Looking for the money
After the Social Economy Network’s final conference in Brussels, one year later the SEN’s successor – Thematic Network on Social Economy – was established, with the opening meeting also in Brussels (12-13 January, 2016). However, the first peer review seminar of the new network was held in Warsaw on 19-20 May, 2016. The host of the meeting, the Polish Ministry of Economic Development, decided to focus the peer review on the most important barrier obstructing the rise of the social economy sector in most countries: access to finance.
Thematic Network on Social Economy brings together Managing Authorities of the European Social Fund and social economy entities from dozen countries of the European Union. It is devoted to improving the way the EU's Structural Funds are used to promote social economy.. Members of the network meet twice a year to share their experiences and perspectives on a chosen subject crucial for the development of social economy.
Most recent conference was held in the Ministry of Economic Development and was opened by Monika Groszkowska, deputy director of the ESF Managing Authority in Poland. She welcomed all guests and shared her contentment about continuity of the network’s work. She pointed out that each country has a different level of wealth, system of the law, presence of charity, and social economy awareness. That combination creates a unique environment, where not every solution for financing the social economy (SE) sector could work. “However we can learn from each other sharing the best practices and successful implementations.” – she stated. She gave the floor to Piotr Stronkowski, the peer review expert and moderator of the meeting, who presented models of financing and main topics of the first and second day of the conference.
Mr Stronkowski’s presentation can be downloaded here.
Fund of funds and social investments
The first session consisted of two parts. First the floor was taken by António Miguel, Laboratório de Investimento Social (Portugal), who described the Portuguese approach to the problem of financing and helping the social economy sector to grow: “Instead of money from the European Social Fund going directly to social organizations, let’s create an intermediary stage, because that could help the market to be sustainable in the long term. This intermediary is a fund of funds which invests money into retail funds. And retail funds will have direct contact with the market.” The fund of funds (Portugal Inovação Social) provides incentives for the investors, attracting them to the products offered by retail funds – such as loans and private investments in the SE entities. Apart from the vouchers for SE, used by growing social enterprises in need of professional business help, Mr Miguel elaborated on the social impact bonds (SIB) outcome fund, where EFS are used to pay for the outcome (achieved by social enterprise) to the social investor as the buyer of the SIBs: ”The government isn’t used to pay for the outcome. And investors are not so sure about getting profit in three years since it depends on the political situation. SIB outcome fund seems to be solution to this problem.”
Mr Miguel’s presentation can be downloaded here.
Mika Pyykkö, head of Focus Area Impact Investing Finnish Innovation Fund Sitra (Finland), presented the powerful institution (almost 50 years old spin-off from the Bank of Finland) challenging public, private and NGO sector to boost the competitiveness and well-being of the Finnish society. “Often it is not an easy job, because our government spends half a billion euro of grant money every year supporting NGO sector in a country with 5,5 million people. Plus the private sector is also seeking good social investments. That means sometimes there is not enough room for investors looking for good projects.” – he drew his unique perspective. Sitra does not support solely the social economy sector or NGO sector: the goal is to spend money on the biggest positive impact on the society and environment. That means the fund helps sometimes private companies. Sitra has 800 million euro and uses return of the capital invested in various projects, reporting only to the Finnish parliament.
Mr Pyykkö described the first SIB program in the Scandinavian countries: Occupational Well-Being, where Finnish public institutions can invest in diminishing the number of sick leave days by improvement of employed people’s well-being. In other words: the program helps to save money (lower costs of sick leaves) by investing in well-being. “From our perspective, the measurement of the social impact is not such a complicated issue if you do the modelling in a very careful way. Sometimes the hardest thing is to pick the right area where SIB or other instruments can be used with positive outcome.“ – he concluded.
Mr Pyykkö’s presentation can be downloaded here.
When private investors seek only profit
The two presentations mentioned above started a lively discussion focused on different experiences of other countries, particular details of SIB instruments, and characteristic cultural and economic reality in each state. Such as Belgium, where the social economy and NGO sectors are lavishly supported by the charity money from individuals. However participants agreed that in most countries SE development needs different sources of money – both private and public.
