Toby Johnson
21 January 2015

ES Fund – pilot programme to finance social economy organisations in Poland

ES-Fund is a pilot loan fund established to remedy the scarce availability of loan finance for social enterprises in Poland. It is the first loan fund for the social economy with national coverage. The design of the scheme started in 2010, and the funding agreement was signed in 2012. Loans will be granted until 2015 and repayments finish in 2020. The target is to make 251 loans of a total value of €6.2 million.

It was financed from the European Social Fund, with a budget of €7.5 million at an 85% intervention rate, under the Human Capital Operational Programme 2007-2013, under changes introduced at the time of the mid-term review.

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To manage the fund, the Ministry of Labour and Social Policy entrusted it to the state-owned Bank Gospodarstwa Krajowego (BGK). BGK divided the country into five ‘macro-regions’ and, on the basis of the number of NGOs in each, allocated the fund between them. It issued a call for tenders for the management of the five regional funds, which was won by TISE in all five macro-regions

TISE launched the fund in 2013 under the brand name ES-Fund, working with organisations in the regions to support clients. Free advice is offered along with each loan, and two-thirds of clients intend to take up this offer.

Loans are available up to €25,000 and for a period of five years, with a grace period of up to six months. The costs are very low, with an interest rate typically being 0.69% (as against 9.5% for TISE’s normal loans) and with no additional fees. The purpose of the loans must be business development for income or employment growth. Beneficiaries must be micro or small enterprises with an appropriate legal form which have been trading for at least a year – the fund does not finance start-ups.

In the first 10 months TISE made 83 loans totalling €1.8m, which have supported or created 114 jobs. However no social impact measurement is carried out.

Clients overwhelmingly appreciated the low cost of the loans and the service provided by TISE. However there was regret that fund was not available to unincorporated bodies, that the loan ceiling was as low as €25,000, and money is only available for investment and not for working capital.

The pilot loan scheme also had a capacity building effect just by its very existence: it obliged social enterprises to think carefully about their finances and to prepare financial projections, and it taught them how to deal with financial institutions – which was a new experience for many of them.

Lessons of a national loan funds

  • A pilot loan fund can provide valuable government with information on the needs and capacity of the target borrowers;
  • In an undeveloped loan market, most target clients do not have the skills need to prepare financial forecasts and write a funding bid, and require a high level of support to do this;
  • Lending criteria may need to be adjusted as experience is accumulated – for instance regarding eligible organisations, the loan ceiling and the purposes for which loans may be used;
  • The rigidity imposed by tender procedures limits the scope for flexibility in implementation.