CYPRUS. Country profile
- General context (definition, recognition)
Cyprus has a long history of cooperative tradition, mainly in the banking sector, as well as a strong sector of volunteer and charity organisations.
Social entrepreneurship, however, is a relative new term for Cyprus, introduced in the public sphere in late 2008 and first appeared on the governmental agenda last year. Efforts to promote the field of Social Entrepreneurship are recorded as far back as December 2008, with the presentation to the Cypriot public and policy makers of a Work Integration Social Enterprise (WISE) from France. In the same year, a comprehensive study was completed on behalf of the Social Welfare Services on the implementation of social economy programmes for the activation of vulnerable groups of people, which explored social entrepreneurship as an approach. In 2010, in an effort to create more awareness of the field, the first Conference on Social Entrepreneurship was launched in Nicosia. Between 2010 and 2013, efforts to promote the sector took place mainly in the form of conference and training events and were the result of private efforts.
Since 2013, Social Economy/Social Entrepreneurship has been included in the Government’s agenda for the Economy. Within this scope, the Ministry of Labour and Social Insurance has been working to develop a funding programme for newly formed Social Enterprises. This programme is of primary importance for the growth of the sector as it can kick-start social enterprises by providing initial funding in the form of grants and/or fund activities of social economy. It also has the capacity to provide definitions for social enterprises and accordingly define the future of social entrepreneurship in the country.
As Social Entrepreneurship is a recent phenomenon, Cyprus has no legal, regulatory or fiscal framework for social enterprises. In addition, there is neither a strategic plan for the development of social entrepreneurship nor a recent completed mapping that will provide the necessary information on the number, size and scope of social enterprises.
Yet there is growing interest in the country on social entrepreneurship, and the current economic crisis provides an opportunity to push the sector forward and create the ecosystem that will enable its growth.
- Support infrastructure
In 2003, the Government of Cyprus supported the development of four business incubators: Diogenes Business Incubator, Helix Business Incubator, Hermes, and Prometheus Business Innovation Center. The incubators were developed through support by the Ministry of Commerce and Industry.
The main target group of these business incubators has been high-technology enterprises. For example Diogenes Business Incubator’s vision is “to pioneer the transformation of Cyprus into an important center, in the Eastern Mediterranean, in the area of commercializing high technology research and innovative ideas through supporting the creation and development of innovative start-ups.”
The services offered by incubators include entrepreneurship training/coaching, access to funding, accommodation (furnished, equipped office, internet, telephone, meeting rooms facilities, etc), office support (secretarial and reception service), legal, accounting/taxation assistance. In exchange of their services, the incubators often become shareholders of the start-up company and have a share in its profits.
In addition, the government is in the final phase of establishing the first Science Technology Park in order to create an important infrastructure for the promotion of research, innovation and high technology in Cyprus. Its ultimate goal is the “contribution towards the diversification of the country’s economy and the transformation of Cyprus into a regional applied knowledge-based hub.”
The companies which are targeted by both the current business incubators and the Science Technology Park are mainly technology-oriented and/or enterprises with high potential for profits. As social enterprises are not profit-oriented, the chances that they will be accepted in such a support infrastructure are rather slim.
However, there is a growing trend by government departments on all levels in Cyprus to promote entrepreneurship by addressing issues highlighted in the Small Business Act. Support infrastructures that are created in this way could and should include segments that focus on Social Entrepreneurship.
Also, Cyprus boasts a very active voluntary sector and there exists a Volunteerism Ombudsman as well as the Pancyprian Volunteerism Coordinative Council which offer support for new or existing voluntary organisations and could provide a springboard for more general Third Sector support structures.
In addition, in countries such as Cyprus where recognition of the sector of social entrepreneurship is minimal, social enterprises need an environment where their mission and scope of work is acknowledged. Thus, support infrastructure for social enterprises need to be separated from mainstream SMEs; or alternatively, already established structures must be trained to address the specific needs of social entrepreneurs and social enterprises.
In the 2014-2020 Programming Period ESF aims to support the Social Economy through a single Incentive Scheme for the Creation of a number of Social Enterprises. This will be augmented by the development of a tool for the set-up and running of a social enterprise on the use of which, interested parties will be trained. The support structures that would be required are, at present, planned to be provided through existing public sector institutions that will customize certain services in order to cater for the social enterprises emerging from the scheme.
- The financial eco-system
Funding and access to finance seem to be the number one problem for social entrepreneurs in the country. Initial funding is currently provided to start-up companies through the programmes for Youth and Female Entrepreneurship offered by the Ministry of Trade, Industry, Commerce and Energy.
Although these programmes do not exclude social enterprises, they exclude those operators of social economy, which are not registered as limited liability companies, such as associations, volunteer organisations or foundations.
Financing is often provided through bank loans, normally at high interest rates, and those loans are applied to SMEs or large enterprises. There are no specific financial instruments exclusively for the entities of social economy.
