimation and
suggestion, that prepares government decisions. Its members are representatives of
ministries, elected members of civil organizations with or without national authority as well as
experts in the domain.
The Equal Chances Program of the Republic is intended to take measures in various areas
with central budgetary support.
As part of the European Union Gender Mainstreaming Program, the Ministry of Social Affairs
and Labour developed the program to implement the issue of ”Men’s role in the promotion of
equal chances for men and women, the meaning of parenthood and fatherhood in particular,
in the conciliation of work, career and private life” in Hungary.
In the "Gender Gap Index" report of the World Economic Forum in 2006, Hungary took the
55 th position among the examined 115 countries.
The long and odd historical period of full employment was replaced by wide and long-term
unemployment after the transitions; two-third of the population loosing their jobs and
becoming inactive. The activity rate only started to increase in the past few years; but it is still
below the EU average.
The pay gap between women and men is currently 11% in Hungary. In the area of part-time
jobs our lag is significant; only 4% of women work in part-time jobs in Hungary. In 2002, a
survey addressed possibilities and barriers of the employment of people who are inactive
due to family reasons. Almost 30% of the answers pointed to the lack of available day care
services as the main obstacle. One-third of mothers after having a child remain away from
the labour market.
However, the earlier strong social network in Hungary is still above EU average in
some areas, despite the budgetary restrictions.
There is no (significant) difference in the attainment of welfare benefits for men and women
in Hungary. The social benefits relate more and more to the level of income or assets, and in
this regard it does not matter whether the recipient is a man or a woman.
Compared to other European and OECD countries, the paid maternity and parental leave is
long in Hungary. The proportion of family support to GDP is also high. In international
comparisons, Hungary ranks on the top of list.
Only one third formerly unemployed people who have become entrepreneurs to break out of
unemployment by self-employment are women.
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Although also generally low, the employment rate of men is traditionally higher: in 2004
57.5% of men and only 44.3% of women were employed, the difference therefore is nearly
14%. Among people who are employed, 19.4% of women and 23.7% of men are selfemployed.
The lack of resources for the launch of a business shows a devastating picture. Most of the
female enterprises start practically without any or with a very low amount of capital; these
entrepreneurs can be considered self employed according to international definitions.
According to statistics and studies, there are twice as many enterprises owned by men than
by women in Hungary,
Low representation of women in the media is connected to the fact that they also have a
small share in the politics.
In recent years, especially after Hungary joined the EU (2004) the number and financial
background of programs and measures enhancing equal opportunities for women in
enterprise development significantly increased.
EU funded female labour market calls for application focused on female entrepreneurs, also
emphasizing the importance of training and networking. As women’s businesses in Hungary
are usually small enterprises, they are vulnerable. The majority are micro-enterprises, which
employ fewer than 10 people, if any. A great number of them are self-employed.
Of the 65,000 non-profit organizations registered in Hungary there are only 60 that
specifically aim to represent women or claim to be women’s organizations. This number is
very low and appears to be even lower if we compare it with the tendencies of Western
countries. In spite of this, several of them were very successful, particularly with the help of
EU support programs. The number of these is likely to increase in the future, thanks to the
new, significantly higher EU funded sources.
Although the enterprises owned by men are somewhat bigger than those owned by women,
regarding both the number of employees and the size of income, practically there is no
difference in capital supply.
Although the number of micro-enterprises is the highest, they apply for or receive loans in the
lowest proportion. Even though the proportion of women’s enterprises is the highest (35%) in
this category, the majority do not count in the usage of loans. The proportion of women’s
enterprises is lower in the categories of small and medium-sized enterprises (27% and 26%
respectively) therefore the proportion when considering all t enterprises using loans is
probably below 30%.
In all the micro-finance programs (national and local micro-credit programs as well as the
Micro-credit Plus program) run by the enterprise promotion foundations in the capital city and
the counties (i.e. LEAs) as micro-finance institutions, which make up the Hungarian Microfinance
Network female and male entrepreneurs may apply for loans with equal chances.
On the basis of data from the national micro-credit program less than 30% of enterprises
receiving micro-credit are owned by women.
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1. Introduction
1.1. Project Background
This study is one of 8 country studies undertaken in the context of a transnational
project financed by the European Union Directorate General (DG) for Employment, Social
Affairs and Equal Opportunities. The project, Fostering Gender Equality: Meeting the
Entrepreneurship and Microfinance Challenge, falls within the DG’s Strategy and Programme
for promotion of gender equality in local development. The project is coordinated by the
European Microfinance Network and includes research, pilot project implementation and
exchange of knowledge and good practice amongst 9 network members operating in 8
countries under the coordination of the European Microfinance Network (EMN).
Representing more than 94% of enterprises in Europe, microenterprises (those with
less than 9 employees) and self-employed people represent an essential element in local
development. The number of women who are self-employed in Europe is much smaller than
that of men and the number of women entrepreneurs with employees is smaller still. As such,
women’s potential to contribute to local economic and social development is not being
realised.
Microcredit has been proven across the globe to be an effective tool for the
development of self-employment and microenterprise. It has been particularly successful in
engaging and assisting women to take their first steps into self-employment. However in
Europe microfinance providers are not reaching proportionally as many women as in other
parts of the world. There is a need to further improve European microfinance providers’
understanding and methodology in order to strengthen their capacities to better serve women
who are or wish to become self-employed or microentrepreneurs.
In this light, Objective 1 of the project aims to assist microfinance providers, national
governments and a European-wide audience to better understand the external environment
affecting women’s entrepreneurship, as well as the specific issues related to gender equality
in entrepreneurship and female entrepreneurship initiatives in the 8 participating countries.
1.2. Purpose of the Study and Report
The primary purpose of the Entrepreneurial Environment Study is to describe and
analyse the environment in which women entrepreneurs start businesses in Hungary. The
environment is summarised in a ScoreCard Diagramme. The report explains and justifies
the scores assigned in the diagramme and highlights good practices. The report is also
meant to provide a spring board for discussion and debate on how best to encourage and
support women’s enterprise. Recommendations are made to policy makers, government,
the research community, business development service providers and financial institutions
such as banks, guarantors and microcredit providers.
The secondary purpose of the report is to provide the basis for a cross country
comparison amongst the 8 countries participating in the project. The cross country
comparison will enable policy makers and practitioners to identify strengths and weakness
and good practices that can be adopted from other countries in order to promote gender
equality in entrepreneurship and microfinance in their own countries.
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1.3. Methodology
Under the leadership of Evers and Jung, project partners developed a Gender
ScoreCard to evaluate the entrepreneurship environment in the 8 project countries. The
Gender ScoreCard was based upon a similar matrix evaluation system developed by FACET
BV, Evers and Jung, and the new economics foundation (nef) in 2005.
The Gender ScoreCard enabled each country team to collect information and assess
the environment for women entrepreneurs against the following 6 dimensions:
• General National Context for Entrepreneurship
• Gender Equality in Society
• Gender Equality in Labour Market Inclusion and Welfare Bridges to Self-
Employment
• Gender Equality in Entrepreneurship and Self-Employment
• Gender Equaltiy in Support Structures for Entrepreneurship
• Gender Equality in Access to Finance
These dimensions represent key factors affecting female self-employment and
entrepreneurship. During data collection each country team also gathered information on
gender equality and entrepreneurship initiatives. These are presented throughout the report
as good practice examples and short case studies.
As far as possible, the scores given to each of the six dimensions are based upon
quantifiable indicators and comparable data available from the World Bank, OECD, Eurostat,
Eurobarometer and the Global Entrepreneurship Monitor global, national and women’s
entrepreneurship reports.
1.4. Gender and Equality Concepts and Definitions
This report uses a number of concepts to describe differences between women and
men and to describe programming approaches to inequality. Often these terms are used
inaccurately in the equality discourse. The purpose of this section is to define several of
these concepts, many of which are used in this report.
Gender - Gender is a concept that allows one to distinguish between sex, which is a
biological condition, and gender, the characteristics, attributes and roles assigned by society
to girls and boys, men and women. These characteristics and roles are not innate. They are
learned through both formal and information education and through messages and images
presented in cultural traditions and celebrations, religion and the media. Roles and attributes
associated with men and women differ from one society to the next and evolve over time.
Gender is an important concept because gender roles and gender relations directly and
indirectly influence an individual’s ability to take decisions and to have access to and control
over resources. Gender roles and relations have a direct impact on vulnerability to poverty
and exclusion.
Gender Roles refer to a set of behavioural norms associated with women or men in a
given social group, society or culture. Gender roles are divided into productive, reproductive
and community management roles. The type and concentration of men’s and women’s
activities in these three areas change from one society to another and evolve over time.
Gender Relations refer to culturally and historically defined systems that regulate
interactions between women and men.
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Gender Equality - This term refers to a belief in the basic equal rights and
opportunities for members of both sexes within legal, social or corporate establishments.
Gender Mainstreaming - Mainstreaming a gender perspective is the process of
assessing the implications for women and men of any planned action, including legislation,
policies or programmes, in any area and at all levels. It is a strategy for making the concerns
and experiences of women as well as men an integral part of the design, implementation,
monitoring and evaluation of policies and programmes in all political, economic and societal
spheres, so that women and men benefit equally, and inequality is not perpetuated. The
ultimate goal of mainstreaming is to achieve gender equality. Mainstreaming includes
gender-specific activities and affirmative (positive) action, whenever women or men are in a
particularly disadvantageous position (United Nations Economic and Social Council 1997).
Gender Neutral refers to designing policies and providing services without regard to
the gender of those who participate. Where differences and inequalities exist, gender neutral
approaches can inadvertently entrench and perpetuate inequalities.
Equal Opportunities – This is an approach intended to give equal access to an
environment or benefits, often with emphasis on members of social groups which might at
some time, have suffered from discrimination. Equal opportunities policies that are gender
neutral can inadvertently perpetuate inequalities.
Affirmative Action - Also referred to as positive action or positive discrimination,
affirmative action is an approach promoting the representation of groups who have been
traditionally discriminated against. The theory is that adoption of gender neutral approaches
may not be sufficient because past discrimination limits access to education, job
opportunities and other opportunities, hence limiting the ability to achieve based upon merit.
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2. General Country Information: Hungary
2.1. Basic Statistics Table
2.1.1. Income Per Capita 2004: 25,056 dollars (PPP)
2.1.2. 4.1% GDP Growth in 2006 (KSH)
2.1.3. Hungary Gini Coefficient = 27 (2003)
2.1.4. 9% unemployment rate for women and 7.7% unemployment rate for men as of
March, 2007.
2.1.5. 14% of the female adult population versus 12% of the male adult lived below
the poverty threshold in 2005
2.1.6. 2004 GEM Country Total Early Stage Entrepreneurial Activity (TEA):
2.1.6.1.1.1. women 3.8 ; men 8.3
2.1.7. UNDP HDR Gender Empowerment Measure (rank) 2006 – Not available due
to lack of Data
2.1.8. 21 st place out of 25 is France’s EU 25 rank for women’s representation in
national legislative bodies both upper and lower houses in 2005
2.2. Evolution of female share in total self-employment
per cent
50
40
30
20
10
0
Hungary
1999 2000 2001 2002 2003 2004 2005
Year
empl
self-empl.
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3. ScoreCard
3.1. ScoreCard Diagramme for Hungary
Gender equality in access to
finance
Gender equality in support
structures for
entrepreneurship
General national context for
entrepreneurship
5
4
3
2
1
0
Gender equality in
entrepreneurship
Gender equality in society
Gender equality in labour
market inclusion
3.2. General National Context for Entrepreneurship Score 2.5
3.2.1. Entrepreneurial Opportunities Score 2.8
The GDP was HUF 23,752 billion (it equals ca. EUR 95 billion) in 2006, GDP per
capita: HUF 2.34 million, (EUR 9,360). The rate of unemployment was 7.5%. GDP growth
was 4.1% in 2006 but it is slowing.
Economic indexes show that Hungary is falling into line with the European average.
GDP growth rate has been 4-5% in the past 10 years; it exceeded the European average
with ca. 2% points each year. This growth rate however is smaller than those of the
neighbouring Central Eastern European countries, and it has decreased since 2006. The
main reason for that is the remarkable increase of the budgetary deficit and the restricting
measures taken consequently, which burden both the population and the enterprises to a
great extent.
Concerning the indexes undertaken to keep upon EU accession (deficit of finances,
inflation etc.) in 2006 (i.e. in general elections time) the country had an enormous lag, which
the government now intend to diminish with the measures of the convergence program
updated at the end of 2006 – and also approved by Brussels. On the basis of data from
2007 the budgetary deficit has indeed decreased notably - as planned, although the results
can be assured only at the cost of great sacrifice, conflicts and tensions. (Economic growth
has slowed down, inflation has increased.)
Starting a new enterprise in Hungary is problematic not because of the timeconsuming
process and costs of obtaining the licence but because of all the other
administrational and taxation burdens as well as the lack of entrepreneurial culture
and - for most people - the lack of their own resources. The taxation system is very
complicated, tax rates are high, and the regulations are changed frequently. A wide range of
the population has little accumulated capital, and the financial institutes do not welcome and
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finance them willingly. Despite all this, the number of micro-enterprises has increased in the
past years as well; although they are mostly enterprises created out of necessity. The
majority of micro-enterprises have no employees (mostly due to tax considerations) or they
are just the self-employed type.
By the end of 2004 registered enterprises had reached the number of 964,000 (if we
add the number of individuals carrying out economic activities with a separate tax number,
the amount comes to 1.2 million), the number of active enterprises however was only
708,000 in 2004.
Chart No. 1:
Number and share of operating enterprises in categories of employees for the period
of 2000- 2004.
Year 2000 2001 2002 2003 2004
No. Of numbe numbe numbe numbe shar numbe
Employees r share r share r share r e r share
0 17 665 3% 18 721 3% 22 835 3% 16 414 2% 15 970 2%
1
408
066 65%
424
782 66%
465
000 67%
464
150 66%
464
096 66%
2 78 508 13% 80 520 12% 82 558 12% 90 205 13% 92 375 13%
3– 4 54 001 9% 54 113 8% 55 088 8% 58 827 8% 61 473 9%
5– 9 34 620 6% 35 205 5% 35 469 5% 37 504 5% 39 613 6%
10–19 16 407 3% 16 656 3% 16 910 2% 17 530 3% 18 170 3%
20–49 9 442 2% 9 501 1% 9 919 1% 10 252 1% 10 636 2%
50–249 5 350 1% 5 337 1% 5 006 1% 5 015 1% 5 028 1%
250 and above 1 088 0% 1 046 0% 1 003 0% 958 0% 946 0%
Total 625
645 693 700 708
enterprises
Total
147 100% 881 100% 788 100% 855 100% 307 100%
microenterpris 592
613 660 667 673
es
860 95% 341 95% 950 95% 100 95% 527 95%
Source: Central Statistics Office
Regarding the time-consuming process of starting an enterprise, there is a significant
difference between starting a private entrepreneurship (entrepreneurial licence) and a
partnership. The former can be obtained within a day while forming a partnership takes a
relatively long time.
Time and costs of registering a private entrepreneurship:
Private entrepreneur: Private entrepreneurship is the business-like economic activity done
by a resident private individual regularly - in his/her name, at his/her risk for profit. A private
entrepreneur may carry out any business-like economic activity not prohibited by law on
Hungarian territory. A private entrepreneur’s liability is unlimited: he/she is liable for his/her
entire assets.
To carry out private entrepreneurial activities - except for agricultural production and
relating services -, one only requires an entrepreneurial licence.
The entrepreneurial licence - applied for on the appropriate form - is issued at the
document office by the notary of the municipality, which executes regional centre
duties, cognizant in the site of the enterprise.
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A private entrepreneur may only have one entrepreneurial licence. This licence can entitle
him/her to carry out several activities and maintain several sites and/orbranches (shops,
production/service unit). The application for the entrepreneurial licence may only be rejected
if its issue clashes with the law.
Normally, if all documents are available, the issue of an entrepreneurial licence takes
one day.
A private entrepreneur may request the registry court cognizant in the site of the
enterprise to register it as a private firm. A private firm is not a legal entity. The advantage
of registering a private firm is that the company registry authoritatively attests the registered
data of the private firm, and that the registered name of the firm is under protection.
The costs of becoming a private entrepreneur:
• the fee of issuing the entrepreneurial licence is HUF 10,000 (i.e. EUR 40), which must
be paid by postal order, or in cash,
• the fee of issuing the official certificate of clean records is HUF 2,000 (i.e. EUR 8)
and needs to be attached to any application for an entrepreneurial licence, and must
be paid through a slip available (and payable) at post offices,
• the fee of registering a private firm is HUF 30,000 (i.e. EUR 120),
• the publication fee if registering a private firm is HUF 10,000 (i.e. EUR 40),
Time and costs of registering a partnership:
The founders of a business partnership may be resident or non-resident private
individuals and companies with or without legal entity. A natural individual may only
have unlimited liability in one partnership at a time, and an underaged person can not be a
member with unlimited liability.
A business partnership is founded by signing a Deed of Association, in the case of a
one-member company or a close corporation it is a Deed of Foundation, and for an open
corporation it is a Statutes.
The founding document - i.e. the Deed of Association, Deed of Foundation, Statutes -
must be written in the form of a public document authenticated (or written) by a notary
public or countersigned by an attorney or solicitor. (If it is a solicitor, there is a restriction,
namely that only the founder’s own solicitor has the right to countersign!) The foundation of
a business partnership must be announced to the county or capital registry court
cognizant in the site of the partnership within 30 days of approving and signing the
deed in order to be registered and published. If the creation of a business partnership
requires permission, the announcement to the registry court must be made within 30 days of
receiving that permission. The partnership is officially created by registration in the
company registry on the date of registration. Upon arrival of the application for company
registration, the firm is given a company registration number in order to be identified and
distinguished from all the other companies. That number must be shown on all documents of
the partnership from then on. At the same time the registry court obtains the tax number,
social security account number and statistical number of the partnership from the relevant
organizations - through a computer system - instead of the person making the
announcement to the court.
Special regulations for business partnerships:
1.) Limited partnership: It is a partnership without legal entity. At least one acting partner
and one limited partner are needed for its foundation. The acting partner is liable with his/her
entire assets, while the limited partner is only liable up to the amount of his/her deposit. The
process and costs of foundation:
- writing the Deed of Association
- fee of the attorney: varied - ca. HUF 60,000 (i.e. EUR 240)
- publication fee: HUF 10,000 (i.e. EUR 40)
- stamp tax: HUF 50,000 (i.e. EUR 200)
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- copy of specimen signature, at least 2: HUF 2,000/pce
The documents are submitted to the registry court by the attorney, and the tax number is
issued at that time. The partnership is bound to announce itself to several bodies. The
registration procedure may take 1-2 months. A limited partnership has double-entry
bookkeeping.
2.) General partnership: It is a partnership without legal entity founded by all the would-be
partners signing the Deed of Association. The partners have unlimited and joint liability. Each
and every partner must also participate in operation personally. The process and costs of the
foundation are similar to those of limited partnerships.
3.) Limited liability company: A limited company is a legal entity. A limited liability company
is a business partnership which is created with a stock capital (share capital) consisting of
capital deposits determined in advance. A partner’s liability is limited; it extends only to the
magnitude of the relevant deposit.
The description “limited liability company” - or its abbreviated form "Ltd." - as well as the
target of company operation must be included in the name of the company.
The Deed of Association can be made using a deed form, which must be signed by every
partner. The signed deed form is either made into a public document by a notary public or
countersigned by an attorney.
A one-member company may be created by one member or another one-member
company, in that case a separate Deed of Foundation is needed. It can also evolve from an
already existing company if a partner purchases all the other partners’ business shares. In all
other aspects the laws and regulations for multi-member companies (with some exceptions)
apply to one-member companies as well.
Costs of foundation: - Stock capital: at least HUF 500,000 (i.e. EUR 2,000), the attorney’s
fee: varied, at least ca. HUF 100,000-120,000 (i.e. EUR 400-480). In addition to the
attorney’s fee the request for registration must bare a stamp tax of HUF 100,000 (i.e EUR
400), as well as the payment stab of HUF 25,000 (i.e. EUR 100) payable to the Ministry of
Justice as publication fee. Copies of specimen signature, at least 5, at HUF 2,000/pce. All
costs can be accounted for with invoices and money receipts.
Registration procedure: The registry court makes a decision about the registration of the
company, incompletion procedure or rejection of the request without incompletion procedure,
in a decree within 30 days of submitting the request. The time needed for registration also
depends on the backlog of the relevant registry court, but if the documents are complete and
assembled professionally, an incompletion procedure is not probable.
4). Detailing corporations is not done here as they are assumed to be large companies
with great stockholders’ equity and besides, the number of corporations newly
founded by private individuals is negligible.
5.) Co-operatives: A co-operative is a separate legal entity. It is usually organized by people
in similar situations wanting to reach the same goals. At least 5 people are needed for its
formation. The foundation of a co-operative must be announced to the registry court within
30 days of approving the Statutes. The assets of the co-operative come from the share
capital. Every member must underwrite share capital, which cannot be endorsed or inherited.
The point is that the members make decisions, not on the basis of their capital shares but
always on the basis of the principle of “one member - one vote”, the basis of the operation is
hence the members’ personal participation. The members are not liable for the debts of the
co-operative with their own assets!
16

