Global grants in the Czech Republic
Personal experience with social economy global grants – lobbying for the grant scheme, expert consultations during preparation and in the course of projects, evaluation of applications, later providing training and consultations to applicants and consultations to beneficiaries.
Authors and organizational affiliations:
Petra Francova, P3 – People, Planet, Profit o.p.s., Czech Republic
1. Context and history of how the good practice has been developed
Social entrepreneurship in the Czech Republic is on the rise with growing interest of public authorities and civil society. Many bottom up and top down activities are happening but there is a lack of political support and the whole social enterprise sector is still weak. ESF support has been crucial for the development of social economy in the Czech Republic.
Statistics of Social Enterprises
There are more than 140 social enterprises registered in the P3 directory and according to the expert estimate there can be 300 social enterprises altogether.
According to the results of P3 recent survey among 92 social enterprises, most of them are in Prague (16%), followed by two northern most disadvantaged regions (Moravia-Silesian and Ustecky both with 12%). The most common area of activity are gardening, cleaning services and real estate maintenance (28%), second are restaurant services (24%) and third is food production and retail (22%). In comparison to the results from a survey a year ago, gardening and restaurant services swapped their place.
Nearly all participants of the survey (99%) are work integration social enterprises that employ people with disadvantages. The prevailing target group (70%) are people with disabilities, followed after a big gap by long-term unemployed (29%) and people from ethnic minorities, being mostly Roma people (15%). It is interesting that the ratio of long-term unemployed employees raised 10% in comparison to the results from a survey a year ago. A type of disability was surveyed – more than half of them are disabled physically (54%), followed by mental illness and mental disability (both 37%).
Social enterprises in the Czech Republic have various legal forms. According to a P3 survey from 2012, most of them were limited liability companies (45%), followed by publicly beneficial companies (24%) and civic associations (16%) – the last two legal forms being civil society organisations. Limited liability companies slightly prevail over NGOs but many of them were in reality founded by NGOs.
It is fair to say that in the social enterprises registered in the P3 directory are those who acknowledge officially social enterprise principles and many of them are affiliated to the NGO sector. There exist also social enterprises in the business sector but they do not officially claim it and do not register anywhere because there are not any advantages for social enterprises (public procurement, CSR, taxes, subsidies...), it is not acknowledged and social enterpreneurship is still suspicious.
There are organisations that offer various types of support (training, consultation etc.) to social entrepreneurs, help raise awareness of this topic or try to garner support for this idea. The most important support organisations in the social economy include the Union of Czech Production Cooperatives, the VIA Foundation (which operates the Academy of Social Entrepreneurship for NGOs), NESsT (which provides consulting and training combined with financial contributions for NGOs but his support is fading out), Fokus Praha (which supports the social firms model adapted from the UK) and P3 (which provides consulting and training to start-ups and widely promotes social entrepreneurship). The above mentioned organisations are based in Prague and apart from training they are involved in influencing strategies and policies.
There are also other small support organisations in regions but it is difficult to find out their capacity and a quality of their consultancy. There is still a lack of support organisations for social enterprises, especially those free of charge. Systemic support structure with regional branches is badly needed because it would help to stabilise the existing social enterprises and help with the development of the new ones.
At the central government level, the Ministry of Labour and Social Affairs (MoLSA) is the most important body. According to the agreement from December 2012, responsibility for social entrepreneurship at the central level stays at MoLSA, resp. its employment department. Another ministry responsible for this area is the Ministry of Industry and Trade that has incorporated social entrepreneurship into the Strategy of SME Development and will promote it together with CSR. Social entrepreneurship is supported at the Cabinet Office by the Agency for Social Inclusion and by the NGO Council. Even when there is an official assignment, in practice there is a lack of cooperation at the central level and even inside MoLSA. The basic problem at the level of government is that the state lacks the definition of a status of a social enterprise that would justify the use of support from the state, as well as it lacks the guarantor, the bearer of this recognition.
