Toby Johnson
02 July 2015

Intergroup discusses finance

The European Parliament’s Social Economy Intergroup met on 25th June, chaired by Jens Nilsson. It looked at ways to improve financing for the social economy, starting with Luxembourg’s plans for the coming semester. The Internal Market Strategy is a key target for improvement.
 
Luxembourg’s labour minister Nicolas Schmit intends to use his country’s EU presidency to revive the social investment package: “social capital is the most important capital of the future, and a large part of it has been destroyed,” he said. “The social economy fits in perfectly.” He noted how ethical banking is growing, and welcomed the €500m package just announced by Commissioner Marianne Thyssen: “We will push for innovative solutions to financial constraints. The social economy needs a borderless market like other businesses.” He intends to send a strong political message from the Council on the need for action plan for the social economy.
Beatriz Becerra noted that the social economy had kept the economy alive and kicking during the crisis, and wants it to be mainstreamed. The previous €85m European Progress Microfinance Fund has created 47,000 jobs. Interest has been raised, but because of low visibility social investors are still finding it difficult to find projects that fulfil social economy principles. We need to establish a clear definition and specific targets, and create a proper business model.
Anna Maria Darmanin of the EESC is working on a finance paper for the Luxembourg presidency. She finds that banks tend to misunderstand what the social economy is, and because of its voluntary ethos tend to perceive it as amateurish. They continue to look only at return on investment and security and need to take a longer-term view over 7-8 years. Ethical banks have grown during the crisis but the regulatory framework hinders them.
Crowdfunding has stepped into the breach somewhat, and find a lot of social projects. However it has no specific framework and there are worries over consumer protection. It needs a coherent push. Above all more specific funding is needed. In particular COSME should take the peculiarities of the social economy into account.
 
Internal Market Strategy
 
Hugues Sibille of the Fondation Crédit Coopératif noted that the “old” social economy and the “new” social enterprises were working together well and that France’s Loi ESS has taken the Commission’s 3-point definition on board. We need to stabilise around this, and to agree the foundation and mutual statutes. It is also important that the social economy has a place in the EU’s Internal Market Strategy which is to be adopted in October.
We need to establish a knowledge centre on impact measurement. France has already established a framework for crowdfunding and solidarity financing, which has a great potential to raise money for the socials economy, but the UCITS 4 directive risks blocking this. GECES should set up a finance working group: if such a group had existed, the EuSEF would have fewer problems.
Jan Olsson described successful financial models from Göteborg and Puglia.
 
Capital Requirements Directive
 
Emanuele Spina described Federcasse’s experience that lending to social economy enterprises is not risky – with a turnover of €200bn their default rate is only 1.75%. He argues that the Capital Requirements Directive and Regulation (CRD IV/CRR)  (the EU version of Basel III) should extend the slightly less stringent providential requirement that applies to SMEs also to social economy enterprises. At the moment, each euro lend to the social economy requires 80¢ to be set aside, whereas for SMEs it requires only 76¢. If the “SME balancing factor” was extended to cover the social economy, this would liberate 30%-33% more investment capital overnight.
 
See full report on the new-look Social Economy Europe website.