For a new enterprise the Hungarian market situation can be both favourable
and unfavourable at the same time, depending on the conditions and resources it has.
In Hungary there is strong competition even in the sphere of micro-enterprises that is a great
number of enterprises strive to meet the demands of potential customers in all aspects of life.
Nevertheless on local markets, where the large multinational and national companies are not
interested, a quick growth in market share is not hopeless for a new enterprise. That is if it
has the necessary resources, as the micro- and small enterprises in these areas usually
have limited resources, abilities and knowledge.
While the growth of the Hungarian GDP was notable, the result of expansion was also
felt by new enterprises. Last year the growth slowed down and the competition increased. As
a result, numerous micro-enterprises closed down. This alone is not a problem; it is an
inherent effect of natural selection in the market. The problem comes when the surviving
enterprises do not get stronger in the process nor are they following the path of development.
Although the proportion of micro-enterprises that employ several people has increased in the
past years, it can be said in general that the performance (i.e. sales), capital force and assets
of Hungarian micro-enterprises significantly lag behind the average of the EU 15 countries.
3.2.2. Entrepreneurial Abilities Score 2.3
a.) The educational system in Hungary does not give sufficient preparation for
entrepreneurial life. At secondary schools (e.g. economic and commercial comprehensive
schools) and institutes of higher education (on economic and technical faculties) providing
economic training certainly there are subjects that help strengthen entrepreneurial skills,
however they give no or little knowledge in other fields for use in later operation of an
enterprise.
On the other hand a number of well-prepared organizations offer courses for improving
entrepreneurial knowledge and skills, which are often supported by the state. Such training is
also organized by state-owned educational institutes, NGOs and for-profit enterprises. This
kind of training is often accessible for potential micro-enterprises or ones that are already in
operation only if they are granted some kind of support since the majority of both private
people and enterprises find it too expensive comparing to their own financial situation (and it
is still a better case if they recognize the necessity of training for many do not even know
what kind of knowledge they need and how or in what sort of training they could get it).
b.) The SME support policy of the government has encountered some debates in the past
decade. Sometimes there are some very innovative moves independent of the governments;
however several operative decisions hint that the professional apparatus of the Ministry of
Economy and Transport (MoE&T), which is responsible for enterprise promotion, did not
always devote the necessary attention to SME development programs. Many times one gets
the feeling that they fail to sufficiently appreciate the indirect ways of supporting enterprises
and the significance of mediating and service providing institution. The importance of the
micro-credit program was realized by the ministry of economy only after the EU had declared
the JEREMIE program.
In their rhetoric all governments so far have emphasized the support of the SME sector and
the improvement of finance terms; however it has not entirely been realized in practice or not
at the required professional standards.
The official SME development strategy approved by the government has been around
for some time now and it gets renewed from time to time (the last such renewal was in
February 2007), but it is usually accompanied by vivid professional debate because it does
not stand on a wide professional consensus. (e.g. at the meeting of the Enterprise
Development Council a large part of the comments on the business federations and trade
organizations were not incorporated in the final report.)
17

Hungary’s membership in the EU (and even the period prior to the accession) means
a positive control in this respect, as the professional principles of the EU give a strong
orientation to the Hungarian professional apparatus. For instance, when the EU Commission
issued the JEREMIE program (with micro-credit specified), the micro-credit program, which
had been present for a long time, was given great value, which resulted in the allocation of
new funds for micro-finance purposes in 2007 (for the first time since 2000!), which exceeded
the previous resources manyfold in amount.
c.) All types of institutes aiming to assist enterprises have already been established in
Hungary; these are briefly introduced below starting with state actors and then continuing
with market actors:
• Organizations of the state administration, authorities, institutes (universities,
research institutes etc.) financed of course by the state budget
• State-owned organizations aiming to develop SMEs (e.g. the Hungarian Development
Bank, Creditguarantee, Regional development Holding etc., EXIMbank Corvinus),
and support brokerage organizations (MAG Close Corp. etc.), which are
established and continuously financed by the state.
• Non-profit development agencies (NGOs), which are not founded directly by the
state, but partly execute state functions as well. They can carry out these state
functions only with support (regional and enterprise development agencies). The
primary mission of these organizations is delivering enterprise development functions
and services that cannot be directly taken care of by state actors nor market actors.
They operate successfully in all aspects because they work neither as an
“authority” nor as "market sharks”, and they are under performance pressure
(for they receive resources only if they function well). The majority of these
organizations are established locally or regionally under local control but they
also carry out government functions on the order of and with the support of the
government.
• Chambers (of commerce and industry, agriculture and special fields etc.) They
operate as local governments following special rules, but they also carry out
important functions of economic development that the state may transfer to them and
finance.
• Entrepreneurial business federations, trade associations: (VOSZ, GYOSZ,
IPOSZ, KISOSZ, Innovation Association, Association of Business Incubators etc.)
They co-operate in this field for the protection of entrepreneurial interests and so that
they can provide services to their members.
• Enterprises providing business-type services (financial institutes, enterprises
of property development, consultancy and training etc.)
Although the institution of enterprise development has been long established, it
does not seem to operate efficiently. The operation of individual organizations is not
efficient enough; it has not helped sufficiently to strengthen the Hungarian SME sector, to
make it more competitive. The target is to correct previous mistakes and improve the
efficiency of the existing institutions, which will enhance the specialization and
professionalism of the organizations and most of all promote the approximation of
the enterprises and the supporting institution.
The main reason for the problem is the parallel finance and competition of
enterprise promotion programs and institutes in the past decade. This led to the failure
of the evolution of a co-operating institution. With a little exaggeration: every actor wanted to
do everything, thus no one could do any function properly. The individual organizations were
unable to specialize sufficiently or become professional service providers. Their operations
were significantly limited by the flaws in the professional preparation and the finance of their
18

programs. In most of the cases the programs were closed down instead of being
continuously controlled, assessed on causality or eliminating the incurring anomalies.
Among the institutes that help and promote the development of enterprises we
must highlight the LEA network, which was specifically established for the
development of micro- and small enterprises by the EU PHARE program.
(The name of the European Community’s (i.e. the European Union) PHARE program comes
from the acronym of: Poland-Hungary Assistance for the Reconstruction of the Economy
(EU PHARE is an acronym for: European Union Poland-Hungary Assistance for the
Reconstruction of the Economy)
The main aim of the PHARE SME program is to promote employment and economic
restructuring through the promotion of the SME sector. On the verge of political change in
1990 both the Hungarian Government and the European Union found it essential to
increase the number and the economic influence of small and medium-sized enterprises as
well as to establish the institution of enterprise promotion.
In order to achieve the above mentioned goals, beginning in 1991, the European
Union - using PHARE resources - provided significant financial and professional help to the
establishment of enterprise promotion foundations in the counties and the capital city and
their operational organizations called Local Enterprise Agencies (later to be referred to as
LEAs) as well as for the training of their staff and for the launch and operation of enterprise
support programs run by the foundations.
The national network of enterprise promotion foundations in the counties and the
capital city had covered the entire country by 1996. (In the initial experimental program LEAs
were formed in 6 counties, then as a result of successful operation, LEAs were established in
all the 19 counties and the capital city.)
In accordance with EU norms, the members of the Network are: sector-neutral,
operating by the principles of decentralization and regionality, built on extensive local support
and co-operation.
The basic activities of the LEAs, financed by PHARE, are counselling, training,
properties (business incubators, industrial parks), providing microcredit as well as
generating development programs.
The operations of the LEAs were limited and were made almost impossible by the
inconsequent and incorrect regulation and finance of recent years.
The main problem was the false reading of the LEA network’s function and
mission; therefore they must be made unambiguous once again:
The LEAs are service providing organizations that serve as a bridge between
micro-, small enterprises and business-like service providers, government support
programs and other helping organizations through enterprise promotion services in
order to achieve the goals of the government, local governments and economic
development and to alleviate market failures.
Thus the LEAs are not competition to actors in the business sphere (e.g. to
banks in micro-finance or to enterprises providing business services in the field of
counselling or training etc.). They also do not act as competition to other organizations
relating to enterprises (chambers, business federations, area development agencies,
innovation organizations or universities). On the contrary: the mission of the LEAs is to
forward the enterprises and their problems to professional providers of business services that
can satisfy their needs and to organizations that can assist their development with special
instruments.
The obtained experience and the market failures have made it clear that the
“bridging” and forwarding functions of the LEAs are necessary so in light of the above the
LEA network has developed the integrated enterprise promotion program, in which
19

there are several micro-finance programs building on each other, in addition to
training and counselling programs.
d.) Since the political change in 1990, enterprise promotion has always been included
in the published programs of local and regional authorities, local governments and
development councils, however with different emphasis at times and in regions. The main
reason for this was the lack of resources in the municipalities. In default of instruments and
resources necessary for the implementation of the programs, usually they could do nothing
more than provide properties for industrial parks and business incubators, or establish
development agencies "administratively”. The enterprise promotion foundations in the
counties and the capital city, as well as the area development agencies, were established
experimentally at first a by the PHARE program, were mostly founded with a leading role of
the local governments in the counties and the cities. The resources for the organizations
were first provided by the PHARE program; later by the government (in many cases also
from EU funds) therefore the agencies were influenced significantly more by the donor
organization or program than by local organizations.
There has been an essential change in recent years when the Regional Development
Councils (usually covering 3 counties) and their operational units were formed and
strengthened; these have more and more resources and independence in the creation and
implementation of programs.
Within the National Development Plan for 2007-2013 - financed 85% by the EU - the
significance of the Regional Operative Programs significantly increased, and therefore, so
did the role of the Regional Development Councils and Agencies. The ROPs represent
enterprise promotion programs with more significance and better finance accompanied by
remarkable resources.
3.2.3. Entrepreneurial Culture Score 1.0
Hungary still has a very underdeveloped entrepreneurial culture. This is primarily due to
historical reasons, as private micro-enterprises were only allowed to operate in a very narrow
niche and with notable limitations for four decades. This was harmful not only because
people were unable to get entrepreneurial knowledge or experience, but also because the
paternal socialist system made the population very comfortable. They were not compelled to
take risks or to be initiatory or innovative as the state provided everything to everybody -
independent of performance - albeit on a minimal level; those who wanted more were even
scourged.
Thus many of the enterprises that formed in mass around the political transitions (1989) did
not have the preparation or experience in running an enterprise.
Unfortunately, entrepreneurial skills have not been taught at schools in the past 15 years
either, so the next generation of entrepreneurs will also start their new enterprises without
the basic knowledge. Well-prepared school training could have sped up the evolution of a
higher entrepreneurial culture. Progress has been made in this area recently; the teaching of
entrepreneurial skills has been introduced to the elementary education; according to the EU
directives, which emphasise the teaching of entrepreneurial skill all educational levels.
The evolution of a higher level entrepreneurial culture has in no way been assisted by the
rough capitalist character of the past 15 years. Performance, the high standards of products
and services or fair operation did not always mean efficacious entrepreneurial behaviour:
sometimes inferior performance with not very ethical methods provided a more efficient way
to stay in the market. Many people think that a successful entrepreneur means a
businessman looking for loopholes in regulations, who became rich fast, not always honestly
and often at others’ disadvantage. Although it is not common, often it is with valid reason.
20

A recent study examined opinions of entrepreneurs on the basis of GEM data and in
reflection of the Hungarian press. 2 The table below shows the relevant data of the GEM
international survey based on both the representative survey and experts' opinions:
2 L. Szerb- Kocsis-Kisantal O 2007: Entrepreneurial culture in Hungary in reflection of the press,
manuscript, University of Sciences in Pecs, Faculty of Economics
21