Concerning the activities at the ground level, there exists since 2009 the Thematic Network for Social Entrepreneurship TESSEA, its predecessor being the EQUAL thematic network for social economy. TESSEA has more than 250 members, both legal persons (organisations) and natural persons (individuals). It is focused mainly on raising awareness, disseminating information and communication with policymakers. A club for social entrepreneurs has been created in 2012. Both TESSEA and club have not its own legal entity and are coordinated by P3 that coordinates also a network of ambassadors for social entrepreneurship.
A new legal form specific for social enterprises – a social cooperative - came into force 1st January 2014. It is the first time that social enterprise principles became a part of a law. The social cooperative legal form seem to be suitable for NGOs or municipalities and not for cooperatives or social enterprises that are closer to the business sphere because its operation is limited. There are not any advantages linked to this legal form. The existing social cooperatives are not willing to register legally as a social cooperative and they will leave the word “social” from their name. There is still a lack of experience and information regarding the use of this new legal form.
Social entrepreneurship is perceived both by public authorities and general public in a narrow way as work integration social enterprises and it is expected to fulfil a work and social integration function for disadvantaged people. Social enterprises can use as any other employer the tools of active labour market policies. Extra costs related to their integration function are partly covered for people with disabilities from active labour market policies. Those who employ people with social disadvantages can use only standard active labour market policy tools for unemployed people. Active labour market policies can be used under the same conditions by any employer who fulfils its terms and conditions. There is a growing need to have a legal recognition and support for social enterprises, esp. for those who employ people from socially disadvantaged target groups. P3 – People, Planet, Profit prepared recently a draft of legal support for WISE, based on analyses of legislation in other EU countries.
History of global grants
When we look back to the history, the first idea about supporting the social economy by setting up a grant scheme for establishing social enterprises appeared in 2005 in the NGO sector. The working group for social economy was created by the NGO sector from the initiative of the Foundation for the Development of Civil Society NROS. This idea was since the very beginning accompanied by capacity building. All the initiatives and stakeholders met in 2006 in the National Thematic Network for Social Economy (NTN SE) that was established under the EQUAL programme and worked on the partnership principle (the network was transformed later into TESSEA).
The main aim of the first NTN mainstreaming strategy was to influence strategic documents for the preparation of the programming period 2007 – 2013 so that social economy becomes the part of the operational programmes that would finance its start. Its members recommended already in 2006 to establish an ESF grant scheme for the development of social enterprises, accompanied by the support scheme providing consultancy and training during a preparatory phase.
This idea was strongly supported by the Government Council for NGOs and by the NGO sector generally. A partnership with a cooperative movement developed that lasts until now. It was a joint effort of many stakeholders to incorporate social economy into the programming strategic documents and social economy became a part of HRE OP and OP Prague – Adaptability. Then the department of social services at MoLSA decided to establish a parallel SE grant scheme for investment in the Integrated Operational Programme IOP from ERDF. They consulted the shape of the joint grant schemes with NTN SE that had many recommendations and suggestions for changes and some of them were accepted. One of the final NTN SE recommendations was to develop support organisations for start- ups and already existing social enterprises.
Meanwhile a comparative analysis of SE models in EU and how to implement them into the programming period 2007- 2013 was elaborated for the MoLSA MA by a British organisation Greater London Enterprise and among their recommendations was also a support structure.
The ESF Social Economy Global Grant was launched in February 2009, the ERDF Social Economy Global Grant was launched in April 2009.
2. Summary of main characteristics of good practice approach
The Czech Republic provides grant support to social enterprises through two operational programmes - the Human Resources and Employment Operational Programme (ESF) and the Integrated operational programme (ERDF).
2.1 Description of social economy global grants
Global grant “Social economy”, provided from the Human Resources and Employment Operational Programme (ESF), in the priority axis Social inclusion and equal opportunities focused on the support of the creation and development of new business activities dealing with social entrepreneurship. Its aim is to enable socially excluded people and those at risk of social exclusion to enter the labour market and also to integrate them into society.
Global grant “Investment support of social economy”, provided from the Integrated operational programme (ERDF), in the priority axis Increase of quality and accessibility of public services, is focused on initiation of economic activities that will enable to obtain long-term own income from entrepreneurship and to use local material and human resources. The aim is also to create jobs for people from disadvantaged social groups.
