Transcript Social enterprises - Ekonomiaspoleczna.pl

The Network for the better future for social economy
Seminar on 15-16 March
STRAND: Financial instruments and mechanisms of fund’s
allocation
to Social Economy
Findings from research amongst NBFSE partners
Hotel Mercure Warszawa Fryderyk Chopin,
al. Jana Pawła II 22, 00-133 Warsaw
Key topics of SE finance
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Definition of SE
Legal system
Tax incetives and subsidies for SE
Grants
Banking instruments
Stategic aproaches
EC Activities
Context
What is the definition of social enterprises partner´s countries /
regions?
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Czech Rep.: Social enterprises run business activities with focus on the
interest of the society in the first place, where the profit is the mean not the
aim. There is no legal definition, but it has to fulfill some requirements when
asking for start-up grant from ESF and ERDF global grants (e.g. at least
30% of disadvantaged employees, over 50% of profit to be reinvested,
principles of local development, empowerment of employees)
Poland: SE run business but focus on social objectives (spend profits for
social purposes), i.e. social cooperatives, vocational rehabilitation facilities,
mutual insurance companies, public benefit organizations, non-profit
organizations, companies belonging to non-governmental organizations,
labour cooperatives, mutual guarantee and loan funds (including MFIs) and
NGOs engaged in economic activities. Their goal is to maximize social
benefits, such as by providing good quality public services, promote local
development and the restoration of dignity and economic independence of
the socially excluded people.
Flanders: Broad spectrum of firms: Work integration firms (neighborhood
services, insertion companies, sheltered workshops, social workshops),
Recognized support structures (start centers, financiers solidiars, advisory
center), Other social goals as primary focus (activity cooperations - official
recognition).
Context
What is the definition of social enterprises partner´s countries /
regions?
 UK: The UK government definition of a SE is a business or service
with primarily social objectives whose surpluses are principally
invested for that purpose in the community, rather than being driven
by the need to maximise profit for shareholders and owners.
 Sweden: Social enterprises conducting business with the goal of
integrating people into society and working life. They empower
employees. They re-invest their profits in their own or similar nature.
They are independent of the public sector. Some of the social
enterprise business is therefore the rehabilitation and labouroriented services you are providing for remuneration from the public
sector. The second part is the production of goods and / or services
sold in the market for private individuals, companies or public sector.
 Finland: No clear definition of social enterprises, on other side a law
concerning social firms; the concept of social enterprise is just rising
and under discussion. Small co-operatives and associations with
economic activity could be also included as well as some social
firms for work integration.
Context
What is the definition of social enterprises partner´s countries /
regions?
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Lombardy: Starting from the definition of “enterprise” contained within the
Italian civil code the following can be considered as “social enterprises”:
Social enterprises as defined by law N. 118/2005 (specifies the criteria
which an enterprise should fulfil to be considered a social enterprise and
hence be able to benefit from specific fiscal and financial support; the two
most important criteria are social utility, total absence of profit-making
features). Cooperative enterprises and social cooperatives as identified
in the Italian civil code and specific laws.
Summary:
- broad (social objectives) or narrow definition (integrating) of SE,
- SE as an independent entity in the legal sense and functionally,
- different approach to:
1) legal regulation - special legal form vs. traditional forms
(business entities plus NGOs forms),
2) profit - total absence of any profit-making features vs. rules of
profit sharing.
Legal barriers for financial instruments and financial
institutions
 Czech Rep: No legal barriers, but rather that SE is not considered
by key decision makers.
 Flanders: State aid and block exemption rules
 UK: Charity Commission guidelines on social investment by
foundations and charities (CC14). This is currently under
consultation. Pension fund fiduciary responsibilities to maximise
shareholder value.
 Sweden: Lack of co-ordination between the various support
systems which makes it difficult for individuals to participate in social
enterprise. Uncertainties and obstacles in public regulations in
relation to social enterprise nature and circumstances, among others
the existing wage and employment security. Difficulties for social
enterprises to participate in public procurements. Large demand for
information, advice and business development of the social
enterprises. Difficulties relating to financing and capital for start-up
and development of social enterprises. Lack of statistics and
research on social entrepreneurship. In addition, they want a special
law that would facilitate aid efforts, and even more clearly, define the
concept of social enterprise.
Legal barriers for financial instruments and financial
institutions
 Finland: Lack of relevant knowledge about social enterprises,
unwillingness to make special arrangements, unclear concept of
social enterprise, fear of distorting the competition.