Country
Chart No. 2:
Factors describing entrepreneurial culture in some countries and groups of countries,
2004-2005
Enterprise
-
Good
career
Enterprise
– high
status
Positive
news of
the
media
The
culture
supports
The culture
emphasizes
autonomy
The culture
supports risk
taking
The culture
supports
creativity
The culture
supports
individual
self-care
The proportion of affirmative Experts‘ opinions on the 5-grade Likert-scale, where one could
answers in percentage of replies rank between 1: „not at all“ and 5: „to a maximum extent“
Hungary 45.51 45.79 27.73 2.42 2.33 2.41 3.01 2.84
USA 58.66 61.77 61.16 4.66 4.47 4.36 4.33 4.34
Europe 59,27 67,56 53,52 2,75 2,86 2,37 2,83 2,82
Latin-America
Australia/
74,89 72,41 68,95 2,68 2,60 2,14 2,41 2,60
New-Zealand 58,16 70,44 67,23 2,98 3,16 2,74 3,30 3,16
Asia developed 42,05 57,21 61,84 3,17 2,74 2,33 2,53 2,66
Asia developing 78,22 76,65 68,14 3,65 3,29 2,79 3,12 3,02
Other 71,27 72,95 67,76 3,39 3,33 3,09 3,43 3,08
Average 61,91 68,34 59,01 2,95 2,95 2,50 2,91 2,89
The bankruptcy wave of the mid-90s and today makes a lot of people realize that being an
entrepreneur bears great risks, and this may deter many from starting an enterprise.
3.2.4. Policy Incentives for Entrepreneurship Score 2.0
Entrepreneurs in Hungary consider administrational expenses as one of the biggest
encumbrances in their development.
According to the ranking assessed in Doing Business, assembled and annually published by
the World Bank on the basis of the 10 main dimensions characterizing the business
environment, Hungary ranks 55th among the examined 155 countries; this implies that it
precedes only Poland and Slovenia from the Central Eastern European countries that joined
the EU in 2004.
Although Hungary still has an advantage in some areas (e.g. in the financial brokerage
system) obtained in the 1990s, in total the survey shows that today it only belongs to the
region’s mainstream. Among the ten indicators the country displays a big disadvantage in the
licensing process of new developments (ranking 119th), in addition, it is long and (more and
more) expensive to register property ownership. Taxes to be paid by enterprises are high
(56.8% of gross profit), and a remarkably large amount of resources are used for
administrational activities and related tax payments (ranking 98th in the world in total). The
protection of (minority) investors is not strong either (ranking 84th), the indicators of hiring
and firing workers and the rigidity of working hours has asimilarly bad ranking.
According to data from the World Bank, the 6 procedures needed for starting a business rank
Hungary in the mainstream of EU countries. On the other hand it takes 38 days to start a
business in Hungary, the costs of the procedures and the minimal capital required to build a
foundation are high. Similarly unfavourable indicators are the conditions for closing a
business in Hungary (capital regrouping index): instead of approximately one year as it takes
in most European countries, it takes 2 years in Hungary. Closing a business in Hungary is
costly, and the capital recoverable from insolvent firms is only a fraction of the claimed
amount.
22

Chart No. 3:
Circumstances of starting a business
Administrative
procedures
needed
Time needed Costs
Minimal capital
needed
number days GNI per capita (%)
Europe and Central 9
Asia
36 13,5 49,1
OECD 6 19 6,5 28,9
Hungary 6 38 22,4 79,6
Circumstances of closing a business
Time needed Costs Recovery rate
year
in percentage of
property value
%
Europe and Central 3,5
Asia
14,0 29,8
OECD 1,5 7,6 73,5
Hungary 2,0 14,0 35,8
Source: the World Bank, Doing Business, http://www.doingbusiness.org/
“According to the assessment by the World Bank, in the past year the only notable
improvements made are in terms of the time needed to start a business (38 days in 2006)
and the costs per income.” (Economic Developmant Operational Programme (GOP)
02.07.2007)
The following table highlights the weaknesses of the Hungarian bankruptcy law as well as
the main procedural and administrative bottlenecks in the bankruptcy process. The recovery
rate expresses how many cents on the dollar claimants recover from the insolvent firms.
Chart No. 4:
Indicator Hungary Region OECD
Time (years) 2.0 3.5 1.4
Cost (% of estate) 14.5 14.3 7.1
Recovery rate (cents on the dollar) 39.7 29.5 74.0
“The domestic enterprises are unsatisfied with the business environment too”
According to the regular survey of the Ministry of Economy and Transport, the business
environment is criticized by the enterprises themselves, firstly because of the high
transaction expenses and administrative burdens, but also because of the unpredictability of
the economic regulation and the problems of SME finance that create a disadvantage in
competitiveness.
It increases relative labour costs so that the contributions to be paid are higher than those in
the other countries of Central Eastern Europe. The high rate of taxes and contributions lead
both the businesses and the population towards the grey economy. Although there have
been steps taken to resolve this matter, the administrative duties of businesses are still
unreasonable and public administration procedures are too long„ (GOP 02.07.2007.)
On October 17th, 2006 The Ministry of Economy and Transport (MoET) - realizing how
serious the situation was - launched a program to ease the administrative burdens. The aim
23

of the program „Tuned to Business” is to decrease entrepreneurial burdens and to
improve the operational conditions of enterprises within the frames of the
convergence program.
In the framework of this program a new action plan was prepared to integrate the concepts of
improving the business environment and decreasing the operational and transaction costs of
enterprises as well as the measures to be taken. The regulatory and development policy
measures of the program include - among other things - the simplification of company and
tax administration, the increase of legal security for businesses, the improvement of the
conditions of financial operation and the enhancement of fair and transparent competition.
The joint proposal for the „Tuned to Business” program and the government’s deregulation
program was approved by the government on April 25, 2007. At the same time, the
implementation of the approved 33 measures and the preparation work were started. The
following must be highlighted in the main responsibilities of the MoET:
• Providing the widest spectrum of information that helps the operation of businesses
through the Internet i.e. the realization of providing information to businesses in the
so-called one-window system
• Spreading the good public administration practice of licensing procedures relating the
entrepreneurial sector (pattern projects)
• Enhancing the efficiency of the controlling system for the sake of whitening the
economy more effectively
• Founding the conditions for E-taxation and payment of contributions electronically,
promoting e-invoicing and e-commerce
• Further training of SMEs
• Expanding the finance of enterprises
Recently several proposals that serve the aims of the Tuned to Business program have been
submitted to Parliament such as:
• the amendment of Law V/2006 about company publicity relating to the start-up of
businesses, registry court procedures and company termination and other laws
(T/2480)
• amendments of laws for the sake of moderating "roll-over debts" of businesses
(T/2914),
• the law about the Hungarian Chamber of Auditing, auditing activities and the public
supervision of auditing, in relation to the raising of the lower limit for auditing (T/2839),
• the amendment of some laws concerning e-commerce (T/2929)
• the amendment of Law CXXIX/2003 about public procurement (T/2879)
The work of the State Reform Committee, formed by the government and presided by a
minister without portfolio, is also expected to significantly ease the administrative burdens of
enterprises. That is provided the state administration becomes more effective as a result of
the Committee’s work.
The modernization already has tangible results:
Electronic company procedure: starting from January 1st, 2007 all requests for company
registration and amendment can be submitted electronically. If a request is submitted
electronically, the publication fee of the amendment is one fifth of the usual fee for paperbased
procedures. The fees and costs of an electronic process must be paid electronically.
Within one working day of payment the Hungarian Treasury will send a confirmation, which
must be attached to the request for registration or amendment.
24

On September 1st, 2007 the amendment of the company law will come into effect,
which will significantly simplify the operation of start-up enterprises.
Thus in order to ease the entry to the market and to make it less costly, it will be possible to
found a limited partnership, general partnership or a limited liability company by filling in a
form. The forms are included in the appendix of the company law.
Simplified registration procedure, company name reservation:
In simplified registration procedures the partnerships (primarily general and limited
partnerships but limited liability companies as well) which will request registration using the
forms included in the appendix of the company law, will count with a shorter procedure time:
the firms will be registered in 8 working days at most. The companies that do not use the
simplified procedure for registration will be registered within 15 working days, and this
timeline will be applicable for request to register amendments.
The determination of the company name is of prime importance since it is the way of
distinguishing between companies. If a company to be founded uses company name
reservation, its Deed of Association is prepared by filling in the form included in the
appendix of the company law and the request for its registration is lodged
electronically, it will be entered into the company registry on the second day after
reception of the request.
Directors and officers
It eases the operation of companies a great deal that under the new law the directors and
officers as well as the supervisory board and the auditor are all elected by the main body
of the company therefore - contrary to the former regulation - this does not require the
amendment of the Deed of Association, and the Deed does not have to include their
names.
3.2.5. Welfare bridges Score 3.5
According to the data of the Public Employment Service the increase in the number of
registered job-seekers that was experienced between 2002 and 2005 halted in 2006.
Employment offices have registered 393,500 job-seekers on average this year, which is
16,500 less (i.e. 4% less) than in 2005. 9.8% of registered job-seekers - nearly 39,000
people - are young career starters; this number decreased by 2,100 (5.2%) from the previous
year. The number of job-seekers who are not career starters declined by 14,300 (i.e. 3.9%)
in one year.
The active employment instruments managed by the Public Employment Service are shown
in the following table:
25

Chart No. 5: The total number of recipients of active instruments
Number of Number of Percentage of Difference in
recipients recipients in recipients percentage
taken over 2006
%
from 2005
Training
18561 47141 24.5 7.8
Support of wages
20154 33150 17.2 -12.1
Public utility employment
11535 66403 34.4 -16.4
Support of developments
that create jobs* 2698 3325 1.7 -12.9
Support for entrepreneurs 962 2736 1.4 -19.4
Travel cost reimbursement
1733 3910 2.0 -22.0
Instruments for career
starters 9090 17976 9.3 -1.3
Keeping jobs
3611 7390 3.8 -46.1
Payment of contributions
3475 6552 3.4 -39.1
Support of self-employment
2765 2941 1.5 -28.0
Part-time employment
547 1253 0.6 -2.5
Total
75131 192777 100.0 -12.8
* The number of recipients was meant by the number of new jobs (as undertaken in the
employment support agreement) taken in that year.
Some of the active employment instruments support enterprises that employ formerly
unemployed people. The instruments are as follows:
• Support of wages: This kind of support can range from 50 to 100 % of the wages
and can be provided for a maximum of one year. The advantage of this program is
that it assures relatively long employment for those formerly permanently unemployed
by specifying a compulsory employment period equalling the period of the support.
• Supporting developments that create jobs: In the call for application the
employment organization ensured that enterprises operating in areas that are at a
disadvantage socially and economically as well as in infrastructure and the labour
market should have supplementary support for the sake of new jobs.
• Support of keeping jobs: The non-returnable grant given to the employer may range
from 25 to 75 % of the added amount of wages and contributions of the relevant
employee. In 2006 this support enabled nearly 7,400 employees, who would have
otherwise been redundant, to keep their jobs.
• Payment of contributions to employers who employ formerly unemployed
people: This support is to urge the employment of job-seekers by paying the
employer’s expenses related to employment (medical and social insurance
contributions, employer’s contribution and health care contribution) in part or total.
• Supporting part-time employment: This kind of support aims to urge the part-time
employment of some important groups by paying in part or total the employee’s
wages and contributions as well as the costs of point-to-point travel between work
and home.
The so-called public utility employment is also worth highlighting: This is a special form
of employment, which provides unemployed people with temporary job opportunities in the
fields of medical, social and communal activities.
26

In 2006 the county employment centres spent a total of HUF 10.7 billion on public utility
employment, 10.1% less (i.e. HUF 1.2 billion less) than in the previous year. The number of
recipients in that year was 66,400, which was 16.4% less (almost 13,000 less) than in the
previous year. Despite the decrease in the number of recipients, just like in the preceding two
years, public utility employment was used in the greatest volume among the active
instruments in 2006. On average 34.4% of the recipients of active instruments and 46.6% of
the total participants in 2006 were those employed in public utility work.
Within public utility employment, which is mostly used by men, the share of women is
increasing. In 2006 56.7% of participants were men, the proportion of women - at 43.3% -
increased by 2.8 percentage points compared to the previous year.
With regard to our study, the most important active instruments which relate to the
unemployed more directly are the following:
• Supporting the training of unemployed people: The employment centres were
able to start 1,600 courses in the recommended form of training in 2006 with a
total number of 22,800 participants. The gender composition of the participants in
the labour market training is characterized by the relative majority of women. In
2006 55.6% of the people participating in training were women; their proportion
had decreased by 1.4 percentage points in one year.
• Supporting the process of becoming an entrepreneur: this form of support
gives actual financial support to unemployed people who become entrepreneurs
since the support enables them to finance their social security contributions to be
paid on their income from the grant. In 2006 approximately 2,700 people received
grants supporting the process of their becoming entrepreneurs, which is 658 less
(i.e 19.4% less) than in the previous year. The sectors of the new enterprises,
started in 2006, were once again dominated by services and commerce: more
than half (i.e. 51%) of the recipients entered these sectors. The third largest
sector was the construction industry (15%), followed by processing industry,
accommodation services, catering, agriculture and transport with significantly
lower proportions.
• The recipients of the support of the “unemployed turned into entrepreneurs” were
mostly men in 2006; the proportion of women in this kind of support was 46.6%,
which is 2.5 percentage points higher than in the previous year. Broken to age
groups, it shows that nearly two thirds (i.e. 73.3%) of supported entrepreneurs
belonged to the age group of 25-44 years.
• Support of self-employment specifically for job-seekers: this support can be
given to job-seekers to whom the employment centre could not offer a suitable job
and who choose to employ themselves - by starting or joining a business -,
furthermore they have the initial funds to start the business - at least 20% of the
investment - as well as the necessary financial security for repayment.
Since January 1st 2003 eligible applicants have been allowed to receive repayable interestfree
funds up to HUF 3 million, furthermore, the costs of professional consultancy needed for
operation can also be paid for. Repayment of the support must be started 13 months after
receiving the grant at the latest, and fulfilled in equal instalments - determined by the
employment centre - within 60 months.
Support of self-employment was granted to nearly 3,000 people, which is 28% less than in
the previous year. 3 Due to the long processing time of the support, this instrument showed
the highest proportion (94%) of people taken over from the previous year(s). The number of
people entering the program dropped significantly (by 71.5%) compared to the previous year:
only 176 people joined the support program in 2006.
3 The duration of this support instrument terminates upon the repayment of the full loan.
27

Compared to the previous year, the county employment centres spent 55.1% less on the
support of self-employment in 2006, totalling ca. HUF 300 million.
b.) The business development services provided or mediated by the local enterprise
agencies (LEAs) can certainly be used by unemployed people who are thinking about
starting a business. In recent years there have been a number of such consultancies in 2.1.1
of GVOP (Economic Competitiveness Operative Program). Basic consultancy was free of
charge up to a time limit for entrepreneurs and potential enterprises, and they were able to
use exceeding services at a reduced price.
Unfortunately the programs of the 2004-2006 period are no longer in operation while the
supported counselling programs of the new 2007-2013 period are not yet operating,
therefore - due to lack of capacity and funds - these consultancy services are limited.
3.2.6 Access to Finance Score 3.6
Although the outer finance resources of enterprises have expanded in the past years, the
companies in the country can involve much less outer resources to finance their expansion
than their counterparts in the developed countries. Almost 80% of Hungarian enterprises
work without using loans while in developed countries the proportion is 15-20%. The
loan/income ratio of enterprises in Hungary is much lower (25.7%) compared to the average
of the EU-15 countries (which is 44.7%). Thus in spite of the improvement sustained since
the 90s, further interventions are necessary on the Hungarian loan market in order to ease
financing difficulties of micro-enterprises and for easier access to finance resources.
The fact that a population of the country did not have notable entrepreneurial traditions,
experience or knowledge nor the necessary accumulated capital, significantly hindered the
development and efficient operation (or simply the survival) of the enterprises in the sector.
Even today a notable under-capitalization and lack of resources of micro- and small
enterprises remains a problem.
The evolved entrepreneurial group does not have a multi-generation entrepreneurial past,
which could have enabled capital accumulation, on the other hand profit-oriented actors of
the financial market are averse from financing entrepreneurs, for the following reasons:
- Small volume loans have low profitability (high expenses due to high counseling and
follow-up demands opposed to low income), and significantly high risks due to higher
failure rates.
- A risk-raiser in their case is the fact that the majority of these enterprises do not have a
considerable entrepreneurial past. (This entrepreneurial sphere self-sustains to a high extent
from the „grey economy”, even those enterprises can operate at a suitable level that are
permanently "in the red" in their books, this however can not be assessed by the bank
sector.)
- In the early '90s lending organizations bore remarkable losses en masse, therefore they
have a much too "careful" business policy due to bad experiences in the past.
28