The aim of both global grants was specified in the Evaluation of social and inclusive entrepreneurship support in HRE OP so that it is more in accordance with programming documents and Calls for Proposals (CfP):
- Inclusion of disadvantaged people into the labour market – its aim is to support employment of disadvantaged people so that they become less dependent on social benefits and support from the state.
- Establishment and development (growth) of social enterprises – this aim is derived from the need to fulfil the aim 1.
- Finding of a suitable social enterprise model for the Czech Republic – this aim is superstructural; projects should develop a sufficient number of social enterprises that contribute to the establishment of a suitable model and its support.
It was the first time that a combination of two funds was approved in the Czech Republic. The same combination of funds was used also for investments into the process of deinstitucionalisation of social services and Roma inclusion. The Managing Authority of HRDE OP is MoLSA, the Managing Authority of IOP is the Ministry of Regional Development. Each MA delegated its power to an Intermediate Body at the MoLSA department. Both the Intermediate Bodies sit in the MoLSA premises. Each of them is in charge of one of the call for proposals and are managed by its MA manuals. Apart of that, the Ministry of Regional Development assigned its semi-budgetary organisation named the Centre for Regional Development to take part in the process by accepting applications and providing their formal control.
It was intended that both global grants procedures would be coordinated – the same terms of evaluation committees, the same external evaluators etc.
ALLOCATION AND TIMING
Both calls for proposals (CfP) were launched in 2009: HRE OP Global Grant Social Economy No. 30 had allocation nearly 10 million EUR, IOP Social Economy No. 1 had allocation 8,8 million EUR.
The ESF CfP 30 was 12 months prolonged and increased gradually to 16,7 million EUR.
The ERDF CfP 1 was transformed into CfP 8 and decreased to 2,9 million EUR. The end of CfP was 5 months prolonged.
Timing of Calls for Proposals
Start of submitting applications
Supposed end of submitting applications
Real end of submitting applications
ESF CfP 30
ERDF CfP 1(8)
Allocation and disbursement of Call for Proposals
ESF CfP 30
ERDF CfP 1(8)
From the point of view of both operational programmes, 85% are financed structural funds and 15% from the state budget.
From the point of view of final beneficiaries, 100% funds were provided in ESF and 90% funds were provided in ERDF with 10% co-financing (later raised to 20% co-financing).
Both global grants operated in the de minimis regime so a maximal amount for a beneficiary was in both CfP 200.000 EUR (minimal amount was 2000 EUR).
ESF was prefinanced, ERDF was financed in an ex-ante regime (invoices are paid continuously after transacting a purchase).
Duration of projects: max. 24 months.
Regional eligibility: the whole Czech Republic apart from Prague.
New entrepreneurial activities that fulfil at the same time the following principles of social enterprises (principles were taken from TESSEA and slightly adapted):
- Employment of 30% employees from disadvantaged target groups (physical persons are recognised). This characteristics was later made more strict – social enterprise had to employ 40% of disadvantaged people, part-time jobs are recalculated to 40% of full-time jobs, a minimal recognised part-time job is 0,4, only written employment contracts are recognised.
- Relations in a social enterprise aim to a maximal possible participation and strengthening of social cohesion.
- Profit should be used for the development of a social enterprise or publicly beneficial aims and not distributed to shareholders and minimally 51% should be reinvested into the social enterprise. The reinvestment of profit was later more specified.
- Social enterprise satisfies preferentially local needs and utilises preferentially local resources, takes part in local initiatives and partnerships and contributes to the local development. This principle was widened and it took into account the environmental aspects.
- New entrepreneurial activities of self-employers without employees who belong to target groups.
Later on, also broadening of existing entrepreneurial activities while employing disadvantaged people was also eligible.
ESF funded activities:
Implementation of social enterprise principles was a compulsory activity in all projects. Highy recommended activities were creating and sustaining jobs for target groups of disadvanaged people, creating positions for managers and people who provide support to disadvantaged employees, training and marketing.