Alternative sources of funding and financing associating with social entrepreneurship, such as angel investors, crowdfunding, and Social Impact Bonds are almost unknown in Cyprus.
Social enterprises, like SMEs, are especially dependent on banks’ ability to provide loans. However, as a result of the banking crisis in the country which erupted in March 2013, banks have preferred to keep their funds in-house to strengthen their balance sheets. When they do provide financing, they do it by charging extremely high rates. In fact, Cyprus lending rates for SMEs is the third highest in the Euro Zone, after Greece and Portugal, averaging nearly 6%.
The Cyprus Entrepreneurship Fund
To address the issue of liquidity that enterprises face and to create growth and jobs, the Government of Cyprus has developed the Cyprus Entrepreneurship Fund (CYPEF). CYPEF is an initial 200 million euro fund pooled together by the Government and the European Investment Fund (EIF). It aims to support and strengthen entrepreneurship in the country by enhancing access to finance for SMEs and self-employed entrepreneurs by providing working capital as well as investment loans. A first call for financial intermediaries was announced in March 2014.
The Fund does not state any special criteria in terms of added social value or social impact.
When fully implemented, the CYPEF should be expected to contribute to the financing of social enterprises, at least those which are registered under the Company Law. However, the Fund does not mention eligibility of financing of operators of the social economy (such as associations, voluntary organisations or foundations).
4. Identity and visibility of social enterprises
Efforts to develop visibility of the field of Social Entrepreneurship are recorded as far back as December 2008, with the presentation to the Cypriot public and policy makers of “Acta Vista,” a Work Integration Social Enterprise (WISE) from France at a European Conference organised in Nicosia titled “European Heritage for Employment.” The Acta Vista model of employment and work inclusion has been presented on many occasions since then in order to raise awareness of social entrepreneurship and its potential to address social issues, such as unemployment and social exclusion. In the same year, a comprehensive study was completed on behalf of the Social Welfare Services on the implementation of social economy programmes for the activation of vulnerable groups of people, which explored social entrepreneurship as an approach.
In 2010, in an effort to create more awareness of the field, the first Conference on Social Entrepreneurship was organised in Nicosia by the SYNTHESIS Center for Research and Education Ltd, an enterprise which has been working to develop and promote social entrepreneurship in Cyprus since 2010. Between 2011 and 2013, the efforts to promote the sector took place mainly in the form of conferencing and training events and were the result of private efforts, through self-financing or through support of the Life Long Learning Programme of the European Union. The Leonardo project “Ignite Europe: Training Trainers to Develop and Support Social Entrepreneurs” was implemented in Cyprus as well as the United Kingdom, Bulgaria, Lithuania, Germany, and Sweden during the same period.
In 2013, two European Conferences on Social Entrepreneurship were held in Cyprus: “Social Entrepreneurship: Innovation for the Future,” aimed to provide visibility of social enterprises that work in the environmental sector, and the European Conference “Social Entrepreneurship in an Economic Crisis,” which focused on the potential of Social Entrepreneurship to alleviate Cyprus problems’ during the financial crisis.
In May 2014, the Cyprus Unit of the European Social Fund organised the “Workshop on Social Economy and Social Entrepreneurship” with local and foreign experts. The Workshop aimed to provide information on social economy/social entrepreneurship and open a forum for discussion for policy makers, social partners, and public administrators. The discussion centred on the competition social enterprises can pose to the market; the pros and cons of establishing a legal framework in a top-down approach or allowing the sector to develop itself, in a bottom-up approach and then recognised or regulated.
Today a growing number of Cypriot institutions, including universities, business schools and NGOs, show an increasing interest on the field and undertake initiatives that increase awareness of the field of social entrepreneurship. Hub Nicosia, a community space for social entrepreneurs which will also serve as an information point on Social Economy is also underway. The project has received partial funding from the Stelios Philanthropic Foundation and the Norwegian grants.
Visibility efforts on social entrepreneurship have been so far the result of private initiatives in the form of conferencing events, seminars and trainings and have been self-financed or through funding from EU’s LLP programme or other donors.
As already mentioned, in the 2014-2020 Programming Period the ESF aims to support the Social Economy through a single Incentive Scheme for the Creation of a number of Social Enterprises. The implementation of the programme has the potential to enhance the visibility of the sector of social economy as a whole.
This outline is based on the papers produced for SEN peer reviews by the Cypriot partners and experts (ESF Unit, Ministry of Labour, Welfare and Social Insurance and George Isaias)
 “Preserving heritage can help ensure social inclusion,” The Cyprus Weekly, October 17-23, 2008. http://www.actavista.fr/IMG/pdf/cyprus-weekly-2008-preserving-heritage-can-help-insure-socialinclusion.pdf
 Prepared by the Institute of Social Innovation
 Both conferences were organised by the SYNTHESIS Center