a) Chart No. 6: Loans to micro-enterprises granted by the bank sector (number of loans, and
billion HUF)
Description
No.
Total loans in the period
given (cumulated from 23,72
Jan 1st)
4
Total loans reaching over 10,35
end of year
1
HUF loans reaching over
end of year: 9,982
Development loans out
Dec 2001
Audited
Gross
amoun
t No.
Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006
Audited Audited Audited Audited preview
Gross
amoun
t No.
Gross
amoun
t No.
Gross Gross
amoun
No.
t
amoun
No.
t
29
Gross
amou
nt
382,85 412,89 79,0 480,48 71,9 474,78 55,2 624,54 115,0 797,2
2 34,841 4 84 3 40 7 09 0 80 81
185,06 233,96 18,2 244,05 8,17 201,06 10,0 245,99 14,28 348,2
5 16,947 7 68 5 6 3 36 5 2 69
137,45 190,65 15,4 161,82 5,14 5,05 104,76 139,4
0 16,540 0 36 0 1 93,200 5 4 7,436 95
2,23 1,25 1,19
50,29
of the above 1,988 31,753 3,532 45,822 3 38,434 1 27,926 3 22,855 1,574 8
Foreign currency loans
2,83 3,03 107,86 4,98 141,23 208,7
reaching over end of year 369 47,615 407 43,317 2 82,235 5 3 1 1 6,846 75
Total loans within the 13,37 197,78 178,92 60,8 236,42 63,7 273,72 45,1 378,54 100,7 449,0
year
3 7 17,894 7 16 8 64 4 73 5 98 12
HUF loans within the year 12,73
0
Export pre-finance
162,41 152,31 60,0
0 17,497 2 73
198,10 61,3
3 50
164,05 39,6
8 72
303,30 90,11
7 4
324,0
25
loans out of the above 3 0.260 7 0.247 16 0.186 17 0.358 10 0.152 8 0.073
Foreign currency loans
2,41 109,66 5,50 10,68 124,9
within the year 643 35,377 397 26,615 743 38,325 4 6 1 75,238 4 86
Total volume of loans 41,04 416,84 525,81 680,94 747,32 67,1 897,70 104,8 904,0
(as of end of period) 9 7 36,247 6
7
3 07 8 26 92
Source: Hungarian Financial Supervisory Authority (PSzÁF)
The table above shows that the sum of bank loans provided to micro-enterprises continued
to increase dynamically after the halt in 2004. It must be noted, however, that the dynamic
increase is particularly notable in the category of loans within the year, and it is a significantly
smaller increase in the category of loans reaching over the end of year.
Concerning the development of micro-enterprises it is almost worrying that despite the strong
increase in 2006 the total number of loans reaching over the end of year is still much lower
than it was in 2002 and 2003, and it is considered to be infinitesimal compared to the number
of micro-enterprises (even if we take into account that a significant part of micro-enterprises
consists of self-employed entrepreneurs out of necessity, who do not want development or
expansion).
b.) Although the resources available for the support of the SME sector in Hungary multiplied
in the period of 2004-2006 as a result of EU accession, only a negligible proportion of it was
granted to micro- and small enterprises in the form of non-returnable grants. There has
always been a great demand for non-returnable grants for the development of SME
technology; a great number of enterprises however could not get support because the funds
ran out fast.
A wide range of SMEs received support indirectly, though it did not improve the general
situation of insufficient capital and resources of small enterprises directly to the point.

c.) Micro-finance of micro-enterprises that are not bank-worthy has a long past.
The members of the Network, the local enterprise agencies in the counties and the
capital city ® - for the first time in Hungary and among the first in Europe - started their
micro-finance activities with professional and financial support from the PHARE SME
program in 1992.
The foundations are independent organizations with legal entities. It is important to mention
that the foundations were selected by way of call for tender in order to implement the PHARE
SME program. The operating bodies (i.e. the LEAs) of the foundations are managed by the
managing directors. The managing directors are appointed by the advisory boards elected by
the founders; and the boards are also the main supervisory bodies of the foundations.
Upon the total establishment of the network, the twenty centres (19 in the counties and one
in the capital) operated a total of 150 sub-centres or offices, through which the services
provided by the network became easily accessible from the smallest settlements.
In 1996 EU experts and politicians claimed the Hungarian micro-credit program to be a
success story not only in terms of the Hungarian program but in terms of all the Eastern-
Central European PHARE programs.
In May 1998 in the framework of South-Eastern European Co-operation Initiative (SECI) and
together with USAID, the UNO-EEC organized an Expert Meeting for the Best Practice of
Micro-lending, with the participation of 12 Central-Eastern European countries - including
Greece and Turkey. According to the British Bannock Consulting firm, the Hungarian
practice of the time was the best micro-lending program in the region!
From the beginning the LEA Network made over 26,000 loan contracts and provided
over HUF 45 billion ( ca. EUR 180 million ) worth Micro-credit and Micro-credit Plus for
the micro-enterprises, while its operation was often hindered by lack of resources or
shortcomings in central regulations. The shortcomings of the central regulation and the
occasional lack of resources are well illustrated in the following diagram (No.1.)
Diagram No.1:
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
Microloans granted 1992-2006 1992 2006
0
1992 1994 1996 1998 2000 2002 2004 2006
2007.05.09. Kovács István OVK Kht.
29
}
26,000 db
45 bn HUF
number of
loans
total amount
granted (bn
HUF)
30

Chart No.7:
Years 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Number
loans
of 132 684 1 518 2 116 2 880 2 371 2 031 1 941 2 392 2 861 2 854 1 171 621 1 222 1217
Total loans 35 196 593 995 1879 1931 1736 1805 3469 6142 9451 3878 1476 4209 7200
(million HUF)
Maximum
amount
300 300 500 850 1000 1000 1000 1300 3000 6000 6000 3000 5000 6350 6350
grantable to
an enterprise
The main reason for the cycles shown in the chart is that when the terms were harmonized to
the needs of enterprises on the initiative of the LEAs, the number of applications soared but
when the irregularly arriving PHARE resources ran out, the increase stopped, and the
number of granted loans dropped or it was only possible to grant loans up to the limit of
already repaid amounts. Starting from 2000, when the centralized National Micro-credit Fund
received new resources, dynamic growth had no limits. The volume of loans especially
increased when the amount grantable to enterprises was raised from HUF 3 million to HUF 6
million. Owing to the operational shortcomings of the centralized fund, the fund was emptied
in August 2002, and the program halted. In 2002 and 2003 the approved micro-credits could
only be dispatched to the enterprises with several months’ delay. The inflexible operation and
the lowering of the grantable amount from HUF 6 million to HUF 3 million resulted in the near
failure of the program, the enterprises were unable to apply for the loans (just as the
Hungarian Enterprise Promotion Network Consortium warned). Consequently, several
billion forints worth ungranted amounts were accumulated in the Fund by 2004. In 2005 the
terms became more favourable for potential enterprises, thus the program re-ignited so much
so that the reserves of the NMF were exhausted by 2006 and only the reflowing payments
can be allocated.
d.) It must be emphasized that micro-credit is one of the most important outer resources for
the start-up of a new enterprise. In addition, one can apply to the Public Employment Service
to gain support for starting a business if the founder is registered unemployed.
3.3. Gender equality in society Score 3.1
In most societies there are differences and inequalities between men and women in terms of
duties to be done, responsibilities, access to resources and the control over these. The
discrimination between genders prevents the society as a whole from attaining optimum
performance. An enduring inequality between the genders not only spoils the quality of living
but endangers long-term economic growth and welfare. 4 Equal chances of the genders refer
to equal rights, responsibilities and opportunities. This naturally applies to both genders.
Gender equality as policy issue Score 2.7
There are numerous known international initiatives that aim to establish equal chances for
the genders. The one accepted by the General assembly of the UNO in 1979 must be
heightened (The Convention on the elimination of All Forms of Discrimination against
Women – CEDAW).
4 Global Gender Gap Report 2006
31

The Beijing Action Platform accepted at the Women’s World Conference organized by the
UNO in 1995 emphasized that equal chances for the genders is a primary aim for all aspects
of social and economic development.
Among the 8 Millennium Development Objectives accepted in 2000, the establishment of
equal chances for the genders can be found in the 3rd place.
In accordance with the international legal regulations and initiatives, this issue is a priority in
Hungary as well.
By passing the law about equal treatment and the promotion of equal chances, the
Hungarian Parliament confirmed that these rights are acknowledged as fundamental human
rights and a commitment from the state was declared in order to provide legal protection and
take the necessary measures. 5
§ 8. (1) of the Constitution states that respecting and protecting the fundamental rights are
primary commitments of the state. 6 One of the points made by the 66 th Article in the
Constitution declares the prohibition of gender discrimination, 70/A declares the provision of
equal rights without discrimination. Law IV of 1959 based on the Civil Code also contains this
issue. The amendment of the Labour Code (Law XXII of year 1992) effective on July 1st
2001 introduced the term of “equal wages for equal value of work”.
The law about equal treatment and the promotion of equal chances was passed for the sake
of total harmonization of community legal norms and a unified regulation. By this law the
Parliament also created an administrational body with nationwide authority called the Equal
Treatment Authority in order to carry out the duty of estimation and suggestion regarding
supervising and governing activities.
The law is intended to assure the fulfilment of the requirements for equal treatment in the
following fields:
- employment (e.g. access to jobs, legal relations in employment, working, working
conditions, perks, promotion system)
- social security and health (benefits and medical services financed from social, child
protection and social security systems)
- housing
- education
- the trade and use of goods
With Government Decree 1089/2006 (Sept. 25th), the government created the Council for
Social Equality of Men and Women with the aim of enhancing the involvement of civil
organizations representing the interests of women into government activities and also aiming
to insure that the approach of these organizations to social equality of men and women get
increasingly accepted in legislation and the process of elaborating action programs. 7 The
Council is a body of consultation, estimate and suggestion, preparing government decisions.
Its members are representatives of ministries, elected members of civil organizations with or
without national authority as well as experts.
Sustainability of policy measures on gender equality Score 3.5
The Equal Chances Program of the Republic, which includes the necessary government
measures, is intended to take measures in various areas with central budgetary support. In
accordance with the objectives laid down by the Program, it is possible to run local programs
for equal chances on the level of settlements, as well as to develop and implement programs
for equal chances at the workplace.
5 Law CXXV of year 2003 about equal treatment and the promotion of equal chances
6 Law CXXV of year 2003 about equal treatment and the promotion of equal chances
7 source: www.eselyegyenloseg.hu
32

Equal chances schemes at the workplace and their practical implementations have been
examined in Budapest 8 . Results showed that 82% of workplaces that are enacted by law to
do so had such programmes. These objectives focus primarily on employees raising
children, working conditions and the process of retirement, and they hardly touch the issues
of waging or professional promotion or not at all.
In Budapest these programs are assisted by a methodology office.
The nationwide network of the House of Chances has been helping to fight disadvantaged
situations and to establish equal chances by co-ordinating, providing information and
professional services since 2004. It has close co-operation with the relevant ministries,
county and city councils, government and civil organizations and experts.
The so-called “Sure Start” program was started in some townships for the first time in
Hungary in 2003 in order to strengthen the social and emotional development of children, to
protect their health as well as to improve their skills and abilities. 9 This program model aims
to strengthen the family as the basic unit of society and as a community serving as the scene
of primary socialization with the participation of the local community and the involvement of
specialized services.
Utilizing British experience, the Sure Start Program aims to reduce child poverty and the
social exclusion of children by firstly harmonizing the local services regarding the age group
of 0-6 years and inserting them in the system of locally available services, and secondly by
building local communities that provide a supporting environment for enhancing the child
raising competence of parents. In 2006 51 professional programs were involved and
facilitated the implementation in various parts of the country.
Since July 1st, 2006 the Sure Start Program has been operated by the Department of Equal
Chances Program Office under the Equal Chances Main Department within the Ministry of
Social Affairs and Labour. The Equal Chances Network is there to help to keep contacts and
co-operate with the organizations and institutes connecting to the program as well as to
continuously keep in touch with the starting programs, and to provide the background
necessary to training and professional programs.
As part of the European Union Gender Mainstreaming Program, the Ministry of Social Affairs
and Labour developed the program to implement the issue of ”Men’s role in the promotion of
equal chances for men and women, the meaning of parenthood and fatherhood in particular,
in the conciliation of work, career and private life” in Hungary. The scheme won the support
of the European Commission, and thus the MoSA&L launched the project of “Equal Chances
for the Genders” in autumn 2005. 10
The implementation of the program and financial handling were co-ordinated by the Main
Department of Social Equality of Men and Women.
The project had 3 important objectives:
• to promote equal participation of men and women in decision preparation and
decision making;
• to dissolve and transform traditional, fixated gender roles and stereotypes;
• to establish equal participation of men and women in the labour market and in
economic life.
The project aims to change prejudice where it is born and experienced permanently.
Therefore the target group of the project is practically the entire Hungarian society, the
decision-makers in particular: top and chief executives, men in management positions.
8 source: www.pestesely.hu
9 source: www.szmm.dov.hu “Sure Start” program
10 GM Closing conference report, source: www.szmm.gov.hu
33

Since 2000 the Family-friendly Work-place Award 11 has been given to work-places that
give accentuated priority to the respect of family duties.
It has proved that such work management effectively increases the competitiveness of the
firm while it is also advantageous to staff with families. The motivation, satisfaction and work
efficiency of the staff are enhanced unambiguously by a management practice that
harmonizes the interests of work and family. It results in reducing stress, fluctuation or the
time of absence from work for health reasons. Thus it is possible to keep highly qualified,
obliged staff and to increase efficiency and creativity in the long run, which means profit for
any company with long-term objectives.
The application includes issues like the proportion of women in management, how many men
and women participate in training whether there are measures specifically aimed at
enhancing men’s family obligations, whether events organized at work or other perks are
open to family members as well, or whether the work-place supports those who return from
maternity leave. In view of labour it is important to offer the opportunity of part time jobs or
tele-work, to create compulsory working hours and possible working hours and to have a
collective agreement and training aimed at enhancing competitiveness preferably organized
within working hours. From a social viewpoint we must welcome benefits that increase the
social security of employees (family starting and maternity support, school starting support,
contributions to pension schemes etc.), or health protection (medical tests, passes to
swimming pools, recreational support etc.) or supplementary services like alternative
daycare, support of children’s institutes. 51 applications were assessed in 2007. The awards
were given in the categories of small, medium-sized and large companies as well as bodies
of state administration.
Gender equality on the basis of the report by the World Economic Forum 12 -
international comparison
In the "Gender Gap Index" report of the World Economic Forum in 2006, Hungary took
position 55 among the examined 115 countries. The "Gender Gap Index" examines the
extent of equal chances for men and women in four major fields: economic participation,
educational attainment, institutional influence on political life and finally health and general
life expectancy. The final ranking of countries is formed by these indexes.
The index of the world organization measures women’s equality with men in the following
four categories:
- economic participation and opportunities (gender partition of employees, partition of wages,
estimated income per gender, decision-makers, officials, gender partition of managers,
gender partition of skilled workers)
- qualification, education outcomes (literacy, students at different levels of the education
system)
- health and survival (life expectancy at birth, sex ratio at birth),
- participation in political decision-making (members of parliament, ministry officials, state
leaders).
Apart from the old EU member states Hungary is preceded by all the other Central Eastern
European countries and a number of Asian and African countries as well.
The sub-indexes show a colourful picture:
11 www.szmm.gov.hu
12 Global Gender Gap Report 2006 – World Economic Forum Geneva, Switzerland 2006
34