ERDF funded activities:
development of new operational units, buying machines, equipment and technologies, adaptation of workplace for disabled people, rarely buying cars and premises.
ELIGIBLE BENEFICIARIES (applicants)
Self- employer, limited liability company, joint-stock company, public company, limited partnership, cooperative, public benefit company (a specific NGO legal form) and religious legal entity. Civic associations were not eligible because according to the Czech law they can carry out entrepreneurial activities in a limited way. All applicants apart from self-employers had to claim in their instruments of incorporation that they acknowledge the principles of the social enterprise.
TARGET GROUPS OF DISADVANTAGED PEOPLE
- people with disabilities
- young disadvantaged people
- ethnic and national minorities
- homeless people
- victims of crime, domestic violence or trafficing
- people caring for family members
Elderly people and mothers at maternity or parental leave were not eligible.
Long-term unemployed and social services users were later added among the target groups.
APPLICATION AND EVALUATION PROCESS
Both global grants had continuous CfPs. Applicants could submit application in both global grants. Applications had to be submitted separately in each OP in different templates, accompanied by the same business and financial plan. Each application was evaluated by two external evaluators and in case of their discrepancy the 3rd evaluation was made. Evaluation criteria were different in each OP. The ERDF evaluation criteria were more suitable than the ESF criteria. HRE OP criteria were the same for all the applications, so business and financial plans were evaluated in wording but could not be officially scored. Those applications which gained more than 65 points went to an evaluating committee that met quarterly.
ESF and ERDF have different sustainability rules so each CfP had its own rules for sustainability:
- HRDE OP – to sustain the created jobs minimally 6 months,
- IOP – to sustain created jobs 5 years after the end of the project.
There was a big difference between the grant schemes. The conditions of ESF were fulfilled automatically because salaries were usually paid in the course of the project from ESF. The ERDF conditions were strict and they were discouraging for many organisations, especially for NGOs. Regulations how to asess its breach were missing.
The applicants’ success rate was low. Many applicants submitted their applications repeatedly, making several corrections, and this strategy was fruitful. Specifically, 822 project applications had been submitted and assessed under OP LZZ; 131 applications had been supported (a success rate of approx. 16%); but only 123 projects were being implemented. Under IOP 341 project applications were received; 59 were approved (a success rate of approx. 23%); but only 51 were being implemented. 25 social enterprises gained a joint support from both CfP.
2.2 Practical experience from implementation of social economy global grants
It was a difficult learning process for all the stakeholders.
Many existing OP rules were not suitable for social entrepreneurship and had to be changed. For example, in ESF projects all the profit had to be reinvested to the project and the contracted amount was diminished. This rule had to be changed for the SE global grant after the start of the first projects because otherwise it had no sense to gain any profit. Another example of the needed change is not positive – it was not possible to score officially a business and financial plan because there were no specific criteria and evaluators had to “smuggle” their evaluation into the official template.
Among the first applications were also projects that misused the eligible rules and it took some time to find a reasonable solution. One of these weak points was a definition of a new entrepreneurial activity of a social enterprise. Czechs are skilful in finding ways how to avoid rules so there were application submitted in a tricky way, e.g. the entrepreneur transformed his/her already existing enterprise into a new legal form, promised to employ one or two disabled people and wanted to gain 200.000 EUR. The first revision of both CfPs tried to prevent the misuse and at the same time not to be too restrictive. MoLSA consulted intended changes with TESSEA; a survey among TESSEA members was made and their recommendations were partly accepted.
There were just few applications submitted in the first year and their number grew very slowly. Most organisations who wanted to set up a social enterprise had no experience with social entrepreneurship, they were afraid and hesitating and it took them at least one year, usually even longer time to develop the idea and to be able to implement it into a business plan and an application. The number of applications was gradually growing, especially in the ESF global grant where the conditions were more favourable. It is interesting that applications of self-employed disadvantaged people were very rare, they often failed and only one beneficiary of this kind gained the support.