 Lombardy: There are no legal barriers to the access of financial
tools
Summary for all partners
 EU state aid rules,
 Difficulties for social enterprises to participate in public
procurements,
 Lack of co-ordination between the various support systems,
 Uncertainties and obstacles in public regulations in relation to
SE
 Lack of statistics and research on social entrepreneurship.
 Pension fund fiduciary responsibilities to maximise
shareholder value (UK)
Does the legal system provides appropriate support to
social enterprises?
 Czech Rep.: Generally no for the whole SE sector. Only work
integration or employment of disabled people is specifically
supported as defined in the Employment law
 Flanders : The legal system with regard to support to social
enterprise is under revision with respect to state aid regulation, block
exemption rules. The reform is based on a matrix with as a vertical
ax the different target groups defined by Europe and other relevant
groups in Flanders. On the horizontal ax is possible to find the
different kind of support.
 Sweden: No, but it will be subject of discussion.
 Finland: No
 Lombardy: The support system in Italy and especially in Lombardy
is rather adequate for social enterprises needs.
Summary for all partners
 System often does not exist, is weak or is being reviewed.
How would you score your legal system ?
1=totally hinders SE financing, 2=hinders SE financing to a small extend, 3 neutral to SE
financing, 4=supports SE financing to a small extend, supports SE financing significantly
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Czech Rep. 3
Poland:
3
Flanders: 4 or 5
UK:
2
Sweden:
2
Finland :
2
Lombardy: 4
Summary for all partners
 The responses are very variable,
 In countries with a spreading system of SE is greater
satisfaction with the legal (regulatory) system.
SE finance
 Tax incentives/relieves and subsidies
 Grants
 Banking Instruments
Tax incentives/relieves and subsidies
Czech Rep.: There are no specific tax incentives in the form of e.g. tax reliefs
or tax break, no relief on the social or health insurance of disadvantaged
employees.
The Czech Employment Law defines three types of incentives for employment
of disabled people provided by Labour Offices, which represents important
source of finance for social enterprises - subsidies on:
• i) creation of a new sheltered work place, ii) creation of a new sheltered
workshop (at lest 60% of disabled employees) and iii) time limited subsidy
to compensate higher costs on disabled employees (for employer with at
least 50% of disabled employees)
• There is also another measure to enhance employment of disabled persons
– companies with more than 25 employees can choose to buy products of
sheltered workshops instead of their obligation to employ certain
percentage (at least 4%) of disabled employees.
• This system is currently being analyzed, discussed and reviewed with the
aim of increasing its effectiveness and reducing its misuse.
Tax incentives/relieves and subsidies
 Poland: Particularly are offered subsidies on employees of social
enterprises, subsidies on newly created jobs, social insurance
exemptions and other subsidies related to social enterprises.
 Flanders: Specific subsidies for wages and coaching for SE as
defined in following regulations:
Decision of the Flemish Government on the recognition and financing of insertion
companies (15.7.2005),
Decision on the criteria for recognition of sheltered workshops (17.12.1999), Decision
on an impulse and support program for the surplus value economy (8.9.2000),
Decree on neighbourhood services - lokale diensteneconomie (21.12. 2006),
Decree on social workshops (14.6 1998).
Tax relieves/incentives for SE investors.
 UK: No specific subsidies or legal support mechanisms specifically
for social enterprises. The only specific tax incentive is Community
Interest Tax relief which is due to finish in 2012.
Tax incentives/relieves and subsidies
 Sweden: There are no legal differences between social
enterprises and other enterprises. The difference is in
the financial contributions.
 Finland: subsidies for employing a disadvantaged
person or long term unemployed (palkkatuki), can be
used by “normal companies” or social enterprises.
Subsidy is mainly for wages and social insurance
payments. There is a very little used subsidy for worker's
co-ops which are established by unemployed people (3/4
of members). This is a subsidy for start up, but it was
only used by 2 co-ops last year, so it is not well
functioning.
Tax incentives/relieves and subsidies
 Italy (Lombardy): The support system of SE is complex and it
can vary considerably depending on the Region.
Tax subsidies/incentives
Tax subsidies on employees of social enterprises for social cooperatives in
accordance National law n. 381/91.
Social cooperatives employing disadvantaged people do not pay National Insurance
contributions of those employees;
Social enterprises are exempted from paying the tax on company’s income (IRES
tax in Italy).
Regional law n. 1/2008 provides for a tax break for NGOs (among which we find
social cooperative as well) which reduces workforce costs by 4,25%.
SE do not pay taxes on profits if they are classified as indivisible reserve (i.e.
reserves which cannot be distributed to the associates).