Chart No. 8:
Economic
participation and
opportunities
ranking Education ranking Health ranking Political
empowerment
Employees 59 Literacy 43 Birth ratio 84 Parliamentary
seats
wages 95 admittance to 84 life
primary
expectancy
education
at birth
1 Ministry
officials
income 31 admittance
secondary
education
to 74 State leaders 41
Decision-makers,
officials, leaders
Skilled workers, 1
physical workers
22 admittance
higher
education
to 1
Average ranking 48 Average
ranking
49 Average
ranking
36 Average
ranking
ranking
In terms of skilled workers, life expectancy at birth and admittance to higher education,
Hungary ranks first among the 115 countries examined. Regarding the index for health
conditions however it must be pointed out that the women have a longer life expectancy at
birth in the comparison to men; however women still show a marked lag behind the
European average!
Inequalities in health conditions
Significant gender inequalities can be seen in health conditions. In addition, there are some
territorial differences - both between and within regions - which cannot be neglected.
Today life expectancy for women at birth is 76.9 years while for men it is 68.6 years in
Hungary. However one can see a significant lag behind the European average regarding
both genders.
Chart No. 9: Average life expectancy at birth, 2003
Men Women
European Union (27 countries)74.62 years 80.81 years
Hungary 68.37 years 76.69 years
Territorial and gender inequalities exist not only between countries but within countries and
even counties.
In terms of mortality, men have a severe disadvantage, and this disadvantage becomes even
more notable when one compares life expectancy in the age group of 20 to 60 years.
Regarding the trend, life expectancy at birth is gradually increasing looking at the 1960s, for
both men and women (the difference between the two genders is increasing at the same
80
62
82
35

time), life expectancy for women in the age group of 20 to 60 years shows a growing
tendency, for men however it indicates a decrease in the period of 1960 to 1995. 13
Among the various indicators of health inequalities it is worth analyzing the incidence rate in
addition to the mortality rate. In terms of using health care usage, women are more frequent
users of health care. „Women are unhealthier whereas men die earlier” – health inequalities
between the genders can be summarized by this statement. 14
Physical and mental health condition of the adult population as well as the interaction
between social, economic, psychological and life-style factors influencing health condition
were examined in representative studies (Hungarostudy 1983, 1988, 1995, 1998). 15
On the basis of a comparison between men’s and women’s health conditions, by way of selfestimates
of health condition and psychic indicators women speak of worse mental states
whereas the objective mortality figures are notably better for middle-aged women. While in
the case of men 73% of differences in middle-aged men’s mortality between the various
counties can be explained by differences in GDP, depression and differences in incomes,
these factors do not show a significant connection to differences in women’s mortality
between the counties.
Examination results show that social-economic lag and primarily lower incomes have a
significantly stronger connection with depression and the deterioration in health conditions for
men rather than women in 1988; however in 1995 this connection could be seen for women
as well. Depression is a significant factor in the decline of both men’s and women’s health;
distress for women and lack of workplace control for men are further risk factors.
A significant part of health deterioration, which gradually increases with age, can be
explained by psycho-social factors in women therefore the medical conditions of mentally
healthy women will decline significantly later in connection with age.
It is an extra-ordinary challenge to be born a woman today: a woman has to fulfil several
roles at the same time, at home, at work and the chronic stress evolving from this multiple
role-taking leads to situations that make it impossible for a woman to take care of her health
or eventually abuse health. On the other hand multiple female roles enable a woman to be
financially independent, develop personally, establish relationships, and feel successful. Last
but not least, a woman’s health behaviour greatly influences the family’s health condition too,
since it determines the family members’ relation to health, and means one of the most
important models for the children. 16
The level of qualification is an important determinant for health condition, but through
employment it also significantly influences the economic competitiveness of the relevant
country.
In this respect the level of qualification in Hungary has been increasing continuously for both
genders since the 1930s; looking at the data from 2001 the number of women with only
primary education is lower than men’s while the number of women with secondary education
is higher than that of men. 17 Women take part in higher education and obtain a degree with
the same chances. Regarding employment men with both secondary and tertiary education
are employed in a higher proportion.
- 76.9% of women with a degree are employed, in the case of men it is 85.1%
- In the case of secondary education 62.7% of women are employed, and 75.1% of men.
Slightly more than half as many women take part in research and scientific work as men.
13 Central Statistics office: Women and Men in Hungary 2004.
14 Psycho-social factors influencing men’s and women’s health - section leader Csilla Csoboth
source: www.gender.uni-corvinus.hu/konf2002/szcsoboth.doc
15 Maria Kopp: Correlation of physical and mental health on the basis of national surveys
source: www.gender.uni-corvinus.hu/konf2002/szcsoboth.doc
16 Hungarostudy 2003. Csilla Csoboth: Women’s health
17 Central Statistics Office: Men and women in Hungary 2004.
36

In 2003 the proportion of women with a scientific degree was 3.5% in the case of academic
membership, in the case of scientific doctor’s degree it was 11.5%, in terms of candidate in
sciences it was 21.8%.
Family decisions, social division of labour 18
Men’s and women’s places in society display basic differences although the equality of rights
is legally established. The basic unit of society is the family. Women’s place within the family,
division of labour and the structure of decisions - that is dealing with the resources (both
financial and inner resources) determines women’s role and place as well. Women’s role as
mothers and wives and its judgement has not changed in the past years, thus they have to
tackle their participation in the labour market with increasing hardship. The division of labour
in the traditional family encumbers public and labour participation. The extent of taking over
duties between the genders in the family greatly depends on the couple’s level of
qualification, occupation and incomes. Women with low indexes and living in small townships
carry a greater burden; therefore they are disadvantaged in terms of financial resource
attainment and higher participation on the labour market.
Apart from the legal background, which provides legal equality, the practical enforcement of
laws, actions and the network of supporting institutes, the change of social attitude is an
important requirement for women’s greater social participation.
Social equality of men and women significantly influences how people feel and has an impact
on economic development. Healthy population and continuous economic growth are only
possible if men and women can realize their career plans and satisfy their material needs
with equal chances. 19
3.4. Gender equality on the labour market and in the access to programs supporting
the process of becoming self-employed
3.4.1. Equality in labour market participation (employment, level of income, proportion
of part-time jobs)
a.) Gender equality in economic activity Score 3
In the period prior to the political change, there evolved a fairly high level of women’s
economic activity, the majority of women had jobs in specie. The level of employment
reached its maximum possible not only socially but also demographically. The economic
activity rate of women in Hungary exceeded far beyond that of developed market economies,
and it was even several percentage points higher than the indexes of the Scandinavian
countries, which are traditionally considered to be leading economies in regard to
employment issues. Many factors contributed to this e.g. the enormous labour needs of the
ideology of extensive industrialization; the political intent to have maximum control over as
many citizens as possible; and the job opportunities were demanded by women themselves.
Doubtlessly there were negative sides to full employment of women: the encumbrance of
women, weakening of family functions etc. It is also a fact that the negative discrimination of
women in the labour market still remained - despite the laws providing equal rights. Yet, the
increasing economic activity entailed the actual improvement of women’s position. Their
employment helped the financial situation of their families; working outside home enriched
their life, alleviated poverty, and reduced their vulnerability to family and men.
18 Bernadett Csurgo -Boldizsar g. Megyesi: Family decisions, division of labour and social structure in
Social sections Napvilag Kiado Publishing 2006
19 GM manual (source: www.genderpilot.hu)
37

Since 1990 there have been dramatic processes on the labour market; the following main
features are:
a drastic drop in the number of employees
soaring then slowly decreasing unemployment
an intensifying tendency to become inactive.
The long and historically specific period of full employment was suddenly replaced by lasting
mass unemployment, this is only one - and paradoxically not the most important - factor - in
the deterioration of the situation of the labour market. A more serious problem is that two
thirds of the people who got redundant due to ceasing jobs became inactive, similarly to
formerly unemployed people. Because of this, in the group of 15-54 year-old women the
proportion of those who live on social-welfare benefits or other people’s earnings almost
doubled (increased from 24.5% to 45.9% between 1990 and 1996). In the meantime the
employment of this age group dropped from 75.5% to 54.1% in five years.
The activity rate started to increase again only in the recent years.
Diagram No. 2:
Economic activity rate of population between the age of 15 and 74
(Central Statistics Office) 2002-2006 yearly average, 2007 Q1 average
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007
male female
activity rate
Female employees are often unable to pull themselves and family out of poverty, partly due
to the differences in wages, status, industry of employment and qualifications between men
and women. Although the number of female employees is significantly increasing worldwide,
unemployment among them also increased according to the latest report of the International
Labour Office (ILO) published on Women’s day in 2007.
38

Diagram No. 3: Unemployment rates: women
As a percentage of female civilian labour force, average 1995-2005 or latest period available
20
15
10
5
0
Korea
Norway
b.) Gender equality in income Gender difference in wages
Switzerland
Japan
Luxembourg
Austria
Netherlands
United States
United Kingdom
New Zealand
Denmark
Ireland
Sweden
Australia
Hungary
Portugal
OECD Total
Canada
Czech Republic
EU15
Belgium
Germany
Finland
France
Italy
Greece
Slovak Republic
Poland
Spain
According to the 2006 "Gender Gap Index" of the World Economic Forum Hungary ranks
95th among the 115 countries examined.
Although girls have better school results worldwide, and there are more female career
starters with university degrees, there is a difference of 15% in their salary.
The reason for the difference is not the same everywhere, and its size also varies. There are
countries where women are concentrated in certain fields of work (Cyprus, northern
countries), in other places - like in the Netherlands - they lag behind due to their part-time
employment. The largest - 25% - difference in the wages of men and women can be seen in
Cyprus and Estonia, while it is the smallest - 3% - in Malta. (There however the women with
low qualifications are usually housewives.) In Hungary the gap is 11%.
The main reasons for the lagging of women’s wages include the greater burden of
housework on wives and mothers; this hinders not only their career but their employment
chances. While husbands in Eastern Europe however do two and a half hours’ housework
per week in average, their Irish and British counterparts do nearly seven.
39

Diagram No. 4:
350000
300000
250000
200000
150000
100000
50000
0
Wage and total income according to gender and type of work
Bluecollar
Whitecollar
Total Bluecollar
Whitecollar
Total Bluecollar
Whitecollar
Male Female Total
Total
Total income
(HUF/month)
Base wage
(HUF/month)
In the number of female managers Hungary ranks well (4th among the 27): their share in
the number of managers is 37% (an increase of 5% since 2000) according to last year’s
data. The average in the Union is 32%.
C.) Gender equality in non-traditional work forms
Gender difference in forced part-time employment
Compared to other European or OECD countries, there is hardly any opportunity for parttime
employment in Hungary.
Diagram No. 5: Incidence of part-time employment 20
As a percentage of total employment, 2005 or latest available year
40
35
30
25
20
15
10
5
0
Slovak Republic
Hungary
Czech Republic
Turkey
Greece
Korea
Portugal
Finland
Spain
20 www.oecd.org Stat data
Poland
United States
Sweden
France
Luxembourg
Italy
Mexico
OECD Total
Brazil
Denmark
Austria
EU15
Belgium
Canada
Ireland
Iceland
New Zealand
Germany
United Kingdom
Switzerland
Norway
Japan
Australia
Netherlands
40

Our lag in part-time employment is graphically illustrated in the above diagram. In Hungary
only one in four women works part-time.
3.4.2 Gender equality in the social infrastructure supporting labour market
participation
a.) Gender equality in the effects of family duties
Although the number of households without children is growing in Hungary, today nearly half
of the households still have one or more children. One in four families with children has only
one parent, which brings with it all its socio-economic consequences. The average age at
which women have their children is now higher, more and more women put off having
children for their career or economic reasons. There are more families with only one child
than there were previously.
The total fertility rate has significantly decreased in recent years, in accordance with the
increase of the average age at which women have their children.
41

Diagram No. 6: The proportion of families with children, composition of families regarding the
number of children, medium age of having the first child, total fertility rate, employment of
families with children: 21
Number of households, million
Births per thousand women
2.5
2.0
1.5
1.0
0.5
0.0
100
90
80
70
60
50
40
30
20
10
0
60
50
40
30
20
10
0
A. Household composition
Couples with children
Single parents
Other households
1970 1980 1990 2001
C. Birth rates by age-group
2000
2002
2004
15-19 20-24 25-29 30-34 35-39 40-44
E. Employment status of families with children
% of total families with children
2.5
2.0
1.5
1.0
0.5
0.0
100
90
80
70
60
50
40
30
20
10
0
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2.4
2.2
2.0
1.8
1.6
1.4
1.2
B. Family size
1990
2001
1 2 3 4 or more
Number of children in household
D. Total fertility rate
HUN
OECD-30
CZE, POL, SVK
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
1.0
1980 84 86 1990 94 96 2000 2004
One-earner Two-earner Working single Non-working Non-working
couples couples parents couples single parents
21 www.oecd.org Economic department working papers
Family policy in Hungary 2007.
1990
2000
60
50
40
30
20
10
0
Number of households, million
Children per woman
42

Absence from the labour market due to having a child, especially if it is for a long time
(having more than one child), results in not only a lag in the level of income or professional
development but it often leads to an overwhelming disadvantage due to the changed
circumstances of employment and changes in the profession.
There are few opportunities for mothers or sometimes fathers who are at home with their
young children for several years that would help them in closing up with their profession or
learning a new one with a schedule harmonizing with their duties at home.
The employment of women is greatly affected by the number of their children: the more
children in the family or the younger the latest one, the higher the probability of inactivity.
Diagram No. 7: Inactivity rates of mothers by the number of children 22
The social participation of women, especially in resource attainment, is greatly affected by
social support systems and their accessibility.
The number of opportunities for child care that previously offered an informal solution for
working women (grandparents, relatives, neighbours) decreased as a greater proportion of
women were employed and therefore the demand for institutional care increased.
For both genders the reason for changing jobs is most often getting a higher income,
however in the case of women obtaining a job that is more compatible with family life is more
often given as a reason than in the case of men. In addition, professional development and
achieving a career are more often given by women as a reason than by men.
22 www.oecd.org Economic department working papers
Family policy in Hungary 2007.
43

Interesting results can be seen in a comparison between those who receive childcare
benefits in different types of townships regarding their ideas for the future. 23
Chart No. 10:
Ideas Capital city Town Village Total
will return to
previous work
52.6 37 26.8 34.8
will look for (new)
work
22.8 35.4 32.4 32.4
will become an
entrepreneur
0.5 2.5 2.9 2.4
expects to receive
unemployment
benefit
0.8 1.3 5.1 2.8
will apply for new
maternity allowance
14.1 12.9 19.8 16
will be a housewife 9.2 10.9 13 11.6
Data from 2002 given in percentage
The table shows that nearly one third of women who decide to have a child are still excluded
from the labour market. Their ideas for the future also vary according to the type of township
they live in: those who live in towns or villages will look for (or be compelled to look for) new
work or seek opportunities to become entrepreneurs in a greater proportion. These groups
are expected to be excluded from employment with a higher probability.
b.) Child care support Score 1
Statistical data from 2004 showed that 30.5% of mothers raising a child below the age of 3
were employed; 0.2% of infants aged 0-1 years went to day care, and so did 4.3% of infants
aged 1-3 years of age.
The day care of young children is mostly sought through informal care systems (relatives,
acquaintances, baby-sitters).
The possibilities and obstacles of employing people who are inactive for family reasons were
examined in 2002. 24 Nearly 30% of those asked said the obstacle was the lack of nursery
school places. In categories of location and type of township, lack of support and benefits
pose an obstacle in various degrees in solving the problem of day care.
The lack of nursery school places poses an obstacle in day care for 40% of people living in a
township; therefore it also poses an obstacle in returning to the labour market. People living
in townships receive more help in child nursing than those living in cities. The supporting net
of the family and the local environment seems to be stronger in smaller townships than in big
cities.
Financial resources (and their insufficiency) available for families appear in the same
proportion in different location types. Lack of kindergarten places and help (or the absence of
help) for the care of a disabled child were mentioned only in a small percentage.
On the basis of the above, in addition to financial support, opportunities on the labour market
for people living in small townships and raising children may be improved by expanding the
availability and accessibility of day care services.
The development of institutional care, including child day care is a highlighted area in the
Hungarian development plan.
23 KSH: Men and Women in Hungary 2004. (www.szmm.gov.hu)
24 Maria Frey: The possibilities and obstacles of employing people who are inactive for family reasons
and receive childcare support Closing study of HU9918-13 Phare program Budapest, 2002.
44

Providing day care for young children is not only a requirement for women’s equality on the
labour market but it is also the basis for life-long learning. 25
With adequate community attitude it can provide the opportunity for all and especially for
vulnerable children to have a successful start and socialization.
c.) General social infrastructure for the promotion of gender equality on the labour
market
The Hungarian policy on family aims to provide favourable conditions for the family for early
socialization, and to facilitate the care of children less than 2 years of age at home. 26
Family support systems:
- long-term financial support (family allowance, tax allowance, regular and supplementary
child protection benefit, social benefit and house-maintaining support)
- supplementary financial support (maternity benefit, child care allowance, child care benefit,
child raising support etc.)
- organizational support systems (medical care financed by the state, maternity leave, other
paid leave, institutional care, education).
The former support system, which was often hard to manage and not always solid, was
reformed in January 2006.
Compared to other European and OECD countries, the paid parental leave is long in
Hungary. In international comparisons, Hungary ranks on the top of list.
Diagram No. 8: International comparison of the duration of paid maternity and parental leave
The proportion of family support to GDP is also high. However, research has proved that
fertility is affected by the availability and capacity of the child care system like nursery,
kindergarten and other institutes more than financial support. It is an interesting fact that
higher qualification, well-paying, attractive job opportunities and a feasible career dim
women’s intent to have children. However the supplementary support systems can help
women harmonize their duties at home and at work.
Diagram No. 9: International comparison of expenditure on family support 27
25
www.bolcsode.hu
Mrs. Mihaly Korintus: OECD policy on the raising and care of young children
26
Philip Hemmings: Family policy in Hungary: How to improve the reconciliation between work and
family? in www.oecd.org
27
Philip Hemmings: Family policy in Hungary: How to improve the reconciliation between work and
family? in www.oecd.org
45