Both ESF and ERDF CfPs were coordinated and changes were made in cooperation. The conditions for applicants were made gradually more wide (e.g. already existing social enterprises could submit an application to expand their operation, new eligible target groups of long-term unemployed and users of social services were added) and also more strict (e.g. to employ 40% of target goups instead of 30% with a more strict calculation, the raise of co-financing in IOP from 10% to 20%).
Generally, there was a big discrepancy between the processes between HRE OP and IOP, IOP was far more strict and demanding and it was more difficult both for applicants and for beneficiaries to fulfil the ERDF rules. The IOP MA was never open to the idea of social entrepreneurship and there was not goodwill to adapt the processes accordingly. The IOP allocation was in threat and later on diminished because there was always a big demand from regions to increase allocations to fulfil their priorities. At the end of implementation the ERDF CfP was closed sooner than the ESF CfP and even applicants with already approved projects more than half a year ago are still waiting for the final decision.
The original idea of a flexible coordination between the ERDF and ESF grant schemes gradually faded. At the beginning there were the same terms of evaluation committees and it was possible to implement the ERDF project before the ESF project (to buy at first an equipment and adapt a workplace, then to hire and train people). Then the IOP part of the joint grant schemes started to be more and more delayed and it was not many times possible to coordinate project activities accordingly. The delays were caused mostly by the Centre for Regional Development whose officers were overworked and had no experience with social entrepreneurship.
The implementation of SE global grants was also a learning process for evaluators and for the evaluation committees. A formally well written application ceased to be enough and gradually, more emphasis was given to business plans and to financial plans. The official template for a financial plan was found not sufficient and more detailed calculations were needed for the approval. The evaluation process had its week points, e.g. low competences of some evaluators or sometimes the small involvement of the evaluation committee. It happened from time to time that a project was approved that was formally well written but the beneficiaries lacked the interest in social entrepreneurship or there was too much goodwill and not enough business approach. The centralisation of the decision process might made harm as well because the knowledge of regional markets was missing.
It was a learning process for applicants as well. The quality of applications improved in time, especially when requirements grew and the projects were repeatedly rejected. The most common failures were underestimation of marketing strategy, insufficient market analyses, missing investment programme, bad risk analyses, weak description of implementation of social enterprise principles and non-transparent financial plan.
As mentioned before, the original intention was to accompany the social economy grant schemes by a support structure that would provide help both to applicants and beneficiaries. Its importance is even bigger in the situation of the Czech Republic where was a low level of social entrepreneurship notion and experience. Those who wanted to set up a social enterprise needed to understand what does it mean, what is perceived as social enterprise principles and generally what is the idea of SE global grants. They needed a thorough explanation and help because social entrepreneurship is an open partnership process that should be developed by all the stakeholders.
MoLSA MA planned such a scheme since the very beginning and there was even a financial allocation. The project was written and several times quite profoundly amended according to the MA comments. Its beginning was several times postponed and its content diminished. In October 2012 MoLSA MA approved the project “Support of the social entrepreneurship in the Czech Republic”. Its aim is to support the development of social entrepreneurship by establishing a network of local consultants and experts/coaches to help existing and future employers who want to set up a social enterprise. Apart from consultations, there is also an offer of study visits to social enterprises and a piloting of two sets of indicators for a general social enterprise and WISE. The project came too late and it is just a fragment of the originally intended support structure.
The sentiments toward social entrepreneurship at MoLSA are close to disillusionment because there are social enterprises that do not perform well, whose sustainability is under threat or they do not behave fair. Most of the supported social enterprises try to do their best, their managers are too preoccupied by everyday operational agenda and they would need to change their priorities and strategies, being assisted by mentors or coaches. The existence of a regional support structure would prevent many existing problems and misunderstandings on both sides and the image of social entrepreneurship in the Czech Republic would be better nowadays.
Disadvantaged target groups
Social entrepreneurship hepls them to gain economical stability, recognition and self-esteem. They are usually in the role of employees and they feel often threatened and insecured by the offer to participate at the management.
Agency for Social Inclusion
Works under the Cabinet Office and supports municipalities in disadvantaged localities to develop local partnerships, raises awareness about social entrepreneuship and socially responsible public procurement. The Agency helps these local partnerships with submitting applications to social economy CfPs.
