Marco Benini
19 June 2013

Czech Republic

Czech Republic background
Czech Republic is a country of central Europe with 10,4 million inhabitants, standing to 2011 census. There are currently around 100 social enterprises in the Czech Republic, doing business in just about every area of the economy. These include cleaning services, cafés, confectionary shops, restaurants, production and processing firms, graphic studios, digitization studios, call centers, park and garden maintenance firms.
The regional distribution of social enterprises is interesting: besides Prague, the largest number of active social enterprises is found in the Ústí, Moravian-Silesian and Zlín regions. Conversely, the South Moravian, South Bohemian and Vysočina regions currently lag behind in terms of activity. The majority of existing social enterprises in the Czech Republic employ people with disabilities. This is influenced by tradition, the relatively clearly defined instruments and status of this kind of disadvantage compared to other types. However, enterprises employing disadvantaged categories such as Roma people, homeless people, former drug-addicted, can be found increasingly commonly, showing an interesting growing trend for the diffusion of social economy in this country.
As regards regulatory framework, there does not exist any specific legal form for social enterprises and there are not any specific tax advantages. Thus, social enterprises in the Czech Republic take various legal forms and this always depends on the specific conditions, the type of services/products and the founders’ approach. Specifically, in the country it is possible to encounter social entrepreneurs carrying on a business as natural persons based on a trading license (self-employed people). However, social enterprises can take the legal form of standard commercial companies, most commonly limited liability companies or cooperatives.
Social enterprise is also possible in the legal form of publicly beneficial companies or citizens’ associations, although in this case, these cannot be founded for enterprise purposes. In general, most of the social entrepreneurs in this country come from either the business environment or the non-profit environment. Social entrepreneurs who come from the ranks of “normal” entrepreneurs are usually well acquainted with the business environment and may possess capital from their previous business activities, which they can now use as a start-up investment in their new enterprise activity or as a “cushion” in leaner times. Another advantage is that these entrepreneurs usually know how to negotiate with banks and have an established network of contacts and acquaintances in their area. In the opposite situation, the entrepreneur coming from the cooperation environment has a good knowledge of the social issues he wants to work with, along with an established network of contacts, but lacks in business management and financial planning skills.
In general, the main problem with creating a social business in Czech Republic is to gather the necessary capital to start it. A good incentive to the increase of social enterprises came in 2009 from Ministry of Labour and Social Affairs, with two calls for proposals targeting support for the social economy through a financial and non-financial assistance award. As regards other funding instruments, it is still very difficult to obtain a loan since most of the banks consider social businesses as very risky assets and thus, the chances of getting money for this initiatives is usually low. In the country, there are also support organizations, such as Union of Czech Production Cooperatives, VIA Foundation and NESsT Incubator, that provide many useful services to existing and new social businesses, making these very important in the development of the social economy.