After the coffee break, the participants were divided into three groups to discuss the main questions and issues raised by the presentations. It was an opportunity to comment on the issues described in the background paper and to share some doubts about compatibility of the featured instruments to the local legislation, economic and social environment. Piotr Stronkowski summarized a part of the group’s discussion: “In many countries, such as Poland, the private sector is interested in profit – and in profit only. Social enterprises must beat other business entities if they want to get funding, and many times it is not possible without public help. Keeping in mind they are focused on social values as well as earnings.”
Background paper, prepared by Piotr Stronkowski – the peer review expert, can be downloaded here.
We have our own tool
The second day started with the presentation of Agnieszka Waszkiewicz, from Bank Gospodarstwa Krajowego (Poland), who featured the bank’s pilot project of loans for social economy entities. The Intermediary in the process was TISE, Polish financial company experienced in analysing and choosing socially valuable SE entities able to repay loan with expected effects in growth and security of its business. “The project was a big success from both points of view. Only 2,9% of the loans were overdue in the end of 2015. And loans helped to create 436 new workplaces whereas the initial target was 50.”
Ms Waszkiewicz’s presentation is ready to download here.
In her presentation Floriana Nappini, Consorzio Sociale Light (Italy), characterized two ways of measuring social impact: the Italian Social Balance and the social added value tool, created during the project Better Future for Social Economy (BFSE). She pointed out: “From 2006 Social Balance has been obligatory for each social enterprise. The problem is that only part of the social economy sector are entities which could be defined as social enterprises. However the survey made in 2011 showed that 73% of social enterprises in the wider sense elaborated the Social Balance.”
Despite its strengths such as globally homogenous data or effective tools supporting the dialogue with external stakeholders and engaging the internal ones, Italian Social Balance produces data difficult to compare and needing an efficient communication strategy. On the other hand, the test made in Lombardy proved that often BFSE tool can serve the SE sector better and in more purposes. The first part of the tool based on social accounting was created for measuring the social added value of the SE. The second tool based on Social Return on Investment was intended for either the whole enterprises or single projects. “During the tests we realized that SROI approach is often tricky when used for enterprises because of lack or poor accessibility of data, and problems with measurement of some impacts. So we recommended it for single projects.”
Ms Nappini’s presentation can be downloaded here.
Scaling is the key
Cesare Vitali, Strategy Department of Banca Popolare Etica (Italy), proposed another interesting approach to social impact evaluation. The institution he represented is quite a unique financial institution founded by citizens and social organizations in 1999 and now operating in Italy and Spain. It offers loans not only calculating the financial risk but also borrower’s involvement as a bank member, his reputation, CSR culture and compliance with the values of the bank. “The Social-Enviromental Analysis involves three steps: a questionnaire filled by the client, reporting social analysis prepared by the bank experts and social-environment evaluation carried out by independent evaluators using the interview with the client and external sources of the information such as stakeholders. The latter is obviously very important because there is not a company that would say openly <we don’t respect our employees> or <we don’t respect the environment>.” Social Evaluators are volunteers trained by Banca Etica.
Mr Vitali’s presentation can be downloaded here.
The presentations were the introduction to the discussion about challenges of the social impact measurement. The participants stated that many elements of social impact are hard to catch, sometimes it is the matter of the delay counted in years or even decades. In other cases calculation is expensive. “The solution is scaling the process to the size of the entity. The smaller the social enterprise is, the simpler the procedure must be. Otherwise it would be useless.” – Mr Stronkowski concluded.
The seminar’s final part was a speech about the future of Social Economy Network made by Dorotea Daniele, thematic expert from DIESIS. “I hope our work will continue and that our network will grow – the more experience we share, the more useful solutions we can implement in our countries to help the social economy sector.”
Conference proved that the participating countries have a very diverse situation when it comes to financing the social economy sector. If we create an axis starting with the point where a country’s SE enterprises have serious problem with the access to the funds, and ending with the point where these enterprises have plenty of financing sources (private and public), EU states will be present along the entire length on this axis.
The growth of the sector can be boosted by workers buy-out transactions and the development of the other forms of self-management enterprises – especially where private sector fails. This topic will be covered by the online seminar (Webinar) on July the 11th (Worker buy-outs and business transfers). Socialeconomy.pl will publish the minutes (short report) from this Webinar.
The next regular meeting of Thematic Network on Social Economy will be held in Bratislava, Slovakia (November/December 2016).
Final report to the Warsaw conference can be downloaded here.