Their interest is slowly growing and social entrepreneurship has been often included into a community planning of social services. Some of the municipalities are involved due to the activities of the Agency for Social Inclusion. They are not eligible applicants because of the independence principle of social enterprises. They are interested in transforming public benefit jobs for long-term unemployed paid from the Active Employment Policy into social enterprises mainly in gardening, cleaning services and real estate maintenance.
The non-profit sector in the Czech Republic regards social entrepreneurship as a very attractive area. NGO sector protested repeatedly against exclusion of civic associations from eligible applicants. It is interesting that among the social economy CfPs applicants there are only 16% NGOs. This is due to the fact that the setting of global grants was quite demanding for them, especially the ERDF global grant with its difficult sustainability. A common model was also that an NGO set up a ltds who applied. Most social enterprises cooperate with an NGO.
Their role was mostly in recommendation of suitable people from disadvantaged target groups. In some cases their cooperation with social enterprises functioned really well but it was due to personal contacts. Labour offices are preoccupied by their agenda and social entrepreneurship is not a part of it. Social enterprises draw active labour policy subsidies for their disadvantaged employees under the same conditions as any other employers.
Responsible for both Social Economy global grants. It is the main ministry that deals with this issue (it is actively engaged in supporting the development of the social economy and the formation of social enterprises). As in the entire state administration, there is no designation within MoLSA who bears overall responsibility for the social economy. An evaluation of social economy has been done recently.
Ministry for Regional Development (MfRD)
MfRD fulfils the role of the National Coordinating Body and it is at the same time the Managing Authority for the Integrated Operational Programme and its Social Economy Global Grant, under which investment support is provided for the development of social enterprises. There is no real interest in supporting social entrepreneurship.
Ministry of Industry and Trade (MoIT)
Not involved in Social Economy Global Grants and not interested in social entrepreneurship before 2012. Support of social entrepreneurship was included in the SME Strategy 10 2012 and MoIT will provide a scoring advantage to WISEs in applying to loans and guarantees in its new OP.
Government Committee for NGOs
Provided support to social entrepreneurship from the very beginning and helped to the establishment of SE global grants. Social entrepreneurship is one of its priorities. It urges to incorporate social entrepreneurship into many OPs in the programming period 2014+.
An opinion platform that works on the partnership principle. It spread actively information about SE CfP, provided a feedback to the setting of CfPs by makong survey among its members, its experts raised many recommendations to SE global grants incl. the support scheme. Information about SE CfPs and its successful and unsuccessful beneficiaries were issued in a monthly newletter.
The Czech and Moravian Union of Cooperatives has been an important stakeholder from the very beginning of preparation of SE global grants, being an active member of the EQUAL NTN and later TESSEA. It always took part in an expert advice to MoLSA regarding SE global grants and has been active in lobbying. It is interesting that despite that only 7% of cooperatives are among beneficiaries.
Social enterprises are mostly an outcome of SE global grants because most of them was established with their grant support. They do not have an equal say in the relation donor and its beneficiary. Their views are articulated by TESSEA.
Not many applicants from the business sector were successful. They often paid an agency to write the application for them and it usually lacked a good description of target groups and principles. They were often discouraged by the structural funds formalities and it was difficult for them to understand social enterprise principles without a proper explanation.
3. Evidence/Justification for Good Practice
It is important to try to provide convincing evidence that a practice is a good practice. This helps avoiding being self-referential.
However, this should not prejudice your choice of good practice cases in favour of the “safer” longer established cases with more evidence; less known, innovative models of good practices would be equally interesting, provided their longevity/sustainability seems reasonably assured.
3.1 hard evidence:
- With the support of global grants, 157 work integration social enterprises were established and 827 jobs for disadvantaged people were created. The average amount for creating one job was 22.447 EUR.