The various forms of child care services are mostly used by women just as taking care of the
old and the sick is also mainly left to women. This contributes to the fact that women cease
their jobs more often, they leave the labour market meanwhile their skills diminish and their
knowledge gets obsolete. Their return is later encumbered by the employers’ discrimination
against mothers with young children as well. The activity of women raising children aged 6-
10 years, who are no longer entitled to receive child care benefit, is lower than that of women
without children or those raising older children. Women with higher qualifications – even if
they decide to have several children – have greater success in returning to the labour
market.
3.4.3 Equality in welfare support (social benefits, support of self-employment,
consideration of gender issues in support development)
a.) Gender equality in the attainment of welfare benefits
There is no (significant) difference in the attainment of welfare benefits for men and women
in Hungary. The social benefits relate more and more to the level of income or assets, and in
this regard it does not matter whether the recipient is a man or a woman. Since the average
income of women is usually lower in every profession and industry than that of men, we can
assume that women – due to their lower income - probably have a better chance at receiving
welfare support than men.
Today the recipients of some benefits are mainly women e.g. child care allowance and child
care benefit. This is due to the traditional family roles rather than different gender
opportunities.
b.) Gender equality in the process of becoming self-employed outside the labour
market
Surveys created about formerly unemployed people who have become entrepreneurs show
that only one third of those who try to break out of unemployment by the means of selfemployment
are women. On the other hand, the survival chances of enterprises started by
women are high and range within that of men’s enterprises. (Frey, 1995)
Chart No. 11: Employment on the labour market between 1999 and 2004 broken by gender 28
Employed Unemployed Economically Employment
Year
active rate
1999 3 809.30 285.3 4 094.60 48.9
men 2 083.60 170 2 253.60 56.2
28 Central Statistics Office labour market statistics, STADAT system
46

women 1 725.70 115.3 1 841.00 42.3
2000 3 856.20 263.7 4 119.90 49.6
men 2 105.80 158.9 2 264.70 56.8
women 1 750.40 104.8 1 855.20 43
2001 3 868.30 234.1 4 102.40 49.8
men 2 113.70 142.4 2 256.10 57.1
women 1 754.60 91.7 1 846.30 43.1
2002 3 870.60 238.8 4 109.40 49.9
men 2 112.50 138 2 250.50 57.1
women 1 758.10 100.8 1 858.90 43.3
2003 3 921.90 244.5 4 166.40 50.6
men 2 126.50 138.5 2 265.00 57.6
women 1 795.40 106 1 901.40 44.3
2004 3 900.40 252.9 4 153.30 50.5
men 2 117.30 136.8 2 254.10 57.5
women 1 787.30 124.4 1 911.70 44.3
2005 3 901.50 303.9 4 205.40 50.5
men 2 116.10 159.1 2 275.20 57.4
women 1 785.40 144.8 1 930.20 44.2
It is well known that the Hungarian unemployment rate is under the European Union
average. The reason for that however is - at least in part - that there are too many people
who receive old-age pensions due to traditionally strong social considerations or disability
pensions due to a decrease in work capability in Hungary. A significantly smaller portion of
the working age i.e. 15-64 years age group actually work. In 2004 barely more than 50% of
the working age population was employed compared with the European Union average of
65%. The employment rate of men is traditionally higher: in 2004 57.5% of men and only
44.3% of women were employed, the difference therefore is nearly 14%. The situation is
further aggravated by the increasingly ageing population; that is both the number and the
proportion of supported pensioners are growing. One of the important objectives of the
economic policy is to increase the employment rate, a possible way to increase the amount
of entrepreneurial activity. (L. Szerb)
c.) Gender equality in the preparation of programs for supplementing income
Due to budgetary limits, the group of social and welfare programs or expenditure is shrinking
in Hungary, though compared to other former eastern block countries, the amount per capita
spent on the finance of the social net and its percentage of the GDP are still high.
47

Diagram No. 10: Public social expenditure as a percentage of GDP 2003 29
32
27
22
17
12
7
2
-3
Korea
Mexico
Turkey
Ireland
United States
Canada
Slovak Republic
Japan
Australia
New Zealand
Iceland
United Kingdom
Spain
Switzerland
Netherlands
OECD average
Czech Republic
Greece
Luxembourg
Finland
Hungary
Poland
Portugal
Italy
Norway
Austria
Belgium
Denmark
Germany
France
Sweden
The target groups of still existing programs for supplementing income are not decided on the
basis of gender but on the the basis of other factors, e.g. unemployed people, single parents,
widow(er)s etc. Within a target group however - due to its character- the proportion of women
is probably higher, a greater portion of income supplementing benefits is given to women.
3.5. Gender Equality in Entrepreneurship and Self Employment
Score 3.0
3.5.1 Gender Equality in Self Employment Score 3.0
a.) Gender equality in total self-employment Score 3
Self employment can be defined in two different ways. The narrower definition is being a
member of a partnership and or sole entrepreneur; the wider definition includes members of
co-operatives and helping family members as well.
Analysis of self employment according to the gender viewpoint shows an interesting
perspective. In 2004, 10.8% of women and 18.1% of men of working age were self
employed. Share of the genders among self employed in the EU in 2004 was the following:
10.8% of women and 18.1% of men were self employed. The same figures for 2004 in
Hungary were 19.4% of women and 23.7% of men. If we look for those who were both
employees and self employed (this would stand for the share of enterprise operated on part
time), 4.8% of women and 9.7% of men fall into this category. 30
It is thus clear, that there are more self employed among men than among women both in
Hungary and the EU.
29 www.stats.oecd.org
30 "Gere Ilona: Vállalkozó nık a mai magyar társadalomban; Source: Közgazdasági Szemle, XLIII.,
1996. december (1115-1125. p.)"
48

Diagram No. 11: Unemployment rates of women (As a percentage of female civilian labour
force, average 1995-2005 or latest period available)
60
50
40
30
20
10
0
Norway
Denmark
Sweden
United States
France
Slovak Republic
Ireland
www.stats.eocd.org
Iceland
Canada
United Kingdom
Finland
Netherlands
Germany
Australia
Hungary
Czech Republic
Switzerland
EU15
Austria
New Zealand
OECD Total
Spain
Japan
Belgium
Italy
Poland
Portugal
Greece
Korea
Brazil
Mexico
Turkey
According to the figures from the labour market data of domestic population between the age
of 15 and 74 in the second quarter of 2005, sole entrepreneurs and members of partnerships
amounted to 522,900; 31.7% of them were female. The interesting but not surprising fact is
that 71.6% of the total 16,200 helping family members were women.
A significant share of women’s businesses are enterprises started without or with a very low
amount of capital, the owners of which can be considered self employed according to
international standards.
b.) Gender Equality in start-up activity Score 3
The above mentioned GEM research examines women’s enterprises as well. There have
been several publications issued in recent years, in 2005 and in 2006 separate publications
were issued about women’s enterprises. 31 The studies unambiguously state that men’s
enterprises exceed those of women in number both in early entrepreneurial activity and in
established companies in every country (there was one exception: the Philippines).
Interestingly the differences are greater in the developed countries, where there are two
enterprises of men for each enterprise of women. On the basis of data from 2006, Hungary,
on average, portrays these figures p for both early phase enterprises and established
businesses as the proportion of men’s enterprises to that of women’s is 2 to 1.
Women know fewer entrepreneurs than men, they see business opportunities in a smaller
proportion, they have entrepreneurial knowledge to a smaller extent, at the same time they
are more affected by the fear of business failure. A great deal of these differences comes
from objective aptitude, which can hardly be influenced by economic policy.
31
Maria Minniti, I. Elaine Allen, Nan Langowitz 2005 Global Entrepreneurship Monitor 2005 Report
on Women and Entrepreneurship;
Allen, E –N. Langowitz, M. Minniti 2006 The Global Entrepreneurship Monitor (GEM) 2006 Report on
Women and Entrepreneurship;,
http://www.gemconsortium.org/about.aspx?page=special_topic_women
49

A recent study about men and women’s enterprises in the country reaches similar
conclusions. 32 Companies owned by men and those owned by women are fairly similar, real
differences can be found in the startup of the companies. A sign of that could be seen in the
lower share of opportunity-driven enterprises among women than among men; while the
share of start-ups driven by mixed motives is higher among women. The idea of necessity is
probably assessed in a different way by women, as for them the possibility of having a child
and getting maternity benefit or becoming a housewife is a socially accepted choice; while
for men becoming unemployed is the final option. Still there is a “grey zone” of women’s
lower share in new business start-ups; an unclear reason why when faced by the same
circumstances men choose to become entrepreneurs while women to become employees. A
possible answer lies in the difference in willingness to take risks. Although the majority
(about two-third) of new enterprises is set up to seize a good business opportunity or to
improve one’s financial status; 8% more women become entrepreneurs out of necessity
than men
An enterprise’s success (or failure), limits of development, growth, viability and stability are
greatly determined by the circumstances of the start-up. The lack of resources for the launch
of a business shows a devastating picture. More than 25% of female entrepreneurs asked
did not have the necessary capital for the start-up and the amount of capital was in general
very low – similar to the already existing businesses in Hungary. (For 50% of the female
entrepreneurs asked the available founding capital was less than 300,000 Ft (EUR 1,200);
and only 15% of them had more than 500,000 Ft (EUR 2,000).) These figures indicate that
most of the female enterprises start practically without or with a very low amount of capital;
these entrepreneurs can be considered self employed according to international definitions.
c.) Gender equality in established business owners Score 3
There are twice as many enterprises owned by men than by women in Hungary, according to
statistics and studies. The historical background to this has previously been discussed, the
motivations will be analysed below.
Significant difference can be seen between women and men among the owners of small
enterprises (10-49 employees); satisfaction with the performance of the company as well as
the future development perspectives is considered considerably worse by women than by
men.
Obstacles preventing growth are considered very similarly by the genders; taxes and social
security fees, burdens of overcomplicated administration and insufficient domestic demand
are most often mentioned as the main factors hindering expansion by both women and men.
Women feel the limits of development to be less restricting; but this can possibly be
explained by the fact that the share of enterprises willing to expand is lower among them
than among men.
3.5.2 Gender equality in entrepreneurial characteristics
Score 2.5
The economic and political changes that occurred in Hungary in the previous decade show
themselves in the dimension of social connections in the form of a unique tendency: social
32 Szerb L. 2007 Nıi vállalkozók és nıi tulajdonú vállalkozások jellemezıi Baranya megyében 2001-2004, Kézirat Pécsi Tudományegyetem
Közgazdaságtudományi Kar
50

oles have been over- and rewritten.
The economic and political transition certainly plays an important role in the reconstruction of
the SELF-system of women entrepreneurs, as a social frame influencing the dynamics of the
personality changes. As the market sector became wider and then more general in the
Hungarian economic system, it meant a new possibility for self-actualization for more and
more active people. Women had and continue to have a special situation in this process
because of their traditional role.
During the socialist era most of them were housewives and working women at the same time
due to the ideological pressure for complete employment. Unemployment became a real
possibility after the economic-political speech in the mid-80s and few years later, after the
transitions, an increasing number of women actually became unemployed. The uncertain
existential situation affected not only women but men as well. In this situation, at the time of
dramatic collapse of the paternalistic state, a large group of employees had to face the fact,
that the fulfilment of their most basic needs had become uncertain. From then on, the
solution could only be the individual.
Certainly, there are gender differences in the handling of risks and target setting is according
to this as well. Besides that, there is an important gender difference in competitive
behaviour: women’s competition – both with members of the same sex and with men – is
usually carried out in a hidden way. This secrecy ceases in the role of an entrepreneur;
competitiveness is accepted and can be used as a constructive force.
Generally, the marital status has a weak effect on the drive to become self-employed;
however, there is a higher share of divorced female entrepreneurs than male. (72% of
female entrepreneurs live in a relationship, 14% of them are divorced; while 86% of male
entrepreneurs are married and only 5.4% of them are divorced.) 33
Motivation behind becoming entrepreneurs
People in Hungary generally start a business because of the following reasons:
• They have specific motivation for becoming entrepreneurs (take over an existing
business within the family; they find it the best way to utilise their expertise or
knowledge; they have an idea to be realised, etc)
• They find that becoming an entrepreneur allows them to better provide for
themselves and their families.
• They are forced to make this decision (because of loosing or the danger of loosing
their job, due to bad job conditions, etc)
The original reason of starting a business also forms an important dimension of the
entrepreneurial attitude as a whole. Those who started a business out of necessity are
usually less prepared and are not likely to overcome the level of self-employment and
therefore more likely to fail. Contrarily, the businesses motivated by opportunities are
more innovative, grow faster and are more stable. A certain share of enterprises,
however, are started based on mixed motives. The opportunity also plays a role; but the
necessity is the principal cause.
It is well known that in the early 90’s, the first years after the transitions, a large amount of
businesses were started due to necessity in Hungary; mostly because of the layoffs at large
companies. 34 Less known are the data of the GEM researches, which show that in the years
following 2000, the majority (almost two thirds) of entrepreneurs were motivated by good
opportunities in Hungary as well. These data were confirmed by Szerb later in another study
33
"Gere Ilona: Vállalkozó nık a mai magyar társadalomban; Source: Közgazdasági Szemle, XLIII.,
1996. december (1115-1125. p.)"
34
Czakó Ágnes és szerzıtársai 1995 A kisvállalkozások néhány jellemzıje a kilencvenes évek elején,
Közgazdasági Szemle 1995/4 399-419. Old
51

(2007).
According to the Szerb study (2007) 52% of women started their businesses to act on good
opportunities in the years after 2000, while 17% started their businesses purely out of
necessity. Compared to men, a greater proportion (23%) of women were motivated both by
necessity and opportunity.
In another survey 50% of those asked (in the same proportion) started an enterprise
because they were concerned by their employment security or hoped for a higher income,
32% were motivated by greater independence, the chance to utilise acquired knowledge,
expertise better or more favourable working conditions, only 4% of them hoped that they
would be able to better harmonize child-raising with this activity. Motivational factors
were naturally affected by the educational level of the entrepreneurs: for instance the desire
for independence or professional ambitions motivated lower qualified people less, while lack
of job opportunities made (or forced) them to start a business to a greater extent. The
opportunity of higher income was a stronger motivation for women with higher education,
which may indicate the satisfaction of this group of people with the income level that can be
achieved in state administration.
In human resources the situation is uneven, for 84% of the people examined had the
expertise for the enterprise, on the other hand 40% of those asked had no entrepreneurial
knowledge, which would be equally important (if not more important). Only 8% of those who
lacked entrepreneurial knowledge participated in a decent, well-rounded program.
b.) Gender equality in size of entrepreneurial projects Score 1
The study prepared by Szerb (2007) found that male-owned companies were somewhat
bigger, with higher sales, but less profitable than those owned by women. The reason for the
differences however comes primarily from the different structure of activities and not from
gender issues.
The tables below show the growth of the 432 enterprises involved in the survey on the basis
of sales (on real value) and number of employees broken into the genders.
52