Other legal support instruments - Law 460/97 establishes that social enterprises have
to be “ONLUS” i.e. non-profit making and socially useful. For this reason, they are
entitled to other special terms such as the exemption from the stamp tax (i.e. a tax
normally paid to produce official documents and certificates) and other specific taxes
such the tax on government concessions.
Tax incentives/relieves and subsidies
Italy (Lombardy)
Subsidies on newly created jobs for work integration of
disadvantaged people (particularly disabled) benefit from regional
funding known as “Disabled Work Dowry”.
5x1.000 - a contribution to ONLUS social enterprises (i.e. non-profit
and socially useful enterprises). All taxpayers in Italy have the
possibility of earmarking a small percentage of the taxes they owe to
the State (i.e. 5x1.000) to support no-profit organisations (social
enterprises as well as universities, research centres etc.).
Tax incentives/relieves and subsidies
Summary
 System of subsidies generally regulated by law, but rare
regulation of special instruments for SE,
 Difference between classical SME and SE in the financial
contributions – rules of distribution resources,
 Particularly are offered: subsidies on employees of social
enterprises, subsidies on newly created jobs for
disadvantaged, tax relieves or tax incentives (Italy, UK,
Flanders),
 Italy (Lombardy): The most complex system of tax relieves,
incetives and subsidies
Grants for a new Social enterprises or their development
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Czech Republic: HRE OP (ESF): Global grant “Social Economy”; cca
10 mil. Eur. Support of social integration through employment or selfemployment of socially excluded people and support of local development,
support of start-ups - new social enterprises or new disadvantaged
individual entrepreneurs. IOP (ERDF): Global grant “Investment Support
to Social Economy”. Support of social services providers, employers and
other entities in the social economy. The aim is the support of sustainable
employment of disadvantaged groups in the real business environment and
support of social services. Allocation 14 mil Eur.
Applicants could submit application in both global grants.
Currently 16 projects implemented in HRE OP and 19 in IOP.
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Poland: A sub-measure 7.2.2 of Human Capital OP (ESF) focused
exclusively on support of social economy. It is dedicated mainly to
institutions from social economy sector's surrounding that within approved
project perform one or more of the following activities: legal, accounting or
marketing services, counseling, training, supporting local partnerships for
social economy.
Recently added support of establishing social cooperatives. The aim of
the measure is to strengthen and broaden the scope of social economy
sector.
Grants for a new Social enterprises or their development
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Sweden: Through ESF in Sweden, it's possible to finance the preparation works and
a start up of social enterprises (pre-planning and implementation phase).
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Lombardy: Disabled Work Dowry offers dowry provides a small grants for new
social enterprises start-ups working in the field of work integration.
Banking Foundations represent a important source of funding to create new jobs for
disadvantaged people. They allocate grants for around 60% of the overall project
costs.
JEREMIE ESF Fund – the aim is to promote and faciliate (through the granting of
financial intervention) access to credit by cooperative associates. One half of the loan
becomes a grant in case the associate stays within the social enterprise for more
than five years (for more details see banking instruments in Lombardia).
Grants for a new Social enterprises or their development
 UK:
Community builders: invests in the sustainability of multi-purpose,
inclusive, community-led organisations (sometimes known as Community
Anchors) through business support and investment (loans and grants?).
Future builders: a programme set up to assist unbankable front-line third
sector organisations through a mixture of grants and loans to build their
capacity to increase the scale and scope of their public service delivery.
Was already finished – can serve as good practice.
 Finland: No special support for social enterprises. Rule, that ESF money
cannot be given to enterprises as grants or aids. Only for different kind of
projects.
 Flanders: ESF grants
Grants for a new Social enterprises or their development
Summary
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3 countries/regions (Czech rep., Poland and Lombardy) have defined instruments
to financially support social economy within ESF/ERDF with pre-set allocation of
resources dedicated to this target area:
- Measure 7.2.2 of Human Capital OP (ESF-Poland)
- Global grants in Human Resources and Employment OP(ESF) and Integrated OP
(ERDF) - Czech republic.
- JEREMIE ESF Fund (Lombardy)
Common elements:
 Form of financing - grants (CZ, Poland) to projects applicants (natural and legal
persons), loans of which half may became a grant (Lombardy)
 Target groups – similar in all 3 cases (disadvantaged people and people endangered
by social exclusion)
• Supported activities
- setting up new social cooperatives, new members of cooperatives (Poland, Lomb.)