- An estimate calculation of the state budget savings is based on the Analysis of the Cost to Public Budgets of a Median Unemployed Person (TESSEA, J. Cadil, Unicorn College 2011). The average, or rather median unemployed person costed public budgets 4325 EUR over a five-month period in 2009, that was 865 EUR per month. When we assume that the average number of disadvantaged employees working full-time in one social enterprise is 4, we can estimate that one social enterprise saves to the state budget 41.520 EUR and 157 social enterprises would save 6.518.640 EUR. This is a theoretical calculation because part of social enterprises intends to reduce the number of disadvantaged employees after the end of the project and few social enterprises will go bankrupt.
- Several surveys were accomplished in the Evaluation of social and inclusive entrepreneurship support in HRE OP. Beneficiaries stated that social enterprise principles in CfPs were comprehensible, quantitative principles being more clear than qualitative. Their fulfillment in practice was tested in 8 case studies with satisfactory results, differences being proved in participation, independence and fulfillment of local needs.
- According to the evaluation, 2 aims of global grants – inclusion of disadvantaged people and establishment of social enterprises - were fulfilled and 3rd aim – finding a suitable social enterprise model – was not fulfilled because only WISE model was developed.
3.2 soft evidence:
- SE global grants accelerated significantly the development of social enterprise sector and due to them social innovation materialised. An inherent consequence of the rules of CfPs was formalization and simplification of innovation and social entrepreneurship.
- It brought to life participation of new actors, esp. Agency for social inclusion and their partner municipalities in socially excluded localities. Socially disadvantaged target groups, esp. people from a Roma minority were able to get a job.
- Social entrepreneurship has been discussed as one of the solutions of social exclusion and it became part of the government, regional and local strategies.
- Due to the SE global grants, MoLSA was active in the EU networks (BFSE, SEN). The transnational partnership and an access to information and good practice examples helped MoLSA and national experts to widen their knowledge of social economy and share it with other stakeholders.
- According to the qualitative survey of the SE evaluation, the impact on target groups is definitely positive. Disadvantaged people gained job, became independent on subsidies, their self-confidence raised and they felt useful to others. The impact on their communities did not prove to be different than the impact of other SMEs.
- A conclusion deduced from the qualitative survey says that without grants, only ¼ of supported social enterprises would be established and ¾ of these enterpises are sustainable after the end of the grant support.
- The SE evaluation states that the key success factors are an experience with entrepreneurship and a good business plan. The recommendation for a next grant scheme is to evaluate mainly economic viability under the condition of fulfilling SE principles and not to evaluate a social impact.
4. Outcomes (for different stakeholders)
SE global grants were a challenge for MoLSA from many reasons – difficult communication among MoLSA departments and with other ministries, coordination of two different funds and MAs, a kind of disappointment from a thread of closing social enterprises when the project finishes, the repetitive template of some applications... On the other hand, SE global grants brought a lot of experience with the theme of social entrepreneurship, different approach to sustainability and social innovation.
As mentioned already at the beginning, there is not an assigned department at MoLSA that would be in charge of social entrepreneuship, its policies and coordination. The activites are scattered and social entrepreneurship is pushed forward only by a personal involvment of few MoLSA officers. Social entrepreneuship has a potential that still waits to be used.
Social economy theme has brought some new considerations into the active employment policy setting , in particular a need of a comprehensive approach to its implementation. However, it turned out that under MoLSA it is possible to support only a part of social economy principles (social inclusion, creating new jobs for disadvantaged people) and a broader grasp of the theme needs cooperation with more resorts.
From the point of view of TESSEA it was positive that its principles of social enterprises were included with small amendments into the CfPs and subsequently to legal documents of social enterprises who applied. Recently even financial institutions that support social enterprises use TESSEA principles to distinguish who is a social enterprise.
TESSEA became for MoLSA a respected partner who was always consulted in case of need.
It is definitely positive that SE global grants helped to spread the idea of social entrepreneurship and due to its funding many social enterprises developed. Its unintended achievement was that those people who know about social entreprises perceive them as WISE – it is for them an enterprise that employs disadvantaged, mostly disabled people. The perception of social entrepreneuship is thus restricted.
5. Strengths and Weaknesses
- Global grants moved forward considerably the establishment of the social enterprise sector.