Diagram No. 12: Average annual growth rate of male- and female-owned enterprises in sales
categories 2001-2004
35,00
30,00
25,00
20,00
15,00
10,00
5,00
0,00
10,79
16,84
-10 m
alatt
8,63
13,68
-1 és-
10m
között
15,83
10,18
negatív -1
m ig
28,78
16,49
pozitív +1
m-ig
nı férfi
21,05
19,42
9,35
14,04
7,19
7,72
1-10m 10-50m 50m.
felett
Diagram No. 13: Average annual growth rate of male- and female-owned enterprises in
numbers of employees 2001-2004
45,00
40,00
35,00
30,00
25,00
20,00
15,00
10,00
5,00
0,00
2,90
3,45
10,34
7,97
-10 alatt -1 és -10
között
14,49
10,69
-1 alatti
negatív
39,86
29,31
25,52
21,74
0 pozitív 1ig
nı férfi
10,14
18,62
2,90
2,07
1,1-10 10 felett
Examining the factors of sales growth one can see that female-owned companies have a
disadvantage when compared to male-owned firms, in terms of innovation, developments
and the geographic spread of sales. That disadvantage is counter-balanced at least in part
by the greater spreading of the growths of male-owned enterprises. This means that the
average differences between companies owned by men and those owned by women are
small, at the same time there are more male-owned companies with outstanding growth but
also more with negative growth. This is probably due to the higher risk-taking attitude of men.
The number of employees seems to prove that female-owned companies are more cautious,
53

they employ fewer new employees in total, on the other hand they sack an employee less
willingly.
Potentially, both women and men, entrepreneurs that are graduates of business or
technology are more likely to have larger businesses than those with other types of diploma
or without graduation. This, of course does not mean that with any other degree it was
impossible to have a successful business; however, having a degree in business or
technology plays an important role in the success of larger enterprises.
3.5.3 Gender equality in entrepreneurial culture Score 3.5
a.) Gender equality in medial representation of entrepreneurship Score 4
Results of “Global Media Monitoring Projects 2005” were presented by Réka Sáfrány,
representative of IgEN Association. Most important conclusions are the following:
The survey included news from television, radio channels and countrywide daily papers. The
study used quantitative and qualitative methods to analyse the gender and roles of the news’
subjects and the gender sensitivity within the news.
In the 122 news pieces reviewed, there were 21 women (10.2%) and 185 men (89.8%); 34 of
the journalists were female (53%) and 30 were male (47%).
Besides female politicians, women are mostly represented in the news as private persons
and rarely as professionals.
Most of the news’ male participants are rulers and politicians, leaders of important public
institutions, managers of financial institutions, entrepreneurs, athletes and sports managers.
Although the share of men and women were almost equal among the journalists, female
opinion has mostly been ignored; even female journalists’ reporting was focused on men.
Low representation of women in the media is in connection with the fact that they also have a
small share in the politics.
We do not have direct data about the media representation of female entrepreneurs.
According to expert estimations, in business papers and electronic media the share of female
entrepreneurs is even lower. Based on the fact that there are twice as many businesses
started by men than by women, one-third of the enterprises represented in the media should
be owned by women; still this is not likely to be true.
It is also important that that among small and medium companies the share of female owners
is lower and often companies founded by women are also managed and represented
generally or in a single project by men.
Personality, motivational and risk-taking differences between women and men may also play
a role in the disparity of media representation.
All in all, the lower representation of female entrepreneurs in the media can not be attributed
to gender discrimination but is mostly due to other reasons.
In the past years, women tend to utilise in an increasing manner the options offered by the
internet, the advantages of online education, information and the connections.
For example, the webpage of female entrepreneurs offers a wide range of information about
starting, maintaining and managing a business. It advises about support organizations,
financing options and other important topics. It is also a channel to promote domestic and
international best practises.
There are several web pages that focus on gender mainstreaming.
b.) Gender equality in the entrepreneurial role model Score 3
“Traditional role model and role behaviour is strongly expressed among the Hungarian
people” and “the domestic labour market prefers the long-term full-time employment of
54

men.” 35 The long-term full employment period of the socialist era (which included
unemployment behind the gates) still has its socialising effects on women living off wages
and salaries: a life spent at a single workplace, state-provided services helping with
homework (is at a low standard), acknowledgement of male-centred workplaces, sometimes
even authoritarian socialisation of the families all worked against the adoption and realisation
of the gender-conscious female role model.
The double pressure on women originating from the known social and demographic reasons
is not easing, but instead becoming stronger. The ageing society puts an increasing burden
on both families (including women) and the social security systems. The decrease in the
share of elderly people and hence the financing of the pension system can only be provided
by increasing the number of births. This means that women should have more children and
also spend more time making money. This is impossible without a more righteous sharing of
housework between the genders.
The most important reason for the deprivation of women can be found among the deeply
preserved traditions and the social prejudice against the idea of equal opportunities. So the
most important tool to improve the conditions is to make the general opinion sensitive
enough to suppress prejudice and to improve social acceptance of the idea of equal
opportunities.
Based on the domestic surveys of the last fifteen years, most of the Hungarian population
has a conservative point of view regarding the topic of gender equality. Even according to
international comparisons, the Hungarian families are the most characterised by the
traditional division of labour, the overburdened situation of women and acceptance of these
facts by the people affected by them.
3.6. Gender equality regarding enterprise supporting institutes
3.6.1 Actions promoting equality in enterprise development programs
In recent years, especially after Hungary joined the EU (2004), the number and financial
background of programs and measures enhancing equal opportunities for women in
enterprise development significantly increased. Prior to that the programs initiated and
financed by the EU PHARE program had strived to address and tackle the problem.
PHARE supported the launch of the Regina Model Program (RMP), a complex theoretical
reintegration model in country development and the labour market, which aims to offer
solutions to problems and needs arising in women’s reality. The Model’s philosophy is that a
woman has the right to make her own decision about having a child and that women should
have equal opportunities in the labour market whether they decide to have a child or not.
After 2004, within the frame of the 1st National Development Plan supported by the EU,
especially and primarily the 2nd component of HEFOP’s (Human Resources Development
Operative Program), there was a call for application No. 1.3.1 regarding women on the
labour market focused on female entrepreneurs, also emphasizing the importance of training
and networking. As women’s businesses in Hungary are usually small enterprises, they are
vulnerable. The majority are micro-enterprises, which employ fewer than 10 people, if any.
A great number of them are self-employed.
One way for some of the employees to escape unemployment after the political change was
to start a new business using their own and their family’s capital, expertise and work at their
35 Acknowledgement and Exercise of Equal Opportunities in Hungary (especially considering Gender
Equality) – webpage of SEED Foundation for Small Enterprise Development
55

own risk. In view of social protection this significantly large group of people got peripheral in
law as these entrepreneurs can not receive unemployment benefits if their enterprise
terminates. This situation is considered as discrimination by this group, and it still remains to
be solved.
A research group set up by the Foundation for the Support of Mutual Friendly Societies has
undertaken finding a solution to this group’s problem. They thought to find the solution within
the frames of Law XCVI/1993 about voluntary mutual insurance funds if the optional services
offered by the voluntary mutual friendly society funds include the income replacement of the
unemployed as an optional service.
Gender mainstreaming appears in research activities generated by local experts and
international organizations. These however were not regular.
In “Our Value: the People” within HEFOP, several specific programs about gender equality
including the improvement of women’s social emergence and the enhancement of women
entrepreneurs’ market competitiveness have been implemented.
Special loan programs and business development programs have been realized; these
programs are often operated by the enterprise promotion foundations in the capital city and
the counties (i.e. the LEAs).
The project named “Man, Woman: are they Equal?” was launched in 2005 with the support of
the European Union and ended successfully. It was co-ordinated by the Social Equality of the
Genders Main Department patronized by the Ministry of Social Affairs within the framework
of the Action Plan of the European Commission’s Community Framework Strategy, helping
to reach the goals laid down by the project with a number of publications.
(www.genderpilot.hu )
In the spring of 2006, interviews with 15 successful female entrepreneurs and edifying case
studies were published (“Enterprising Women in the 21st century”) by SEED Small
Enterprise Development Foundation on the commission of the Ministry of Youth, Family,
Social Affairs and Equal Opportunities. „Popularity and Emergence of Equal Opportunities in
Hungary (in special regard to Gender Equality) 2006 36 ” had a similar topic.
Regional Forum of Enterprising Women (i.e. VERA) - is the implementation of a complex
program of enhancing competence and building contacts with the support of e-learning and
e-mentoring in the region of Central Hungary. It aims to improve entrepreneurial knowledge,
develop complex training programs for enhancing competence, building contacts and
generating partner co-operation between the participating enterprises and women. It assists
the target group participating in the program with continuous professional assistance,
business management consultancy and mental hygiene mentoring.
The Hungarian EQUAL program supports experimental initiatives that promote the training,
work attainment and employment of those who are unable to take jobs owing to the
discrimination on the basis of their disadvantage, ethnic group, gender, disability, age, or due
to their low qualifications, lack of skills or work experience etc. The professional work of the
Managing Authority and the elaboration and implementation of the projects of the
Development Partnerships will be supported by the EQUAL National Support Structure, the
National Employment Foundation.
Three main types of organizations apply to the Foundation for funds: non-profit (mainly
organizations operating in the form of association) (57.8%), bodies of public administration
(26.3%) and enterprises (14.1%).
36 www.seed.hu/menu/tevekenysegeink/kutatas
56

In the framework of the 2nd National Development Plan (New Hungary Development Plan),
which is supported from the EU budget, several programs are being launched, which could
promote the creation and development of women’s enterprises, primarily financed by
TAMOP (Social Renewal Operative Program).
3.6.2 Promoting equality in local business development measures – on local level
Developing and providing business development services are primarily in the competence of
market actors, business consultants. There may be some consultants (perhaps even women)
who have already developed services specifically provided to female entrepreneurs, but we
have no information on them or their efficiency.
There are however counselling programs, some are even supported by the state, and usually
non-profit organizations for the alleviation of the “market failure” on the enterprise counselling
market, which offer BDS to all enterprises including women’s businesses free of charge
and/or at a discounted price.
In this circle we must highlight the counselling programs run by the local enterprise agencies
(LEAs), which provide business development consultancy services to a wide range of microenterprises
jointly with the network of their contracted counsellors. The counselling activities
of the LEAs were formerly financed by the PHARE SME program then by the Hungarian
government, then again in 2004-2006 by program 2.2.1 of the Economic Competence
Operative Program supported by the EU. There is no discrimination among the
entrepreneurs using the services on the basis of gender, and there are no counselling
services specifically developed for and targeted at female entrepreneurs.
In the 65,000 non-profit organizations registered in Hungary there are only 60 that
specifically aim to represent women or claim to be women’s organizations. This number is
very low and appears to be more so if we compare it to the tendencies seen in the Western
countries. Experience shows that in countries where there have been successful women’s
movements, it was enabled by the joint presence of at least three factors. The first condition
is the presence of women’s “critical mass” in political institutes, which is also the token of
women’s interests continuously appearing in political decision-making. The second factor is
the presence of efficiently working, well-organized women’s organizations, while the third one
is the existence of a strong and radical women’s movement. It is unnecessary to emphasize
that the three factors amplify each other, build from each other, and if any of them is missing
from the bunch, it has significant effects. In fact in Hungary all three factors are absent.
Women’s organizations in the civil sector – except for the few examples highlighted here -
have started to build their institutional structure, and determine their operational profile in the
past few years.
There are however women’s civil organizations that concentrate on one issue only e.g.
violence against women, enhancing female employees’ legal awareness, the role of female
entrepreneurs in the economy etc. They are run fairly well and organized and due to their
determined roles and precisely outlined activities they probably have the best chances of
obtaining funds that can be applied for.
Several organizations have recently been established to enhance the motivations of women
entrepreneurs, develop and help their enterprises e.g. Association of Hungarian Women,
Marketing Circle of (Female) Entrepreneurs, Safety Net, Hungarian Businesswomen’s Club.
Civil organizations that aim to enhance women’s social equality are definitely getting stronger
but still lagging far behind.
Among the non-profit organizations aiming to promote women’s enterprises we must
highlight SEED Small Enterprise Development Foundation, which is a counselling and
training institute that provides services to young female entrepreneurs and the operators of
family innovation centres.
57

The aims of SEED Small Enterprise Development Foundation are:
• to develop the Hungarian entrepreneurial culture, increase the professional
knowledge of entrepreneurs, enhance the competitiveness of small enterprises,
• to strengthen the non-profit sector, foster the economic and public participation of
minority groups and people at a disadvantage.
Its important target groups include women and family businesses.
The Innovation Centre of Entrepreneurs, the Association of Female Entrepreneurs and the
Hungarian Member Organization of the Association of Women’s World Bank also work
successfully in this field. 37 Compared to the importance of the issue, relatively few deal with
unemployment: by retraining, forecasting women’s professions expected to be sought after in
the future or orienting women on the labour market.
Finally we present an example of a successful project supported by HEFOP:
The project called “e-NIVO Network of Collaborating Female Entrepreneurs in Reality and
Virtually” won EU support in 2004 in a call for application titled „Promoting Women’s Return
to the Labour Market”. After the end of the project, the collaboration is still running.
Approximately 160 female entrepreneurs or would-be entrepreneurs applied to join „e-NIVO
Network of Collaborating Female Entrepreneurs”, which in the meantime became an
exemplary national networking model. Following the opening conference 120 of them started
the training and counselling program in five locations in the country last autumn. They
expanded their knowledge in the following topics: entrepreneurial self-knowledge (inside and
outside), basic EU information (institution, SMEs, gender mainstreaming), marketing and
financial knowledge, community enterprises, writing applications, strategy planning,
networking and building a team, group dynamics, business planning.
In total 57% female entrepreneurs and 43% would be entrepreneurs participated in e-NIVO
in various fields:
• retailing, wholesaling (clothing, traditional and reform foodstuff, pastry, construction
industry, hardware sales, musical instruments),
• services (PR, marketing, training, traditional medicine, insurance, financial
consultancy, accountancy), crafts (leather goods, stained glass) etc.
The highest number of the participants were private entrepreneurs (37%), much fewer of
them were the owners or partners in limited liability companies or limited partnerships (11%
and 7% respectively), agricultural private entrepreneurs and their helping family members
were represented only by 1 or 2 people.
It can be said that most of the people involved in the program are still active entrepreneurs or
members in active enterprises; moreover, there are some who have been earning their living
as entrepreneurs for 10 or even 15 years.
The exemplary networking model program “e-NIVO” was accompanied and helped by
internet support. Absolute beginners participated in a basic internet usage course and they
could therefore join the communication in the national mailing list created for the participating
groups. The work of the implementing staff had been supported by a closed web system
from the beginning.
The domain name of e-nivo.hu was bought, which will record the history of the project in
detail and it will be the website of a national network of female entrepreneurs. The domain
name of noivallalkozok.hu was also bought – this website (www.noivallalkozok.hu) aims to
be the professional portal of female entrepreneurs in the long run.
37 Levai-Kiss: Women in Public Life (www.tarki.hu/adatbank-h/nok/szerepvalt/levai-kiss97.html)
58

The e-NIVO program plans to be maintained because it established a network and contacts
that contribute to long-term sustainability. There is also a program connected to the e-NIVO
project which won a grant from the National Employment Foundation. Its main aim is to build
a network for civil organizations dealing with female entrepreneurs as self-employed women,
and to document the e-NIVO project as an exemplary national networking model program in
details so that it could be spread in as wide a circle as possible.
3.7. Equal rights for the genders in accessing finance
3.7.1 Equality in the magnitude of financial resources Score 1
The conclusions of a study (by L. Szerb in 2007 about the comparison of a county and a
wider sample) can be summed up with the analysis of enterprises by gender, as follows. (It is
very probable that the results obtained on the basis of the sample are not far from the real
national situation)
In Hungary there are about twice as many enterprises owned by men than by women.
Although the enterprises owned by men are somewhat bigger than those owned by women
with respect to both the number of employees and size of income, in reality though, there is
no difference in capital supply and what is even more surprising is that the enterprises owned
by women were significantly more profitable in 2004 than those owned by men! One can not
make far-reaching conclusions from this alone since it may be that men used more “creative”
tax evasion techniques than women. This may be significant only for small size companies.
35% of micro-enterprises are owned by women, 65% by men. Female ownership in this
dimension is a little over-represented compared to the sample average (32%), while in the
category of larger-sized small companies only 27% are owned by women, and for middlesized
companies the proportion is 26%. Interestingly 40% of the largest firms are owned by
women. All in all it can be said that the companies owned by men are more likely to belong to
the bigger categories of size than those owned by women, the difference is not significant
though.
There are differences in terms of attainment to financial resources as well. If we look at the
availability of resources needed for the development and growth of a company, we can see
the presence of gender inequalities.
59

Diagram No. 14: Availability of financial resources within the company for growth
100,00
90,00
80,00
70,00
60,00
50,00
40,00
30,00
20,00
10,00
0,00
0-9
alkalamzot
10-49
alkalmazott
50-249
alkalamzott
250 + fı
alkalmazott
a cég mérete kategóriákként,
hagyományos besorolás
0-9
alkalamzot
10-49
alkalmazott
50-249
alkalamzott
250 + fı
alkalmazott
a cég mérete kategóriákként,
hagyományos besorolás
nı férfi
Nem Igen
The majority of companies have insufficient financial resources available for growth. 38.6%
of male-owned companies and 46.4% of female-owned firms say that they need no outer
resources. As a general rule the growth in company size entails a growing need for outer
resources and/or an increasing willingness of the company manager to involve outer
resources. If however recources are indeed wanted, then female-owned enterprises realize it
in a greater part that they have insufficient inner resources.
In addition to bank loans, involvement of an outer proprietor may be an important source of
growth. The table below indicates the willingness of male and female owners to involve outer
capital funds.
60

