EU financial instruments for social entreprises
Report from a capacity-building seminar on this issue, organised by the Social Platform. The financial instruments in question are aimed to increase the accessibility of finance for vulnerable groups, micro- and social enterprises. This includes NGOs.
These instruments can be interesting for ENAR members, since NGOs are invited to apply. There are two main criteria for being eligible: 1) Having a social aim as a primary objective and 2) performing an income generating activity.
Here is a summary of the capacity building seminar in 5 points:
Financial instruments are available under the European Structural and Investment funds (ESIF) and microfinance under the Programme for Employment and Social Innovation (EaSI)
What is the aim?
– ESIF: To support development in a comprehensive way by investing for instance in businesses, research and development, infrastructure, employment and training, with the overall objective to improve the quality of life of EU citizens.
– EaSI microfinance: To increase the accessibility of finance for vulnerable groups, micro- and social enterprises.
What are financial instruments?
– Loans (issued by the EU, importance of long-term loans, rates lower than on market)
– Guarantee (assurance to a bank or microfinance provider that their capital will be wholly or partially repaid if a borrower defaults on their loan)
– Equity (bank becomes co-investor, profits will be shared, needs special investors (patient, interested in p purpose))
Is this relevant for ENAR members?
– Yes, if they qualify as a social enterprise. What is a social enterprise?
– The legal format of enterprise does not matter. It needs to have social aim as primary objective and an economic activity
– NGOs are eligible when they have an income generating activity (which does not need to be registered as one)
What makes this approach different to other loans, guarantees, etc.?
– Social approach: Social purpose defined at the beginning through social impact assessment, responsibility of involved parties to report on achievements of social objectives
– Bank or microfinance providers need to provide assistance for running the enterprise, managing first steps, handling administrative burden – knowledge transfer from private sector to social enterprises
– Bank or microfinance providers are encouraged to provide small loans, which can be expanded in future cooperation – aim to increase business credibility of social enterprises
– Overall aim to broaden market of social enterprises, to foster the eco-system by getting banks and microfinance providers on board
Remark: Jader Cane from DG employment:
– EFSI is to react to need for investment in times of lack of public funding due to fiscal consolidation and high interest rates due to high risk
– financial instruments might not kill grants, use them to complement efforts to reach policy objectives
– financial instruments are limited in scope, are used to explore where the technology can work, try and error
fi-compass is a unique platform for advisory services on financial instruments under the European Structural and Investment funds (ESIF) and microfinance under the Programme for Employment and Social Innovation (EaSI). https://www.fi-compass.eu/
– Presentation: Practical examples of the use of financial instruments
– Presentation: Financial instruments in support of microfinance social enterprises