- A lot of experience on the ground was made with establishment and development of social enterprises.
- It was a learning process for MoLSA.
- A positive approach of the government to social entrepreneurship was proved by establishing SE global grants.
- MoLSA was open to cooperation with TESSEA, took over their principles and the partnership worked quite well.
- Growing number of existing examples of good practice.
- Social enterprises are perceived only as WISE.
- Social enterpises got used to a grant support and many of them are expecting its continuation even after the end of projects.
- The implementation of the joint grant schemes did not work well and the ESF and ERDF global grants worked in discrepancy.
- The originally intended support scheme to applicants and beneficiaries of global grants was never set up which caused big failures in applications and less sustainable social enterprises.
- There were two sets of complicated administrative rules for each global grant, ERDF being more difficult than ESF.
- Business sector was not an active stakeholder.
6. Comparisons with other experiences (alternatives or complementary - in same territory or elsewhere)
Generally, the structure of grant schemes for social enterprise start-ups is usually more or less the same – it starts with a serie of trainings, then submitting an application, gaining a grant support and providing a consultancy in the course of the projects. The activity of capacity building is always included.
The original intention in the Czech Republic in 2006 was to implement the ESF global grant in its original meaning - small grants with simplified procedures, accompanied with an element of capacity building. An enquiry was made in the EU countries for this kind of experience and this kind of simplified grant scheme was implemented in Italy and UK.
We are not aware of any SE grant scheme similar to the one described in the case study. We would appreciate to gain information about social economy grant schemes from other EU countries, especially from our neighbours if there are any.
7. Overall assessment and transferability
The Czech global grants case study was appreciated from several reasons:
- The combination of ESF and ERDF funds raised quite a lot of interest because it is considered to be useful for social enterprises but on the other hand it is very difficult to manage effectively on the side of Managing Authorities and administrators a joint financing from two funds. Several participants mentioned that they experienced similar difficulties as the Czech Republic when they financed activities from both ESF and ERDF. It was not surprising for them that it encompassed problems.
- It was discussed that sometimes sharing of a bad experience is more helpful than the good practice examples and the description of the Czech difficulties was found inspiring.
- The less developed countries in social economy found the Czech experience more interesting than the countries with a long social economy tradition (e.g. Hungary, Greece, Cyprus). Cyprus considers to prepare similar joint grant schemes for setting social enterprises.
- The result from the discussions at the peer review was that grants are useful at the beginning when social enterprises start to operate and they should not be neglected. Grants have been used in most SEN countries and they are still used. Nevertheless, social enterprises should be able to operate without grants when they get off the ground and it is important to change their mentality and mind-set so that they do not rely only on grants. It is important to help them move more to the business side of their functioning and to use loans.
- A terminological note at the end: The term “global grant” was misleading for many participants because the Czech state administration filled it with a different content than the way how it is used by other member states. For the Czech administration, global grants are normal grant schemes but it is reserved usually for small grant schemes with simplified procedures for those organisations that do not have capacity for the standard structural funds administration.
Evaluation of social and inclusive entrepreneurship support in HRE OP, draft of the final report, IREAS, 2014
Analysis of the Cost to Public Budgets of a Median Unemployed Person, TESSEA, J. Cadil, Unicorn College 2011
Study of the Infrastructure of the Social Economy in the Czech Republic, TESSEA, D. Bednarikova, P. Francova 2011
 Exchange rate 1 EUR = 25 CZK was used in all table to simplify the calculation.
 The disbursed ERDF sum containes part of CfP no. 1 and part of CfP no.8 disbursed amount.
 Exchange rate 1 EUR = 25 CZK was used in all table to simplify the calculation.
 The sum of CZK 108,130 includes direct costs such as unemployment benefit and the lost tax and social and health insurance revenues the individual and his employer stop paying when the individual loses his job. What makes this analysis special is that it also put a figure on the indirect costs that result from reduced spending among the unemployed. This reduced consumption leads to lower revenues from both direct and indirect taxes. The analysis reckoned with a statistically typical unemployed person, who is below the age of 40, has primary education or incomplete secondary education and spends around five months without work.