Diagram No. 15: Willingness to involve outer proprietors in the total of the sampled
companies, given in percentage broken into genders
80,00
70,00
60,00
50,00
40,00
30,00
20,00
10,00
0,00
0-9
alkalamzot
10-49
alkalmazott
50-249
alkalamzott
250 + fı
alkalmazott
0-9
alkalamzot
10-49
alkalmazott
50-249
alkalamzott
a cég mérete a cég mérete
nı férfi
0 max 33% 33,1-49,9% 50% felett
As you can see, the majority of company owners exclude the possibility of involving outsiders
in the company by way of capital raise or purchase of business shares. In comparison 15%
fewer women (33.3%) than men (48.2%) would be willing to part with at least a minority
share but it also depends on company size.
3.7.2 Equality in access to outer resources (bank loans, state loan programs)
Score 1
There are no statistical data available but both the authors and the surveyed experts, bank
professionals say that there is no significant difference in the numbers of loans granted to
female and male entrepreneurs. As there are twice as many enterprises owned by men than
women, approximately twice as many companies of men participate in the loan programs of
the commercial banks and those supported by the state than the number of women’s
companies.
Considering what was said in the previous chapter (3.7.1) however this can be slightly
modulated by reducing the proportion of the women’s enterprises that are provided with
loans. Since the number of micro-enterprises is the highest but they apply for or receive
loans in the lowest proportion, even though the proportion of women’s enterprises is the
highest (35%) in this category, the majority does not count in the usage of loans. The
proportion of women’s enterprises is lower in the categories of small and medium-sized
enterprises (27% and 26% respectively) therefore their proportion within all the enterprises
using loans is probably below 30% - this is not affected by the greater proportion of women’s
businesses in the category of large companies (40%) because they are the smallest in
number.
250 + fı
alkalmazott
61

3.7.3 Equality in access to micro-finance Score 4.7
In all the micro-finance programs (national and local micro-credit programs as well as the
Micro-credit Plus program) run by the enterprise promotion foundations in the capital city and
the counties (i.e. LEAs) as micro-finance institutions, which make up the Hungarian Microfinance
Network female and male entrepreneurs may apply for loans with equal chances.
On the basis of data from the national micro-credit program less than 30% of enterprises
receiving micro-credit are owned by women, though 35% of micro-enterprise owners are
women as shown in surveys in the previous chapters:
Chart No. 12:
Number of Clients Total No. Proportion
Men Women Men Women
2007 144 59 203 0,7093 0,2907
2006 733 294 1027 0,7137 0,2863
2005 733 298 1031 0.71096 0.28904
2004 352 187 539 0.653061 0.346939
2003 689 272 961 0.716961 0.283039
2002 1684 670 2354 0.715378 0.284622
2001 1937 795 2732 0.709004 0.290996
Total: 5395 2222 7617 0.708284* 0.291716*
* mean value
To improve this - and at the urge of EMN - in 2007 some members of the Network
experimentally started their new micro-credit product specifically launched for women. The
experimental program was prepared by the experts of the LEA in Fejer County; the product
description and the operational rules were approved by the consortium of the LEAs in the
framework of the regulation of the local micro-credit programs. The Consortium made the
program available for all the LEAs but it could be announced only by the LEAs with quite
significant Local Micro-credit Funds.
In the creation of this loan product the Consortium again began from the fact that microlending
is an effective tool to enhance the development and investments of individual
segments of enterprises. As seen in the previous chapters, a lower proportion of women start
businesses, and they undertake developments more carefully. The experimental program
aimed to examine whether it was possible to ease up this careful behaviour of women and to
urge them to undertake developments - and also to take more risks- with the use of positive
discrimination.
62

The experimental micro-credit program for women was offered at an interest rate 1
percentage point lower (instead of the central bank’s base interest rate of 7.75% it was
offered at 6.75%).
In the experience of the experimental program the counties that offered the program
managed to quicken female entrepreneurs by applying a lower interest rate. The number of
applicants had soared until the available funds were used up. This leads to the conclusion
that positive discrimination (a lower interest rate) is a suitable tool to goad other spheres of
entrepreneurs to be developed. A cautionary counter-example is the disinterest experienced
in the micro-credit program of the LEA in Fejer County to be run jointly with a commercial
bank probably due to the higher interest rate.
63

4. Conclusions and recommendations
4.1. Conclusions
Entrepreneurship culture practically needs to be recreated in Hungary; its quality needs to be
significantly improved and this requires a lot more effort. The main reason for this is that
during the Soviet occupation, traditional small private enterprises were not allowed to operate
for duration of about 40 years. The majority of businesses were established during and after
the transition years, however entrepreneurs lacked an entrepreneurial past and experience.
Entrepreneurs could not get the necessary knowledge from their parents, or in the school
system. Sadly, basic financial-entrepreneurial topics are still not included in the elementary
school curriculum, and even high schools and colleges/universities teach these mostly only
at business, finance and technology faculties.
The fact that the population of the country did not have notable entrepreneurial traditions,
experience or knowledge nor the necessary accumulated capital, significantly hindered the
development and efficient operation (or simply the survival) of the enterprises.
Even today the notable under-capitalization and lack of resources of micro- and small
enterprises remains a problem.
The existing entrepreneurial group in Hungary does not have a multi-generation
entrepreneurial past, which could have enabled capital accumulation.
The official SME development strategy approved by the government has been implemented
for some time now and it gets renewed from time to time (the latest such renewal was in
February 2007). However, it is usually accompanied by vivid professional debate because it
is not based on a wide professional consensus.
In their rhetoric, all governments so far have emphasized the support of the SME sector and
the improvement of financial terms; however it has not entirely been realized in practice or at
the required professional standards.
Sometimes there are some very innovative initiatives independent from government.
Frequently one gets the feeling that they fail to sufficiently appreciate the indirect ways of
supporting enterprises and the significance of the mediating and service providing institution.
The professional state apparatus responsible for enterprise promotion has not always taken
sufficient care of the SME promotion programs; it does not sufficiently appreciate the indirect
ways of enterprise promotion or the importance of the relaying service providing institutions.
Recently the government recognized that the administrative and financial burdens of starting,
running and ceasing a business have been high; thus a radical restructuring program has
been launched. This must be implemented consistently.
Although the institution of enterprise development was established a long time ago, it does
not seem to operate efficiently. The aim is now to improve the efficiency of the existing
institutions and to enhance the specialization and professionalism of the organizations.
The main task is to eliminate the shortcomings of the professional preparation, control and
finance of the programs as well as the parallelisms.
In order to promote micro-enterprises, a service providing network has been created on the
initiative and from the funds of the EU PHARE program, but the expertise and capacity of this
network were not sufficiently utilized by the governments. The results confirmed and signified
the necessity of the “bridging” relaying function of the LEAs though.
64

The LEA network has developed its integrated enterprise promotion program, in which there
are several micro-finance programs building on each other, in addition to training and
counselling programs.
Although the performance of the SME sector and the proportion of micro-enterprises that
employ several people have increased in the past years, it can be said in general that the
performance (i.e. sales), capital force and assets of Hungarian micro-enterprises significantly
lag behind the average of the EU 15 countries.
In order to reduce the finance deficit, which has reached a record high level in recent years in
Hungary, the government accepted a convergence program - with approval from Brussels –
which increased the not-so-insignificant burdens of both the population and the
entrepreneurial sector slightly further. Meanwhile the planned and initiated reform measures
generated social tensions – hopefully also temporarily. In these circumstances it became
particularly important and has always been in the basic interest of Hungary to give effective
help to the SME sector, which lacks capital, resources and adequate entrepreneurial culture,
for the sake of its reinforcement and development.
In the government’s economic development policy greater emphasis must be put on SME
promotion programs including the indirect ways of enterprise support as well as the
development of the relaying, service providing institution and the harmonization of its
operation.
Perhaps an unprecedented historical opportunity for this could be the significant funds
provided by the European Union in its budgetary period of 2007-2013, the efficient use of
which is in the basic interest of Hungary. Using this, not only is it necessary to improve the
possibilities of small enterprises to access outer resources but for the sake of long-term
sustainability the institution of enterprise promotion must also be reinforced. With the
elimination of the existing parallelisms, and with more efficient management and finance, it
ought to be made more co-operative, specialized and professional.
All in all, there is quite a wide range of enterprises and private individuals with the chance of
self-employment in Hungary, whose development would be necessary and possible in social
and/or economic aspects but whose needs for development resources are not yet being
satisfied by money market actors. This range of enterprises will be the potential target group
of state-supported microfinance programs for a long time.
The so-called JEREMIE program funds allocated from the resources of the Structural Funds
can signify a great opportunity to reduce the micro and small enterprises’ lack of resources.
The members of the Hungarian Microfinance Network, the local enterprise agencies in the
counties and the capital city ® (LEAs) - for the first time in Hungary and among the first in
Europe - started their micro-finance activities with professional and financial support from the
PHARE SME program in 1992.
The loans totalling more than HUF 45 billion (i.e. ca. EUR 180 million) provided in over 26
thousand contracts can be considered a remarkable achievement.
Social acceptance of female-owned enterprises is average: it is not the reason why there are
not more women’s enterprises; it is due to their family roles (pregnancy, child-care,
household chores) women have different opportunities. There is a good day-nursery service
in Hungary; however, about 30% of women cannot start their own business because they do
not have access to this service.
According to some research, finance is not a major problem for entrepreneurs, but this is
misleading. However the competition among banks is getting stronger, 80% of enterprises
operate without loans. It is especially problematic that only a fraction of enterprises receive
65

development funds from banks for a longer period than one year. Start-up micro-enterprises
very rarely do receive funds, though 25% of new enterprises have insufficient starting capital
and 50% of them have no more than HUF 300,000 (i.e. EUR 1,200) as starting capital.
There is a smaller proportion (about 30%) of women among microcredit clients than their
share in micro-enterprises (which is ca. 35%). Considering women’s lower incomes, their
slightly more disadvantageous capital situation and their greater risk of poverty, this
proportion can and must be significantly increased. Particularly if we take into account that
women’s enterprises are more cautious and more profitable than men‘s.
Although the Constitution as well as several laws and government decrees particularly
provide for equal opportunities for women, the proportion of female politicians, public figures
and entrepreneurs is low. This needs to be improved in spite of the fact that there exist a
great number of regulations, programs and organizational bodies to provide equal
opportunities for women. Presently it is on the agenda to increase the traditionally low
proportion of female members of parliament by changing some provisions of election rules.
The greatest problems in Hungary are not gender opportunity issues: there are more
important concerns (e.g. budgetary and economic growth issues). Still, the “gender neutral
approach” is not sufficient either because it preserves the originally more disadvantageous
situation of women. Positive discrimination is required in several areas.
Notable gender inequalities have been found in the following issues:
• Life expectancy for women at birth is 76.9 years, while it is 68.6 years for men.
• 76.9 % of women with a degree are employed while this proportion for men is 85.1%.
The respective figures for those with secondary educational background are 62.7%
and 75.1%.
• While men‘s activity rate (within the age group of 15-74 years) is around 60%, that of
women is only around 45%.
• There are twice as many enterprises founded by men as those by women.
• There are 8% more women than men running a forced enterprise.
• The proportion of women who have turned from unemployed to self-employed is also
around one third.
• Women generally start a business with smaller funds than men.
• Women find it harder to settle into business networks traditionally controlled by men.
• Women tend to start businesses in the sector of personal services and retail trade,
where there is a strong competition and low profitability; still, they operate more
efficiently than men’s businesses.
• Women’s enterprises grow more cautiously, they increase the number of employees
at a slower pace, at the same time they are less willing to sack any of them.
Further differences between men and women:
• Hungarian women traditionally spend significantly more time child-raising and doing
housework than men
• a third of women with children do not return to the labour market
• women earn 15% less on average therefore they have smaller savings
• only 4% of women work part-time
• women stand a greater chance for unemployment
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4.2. Recommendations
Women’s enterprises in the centre of support programs
In order to improve employment chances and the income situation of women and to promote
women’s enterprises, positive discrimination of women is required in government support
programs. It is particularly important now when support funds, available for human resource
development and enterprise promotion in the EU budgetary period of 2007-2013 have been
greatly increased.
Government
Within developing enterprise promotion programs, greater emphasis must be laid on the
professional planning, consistent implementation and finance of the programs as well as on
the cause analysis of the processes. When financing the programs, special care must be
taken to make the participating institutes specialize in the tasks and co-operate rather than
compete with each other. Women’s enterprises must be promoted by way of positive
discrimination because of their more disadvantageous situation primarily originating from
their traditional family roles.
Education
Training in entrepreneurial skills ought to be introduced on every level of secondary and
higher education. In fact, children’s creativity, experimental and entrepreneurial inclinations
ought to be developed as early as in primary school years.
It is also necessary to support programs that enhance women’s participation in the media,
which would result in the foundation of women’s enterprises and their social acceptance in a
positive way.
Particular promoting measures
Programs intended to reduce the administrative and financial burdens of starting, running
and ceasing a business must be implemented consistently, quickly and professionally.
Recent changes have been for the most part good; however significant simplification is
necessary in the field of tax, contribution and duty return processes. The recently launched
electronic business registration and tax return systems are a good start in following the
simplification process.
The existing program to promote the unemployed who intend to be self-employed must be
further developed and the finance limit must be eliminated. With the consideration of
international experience, it would be reasonable to provide the unemployment benefit for a
further two year period to someone who decides to start a business after six months of
unemployment, and eligibility ought to be extended to women returning from child-care leave.
Finance by banks
In order for banks to provide significantly more micro-entrepreneurs - including women - with
development loans with relatively low interest rates and for periods of more than a year, it is
necessary to enhance the services of organizations that provide guarantees as a substitute
for collateral and to improve the terms of guarantee. The JEREMIE funds allocated in the
Structural Funds can and should be used for this purpose. Further research into women and
the banking sector needs to be conducted.
Business development service providers
It is necessary to help business development service providers find the enterprises that need
their services, as well as to grade the service providers. Bridging organizations relaying
counselling services, local enterprise agencies in the capital city and the counties, which
were established by the EU PHARE program, can play an efficient role in this. Government
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support programs aimed at business development counselling services ought to be better
harmonized, and be integrated because this can significantly improve efficiency.
The current programs apply a „gender neutral approach“. This is unsuitable to improve
disadvantageous situation of women: another approach ought to be applied instead, one
which considers the different gender requirements.
Financers other than banks
Hungary is in a lucky position because it has already been more than a decade since the
microfinance network i.e. the network of local enterprise agencies, which was supported by
the EU PHARE program and encompassed the entire country homogeneously, was created.
This network is capable of running the JEREMIE microcredit program professionally since it
has microfinance and counselling experience of 15 years, and it can provide it to micro
enterprises efficiently and in an integrated way.
The LEAs as microfinance institutes ought to create a strategy which considers the needs of
female entrepreneurs. A good base for this could be the experimental program aimed at the
microfinance of women’s enterprises, which was launched by the LEAs in 2007.
Researchers
The current research programs are useful for the basics. Co-operation between universities,
research institutes and organizations of practical support as well as government bodies
ought to be enhanced.
Networks
When developing government support programs, one should seek to utilize the advantages
of networks more efficiently, including the reinforcement of female entrepreneurs, existing
networks and the enterprise promotion network (i.e. the LEAs), to urge the creation of new
networks where there are none. The national management of networks must be
underpinned, and used to provide national programs which put special emphasis on micro
and small enterprises and support female entrepreneurs more effectively.
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6. Experts and associates who helped the creation of the national report:
• Dr. Pénzes, Mariann, Chairwoman; Nyíregyháza Város Kábítószer Egyeztetı Fóruma
• Dr. Szirmai, Péter, Associate professor, Director; Budapesti Corvinus University
• Dr. Szerb, László, Associate professor; University of Pécs, Faculty of Business and
Economics, Institue of Business, Department of Management and Accounting
• Dr. Szabó, Antal, retired Regional Adviser, United Nations Economic Commission for
Europe (UNECE)
• Dr. Gál, György, Head of the Office, Nyíregyháza City Council Document Office
• Dr. Nagy, Miklós, general manager; Budapest Enterprise Agency
• Dr. Bujáki, Gábor, general manager; Pest County Enterprise Agency
• Gönczi, András, Vice director responsible for coordination; Northern Plains Regional
Labour Centre
• Sigora, Irma, general manager; Foundation for the Development of Rural Small and
Medium-sized Companies
• Iványi, Csaba, senior consultant; Windhoffer & Treiber Bt.
• Gurabi, Attila, business consultant; YIELD Kft.
• Tajti, Norbert, general manager; Nógrád County Enterprise Agency
• Csák, László, general manager; Jász-Nagykun-Szolnok County Enterprise Agency
• Juhász, László, assigned general manager; Heves County Enterprise Agency
• Böszörményi, László, general manager; Zala County Enterprise Agency
• Szekfü, Tibor, director of financing; Székesfehérvár Regional Enterprise Agency
• Jászai, Menyhért, microcredit director; PRIMOM Regional Enterprise Agency
• Remport, Gábor, associate; Hungarian Microfinance Network
71