- setting up new social enterprises with sheltered jobs; self-employment of
disadvantaged people (CZ),
- complementary activities
EU Funding of social economy – integrating different types of instruments (ESF and
ERDF) allows more complex support to beneficiaries.
Grants for a new Social enterprises or their development
Summary
Other partner countries/regions uses ESF grants only to support SE
environment (advisory, trainings, networking, research) as they are not
allowed to provide grants to enterprises (mainly due to the state aid
rules)
Grants are often (co)funded by other then EU sources and combined
with loans.
Banking Instruments
 Flanders :
SIFO (Social investment fund) offers money at a discounted rate to
organizations that comply to certain criteria. These organizations can
combine this money with their own money to offer loans at a discounted rate
to organizations in the social economy. Organizations from social economy
often cannot obtain a loan from traditional banks because of higher risk
involved, low amount of money asked (high handling costs), lower return on
projects in social economy making regular banks not interested, lack of
guarantees. SIFO aims to support organizations in all phases of
entrepreneurship.
Trividend is a successful example of a public-private partnership offering
venture capital. Private investors are offered a tax break when investing in
microfinance institutions that invest in developing countries. It could be
extended to investing in the SE thereby opening up a new source of credit
for the sector.
The guarantee facility offers greater security to banks and credit providers
in situations where an entrepreneur would like to invest but is unable to
produce sufficient guarantees. In any phase of entrepreneurship.
Win-win loan - To encourage friends or relatives from a SME (both regular
as social economy) to lend money, in any phase of entrepreneurship. They
receive a tax refund for doing this and in case of a default of the borrower
receive back up to 30% of money lend.
Banking Instruments
 Flanders:
Kringloopfonds - Preceding the Flemish SIFO. It was an investment fund
set up by the Belgian government in 2003. Through the issue of a 5-year
government bond it raised 72 million euro which it used for co-investing
(with specialized institutions) in the social economy and in projects aimed at
a sustainable economy. Private investors were offered a tax break, thereby
promoting Socially Responsible Investment.
Specialised institutions Trividend, Netwerk Rentevrij, Hefboom and
Triodos offer a range of financial products for the SE. The way they work
and the origin of their capital differs but they have been successful so far,
meeting a demand from the SE.
The Business Angels Network – at the moment the focus is only on the
regular economy but it could be extended to the SE. ARKimedes doubles
the amount of venture capital that is available to young high-growth
enterprises. Its focus is on the regular economy.
Banking Instruments
UK:
The Charity Bank is a retail bank and lender with an investment subsidiary
offering mainstream, listed corporate bond facilities for charities and social
enterprises. The Charity Bank is an FSA regulated bank and also a
registered charity. It is a bank for the sector and of the sector (its
shareholders are all not-for-profit organisations). It provides financing
(loans), investment readiness support for charities and social enterprises as
well as facilitating corporate bond loan finance infrastructure for charities
and social enterprises to raise long term, unsecured, mission driven finance
from social investors. The basis of all investment decisions is risk, return
and impact.
Big Issue Invest provides medium-term, growth capital for social
enterprises that have a clear social purpose, compelling business model,
strong management and which can demonstrate a sustainable revenue
stream and growth potential. The mission is to finance the growth of
established social enterprises, but will also consider financing some early
stage businesses. Big Issue Invest provides provide short-to-medium term
loans at competitive rates of interest.
Banking Instruments
UK
The Social Investment Business is social investor in the UK who helps
social enterprises, charities and community organisations prosper by
providing innovative financial solutions and business support. Social
Investment Business manage the Social Enterprise Investment Fund (SEIF)
with Local Partnerships, on behalf of the Department of Health. SEIF is a
fund that provides loans, grants and professional support to social
enterprises involved in the delivery of health and social care services.
Social Investment Business also set up The Adventure Capital Fund that
back community enterprises by offering a combination of financial
investments and expert support.
Big Society Bank – will provide money to social economy through
intermediaries, (it is in preparation - detailed information are not available
yet).
Banking Instruments
Sweden
New Micro Fund will provide assistance to companies and projects by
providing collateral for loans and in other ways to work with to obtain
venture capital. The fund will interact with the credit guarantee associations
for social enterprises or other organizations with local presence and broad
experience of local development, social entrepreneurship and social
economy. The funds of MF uses Eko-banken.
KGF Social Economy West Cost and Stockholm offers those, working
within social economy organizations, a bail at the expansion and start-ups.
In that case there is no formal security for the entire engagement. In that
way they are able to, after the usual credit check, borrow money without
risking their personal finances.
