Designed for the Few, Marketed to the Many: Another Case of Policy Spin?
Why Hungary’s New Capital Program Leaves Most SMEs Behind
Hungary’s Sándor Demján Capital Program is being hailed as the country’s "largest-ever SME program"—but a closer look at the criteria reveals it’s far from inclusive. With revenue and headcount thresholds that exclude 85–90% of SMEs, this initiative primarily serves a narrow, elite segment, all while being marketed as a systemic reform. It’s a flagship program designed for the few, marketed to the many.
Chronic capital poverty has defined Hungary’s small- and medium-sized businesses (SMEs) for three decades—undercapitalized, overleveraged, and locked into a vicious cycle where growth is nearly unattainable.
Given this, a large-scale equity program isn’t just welcome—it’s long overdue.
The real question is whether the recently announced Sándor Demján Capital Program actually addresses this critical need or merely gives the illusion of reform.
The Sándor Demján Capital Program
According to the Hungarian Government, the Sándor Demján Capital Program is a flagship initiative within the broader Sándor Demján Program, aimed at accelerating growth and strengthening Hungarian SMEs. The Hungarian Chamber of Commerce and Industry (Magyar Kereskedelmi és Iparkamara) claims about the program:
It’s also touted as the largest SME capital program ever launched in Hungary.
With an initial allocation of HUF 100 billion, the program offers equity-like capital ranging from HUF 100 million to HUF 200 million to eligible SMEs. The cost of capital is set at an annual 5%, significantly below market rates.
Crucially, businesses can access the funds with a 0% equity contribution and no collateral, which improves creditworthiness and unlocks additional financing opportunities.
The program is jointly implemented by:
The Hungarian Chamber of Commerce and Industry (MKIK)
National Capital Holding (NTH)
The Hungarian Development Bank (MFB)
Program Target Group
The officially communicated target group includes Hungarian micro, small, and medium-sized enterprises that meet the following criteria:
At least two closed financial years
An average annual revenue of at least HUF 300 million (approx. €750k)
A minimum of two employees
At least 50% Hungarian ownership
The funding can be used flexibly for purposes including expansion, acquisitions, digitalization, renewable energy, marketing, hiring, inventory financing, consulting, follow-on investments, and even owner-management buyouts.
A Reality Check: Beyond Political Spin
Sounds like a great initiative, right?
As of July 2025, over 55 companies have already received approval, totaling HUF 10.8 billion. The program is said to aim to support 500–600 enterprises in total. Certainly, this is great news for those 55 companies that secured support.
But what happens when political marketing meets the hard data?
According to the Hungarian Central Statistical Office (KSH), there are approximately 902,000 businesses operating in Hungary. Of these, 99% are classified as SMEs.
Interestingly, 73% of all businesses are sole proprietors or have fewer than two employees, meaning they fall outside the headcount criteria for micro-enterprises.
Roughly 22% of Hungarian businesses employ between 2 and 9 people, placing them within the official definition of micro-enterprises by headcount.
Based on an average revenue of €54,000 per employee for micro-enterprises (2–9 employees), a 9-person firm is estimated to generate approximately €486,000 in annual revenue. (Rounded to €490,000 for simplicity; assumes a constant per-head revenue across firm sizes.)
Based on these numbers, it’s clear the program is designed for a very narrow segment of SMEs:
4% of SMEs qualify as small enterprises (with average revenue of €101,000 per head)
0.6% of SMEs qualify as medium-sized enterprises (with average revenue of €163,000 per head)
While the political messaging frames the program as a broad solution for all SMEs, its eligibility criteria effectively exclude ~95% of businesses.
A very small, top-performing subset of micro-enterprises—those with higher-than-average revenue—would meet the minimum requirements. In fact, over 99% of micro-enterprises are excluded from the program by default.
In the best case, this program in reality targets the top 5% of the SME universe.
Summing Up the Numbers
Although the program is marketed as a broad initiative for SMEs, a closer look at the data reveals that it effectively excludes 95% of Hungarian SMEs.
As of the latest figures (end of July 2025), only 55 companies have been approved.
According to recent government statements, the target is to reach 500–600 companies by year-end.
When these numbers are extrapolated across the SME landscape, the true participation rate is just 0.06–0.07%.
Even when focusing only on the relevant small and medium-sized enterprises (excluding micro-enterprises), the rate barely reaches 1.2–1.4%.
This is yet another example of a program designed for the few but sold to the many—a familiar marketing (or propaganda) tool often employed by the current government.
It does not represent systemic reform, nor does it signal a genuine commitment to supporting SMEs at large. Rather, it reinforces the position of a small, already well-placed elite within the SME sector.
While the financial support may be meaningful for the selected few, the program fails to engage with the broader structural challenges faced by Hungarian SMEs—particularly the micro-enterprises that make up the overwhelming majority.
Key Takeaways: A Narrative Summary
Despite being promoted as a broad solution for Hungary’s small and medium-sized enterprises (SMEs), the program in question leaves the country’s core business segment untouched.
The real structural problems remain unaddressed.
Hungary is home to over 850,000 micro-enterprises, employing nearly 1.3 million people and indirectly supporting an estimated 2.5 to 3 million citizens. These are not fringe operators—they are the foundation of the Hungarian economy. Yet, they are persistently excluded from policy considerations, treated as marginal players in economic planning. This isn’t just poor economics. It’s bad governance.
Hungary’s economic performance has lagged behind its Central and Eastern European (CEE) peers for decades. This is not a coincidence. The country’s long-term stagnation can be traced back to the systematic neglect of micro-enterprises—the very entities that drive grassroots entrepreneurship, regional employment, and innovation.
Look across the region, and a pattern emerges: countries that invest more strategically in their SMEs are consistently outperforming Hungary on key economic indicators. These governments have recognized that SMEs are more than a policy talking point—they are a growth engine. In contrast, Hungary’s approach has placed artificial ceilings on business development, through policies that inhibit scale, reduce flexibility, and suppress competitiveness.
A perfect example of this is the recent 2025 EU VAT reform for small enterprises. The updated EU SME Special Scheme introduces two thresholds for VAT excemption:
A domestic threshold (up to €85,000) within the country of establishment
A cross-border threshold (€100,000), allowing small businesses to sell in other EU countries without registering separately in each jurisdiction—provided they stay under the limit and submit quarterly reports using a designated EX number
This reform opens the door for EU-resident small businesses to expand across the single market under simplified VAT conditions. However, each member state sets its own domestic threshold, and this is where Hungary’s policy choices again fall short.
While many CEE countries have adopted higher thresholds and more inclusive flat-tax regimes, Hungary maintains a threshold of just €45,000. The result? Around 80% of Hungarian micro-enterprises are excluded from leveraging the new VAT regime. This isn’t a minor technical detail—it’s a structural chokehold on the ambitions of small entrepreneurs.
Hungarian business owners are effectively punished for growing, blocked from simplified regulatory schemes that their counterparts in neighboring countries can freely access. The ecosystem is fragmented and constrained—not just by market forces, but by design.
This is not simply policy inertia. It reflects a deeper systemic problem.
When a government continuously ignores the majority to protect the privileges of a well-positioned minority, it’s not reform—it’s regression dressed up as policy.
Yes, the current program may bring tangible benefits to a select few. But for the overwhelming majority of SMEs—especially the micro-enterprises who form the backbone of the economy—it offers little more than a reminder of their ongoing exclusion.
Disagree? Good. I don’t write to be right—I write to be tested. Bring your Tenth Man view, your sharpest counterpoint, or even a quiet doubt—so long as it builds on data. The most useful critique is often the one that unsettles my own thinking.
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