Microfinance Institutions for promoting employment, economic and social
integration, aim to extend financial services to groups that do not have
access to funding to start or develop their own business. This is a threeyear project implemented in four counties in Sweden.
Banking Instruments
Lombardy-public:
FRIM Cooperation fund (i.e. Entrepreneurship Rotation Fund) which
provides funding for setting up new social cooperatives or for widening and
developing existing activities.
Mutualistic Funds - national system helping social enterprises (cooperatives) to develop or support their start-up.
JEREMIE ESF Fund - integrates ESF policies on work inclusion with tools
to support SMEs. JEREMIE ESF provides loans to social cooperative (to
associates) which work force is made up of at least of 30% of
disadvantaged people. The amount loaned depends on number their
associates (maximum 4.000 Eur for an associate, up to maximum of
200.000 Eur for an enterprise). One half of the loan becomes a grant in
case the associate stays within the social enterprise for more than five
years. Access to the funding is managed by local banks and takes place
through the so called “counter service procedures” which means that
funding is allocated chronologically to all eligible applicant until all funding is
exhausted.
Banking Instruments
Lombardy-private:
The Italian banking system and its system of financial institution is same for
social enterprises like for other SMEs even though there are small
differences in some of the terms (i.e. interest rates etc.) due to the nature of
the enterprise and its low capitalisation.
Banca Prossima – specialized on non-profit organisations. It developed an
innovation Terzo Valore - a peer-to-peer web site which enables individuals
to lend direct to social enterprises. It is brand new and not frequently used
yet.
Banka Etica (see NBFSE baseline study)
Banking Instruments
Poland
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TISE SA developed lending activity and provides loans for NGOs and SMEs. The
company offers bridging loans for projects co-financed from EU funds and investment
loans for business. TISE SA manages the private capital fund - CoopEst, which is
the fund promoting social economy in the countries of Central and Eastern Europe
All Polish regions in their operational programs decided to allocate a part of EU funds
on granting loan and guarantee funds.
Five voivodships (dolnośląskie, łódzkie, pomorskie, wielkopolskie,
zachodniopomorskie) implements JEREMIE (joint European initiative of EC, EIF and
EIB). For more information visit: www.jeremie.com.pl
Krajowy Fundusz Kapitałowy – National Capital Fund (NFC) - the Company is
wholly owned by Bank Gospodarstwa Krajowego. NCF operates as a fund of funds
that invests in private equity / venture capital funds operating in Poland. The mission
of NCF is to limit the size of equity gap that prevails on the domestic SME market.
NCF will strive to accomplish this aim through investing in PE/VC funds that finance
the growth of Polish SMEs, and especially those funds that focus on innovation and
R&D.NCF supplies financing to the selected funds either through equity investments
or through provision of long-term debt. As a fund of funds, NCF does not commit to
companies directly. NCF uses state funding, EU structural funds and Swiss
Contribution funds.
Banking Instruments
Summary for all partners
 Financial instruments are often designed to SMEs but SE may also
participate vs. special instruments for SE development,
 The participation of private entities based on a combination of
commercial interests and social responsibility,
 Public-sector initiatives to attract private capital investors (retail vs.
entrepreneurs vs. institutional investors),
 Public-private partnership initiatives,
 Objective - the accumulation of capital funds for start-ups (loans,
guarantees, seed capital) and for next development of SE.
Strategic Sector Approaches
Czech Rep.
– no strategic approach
England
– social ent. Strategy and action plan
Finland
– strategy for identifying and developing social
economy sector in Finland is currently being
ministerial level
prepared at
Flanders
– creating a „matrix“ for reform of SE supportive matrix
Lombardy
– complex set of measures
Sweden
– subject of political discussion
EC Inititives in relation to SE finance
Public hearing in EP in March 2011
Preparation of communication that will set out the Social Business
Initiative
The Commission is working on the following issues:
• better visibility of the social economy to investors – by assessing existing
rating schemes and if possible improving them to create a ‘social rating’
which could improve investor confidence
• a ‘stock market’ for social economy finance – this is part of the
Competitiveness and Innovation framework Programme 2014-20;
• a solidarity investment fund – a legal instrument to improve investor
confidence;
• microfinance – the first €20m loan under the EPMF has gone to Credits in
the Netherlands, and the question of whether JEREMIE can help the social
economy more is being looked at;
• an equivalent to the USA’s Community Reinvestment Act (CRA) which
obliges banks to report on whom they lend to.
Filip Kučera
E-mail: [email protected]
Ministry of Labour and Social Affairs
ESF HRE OP Managing Authority