07/08/2023 Време за четене: 4 минути

Financial instruments for start-ups and social enterprises – declaration with recommendations

Social enterprises have significant potential to solve some of the most pressing problems in our society. At the same time, this potential remains undeveloped in Bulgaria, even though European policies prioritise the issue and support this claim with significant investments to promote the social economy in Member States. Not only in the form of grants, but also through specifically designed financial instruments.

Stepping up a gear – the missing elements Bulgaria adopted a legislative framework in this area in 2018, but at the moment it does not contribute significantly to accelerating the development of this part of the economy. This is shown by a recent impact assessment of the Social and Solidarity Economy Enterprises Act commissioned by the Bulgarian Center for Not-for-Profit Law. Bulgarian legislation restricts rather than encourages the start-up and growth of social enterprises, as exemplified by the narrow definition given by the law. The definition also does not allow for the deployment of incentive policies to help build a real ecosystem. This was brought up as an important conclusion by participants in all panels of the forum – social entrepreneurs, supporting organisations, social intermediaries, representatives of funding institutions and organisations providing micro-credit.The restrictive definition is also the reason why only 33 social enterprises are registered as social enterprises in a specially created register at the Ministry of Labour and Social Policy. It is the registered enterprises that will also receive support through European funds in the form of grants promoting employment in social enterprises. Yet both the definition and the grant schemes prioritise employment support for vulnerable groups and do not take into account modern developments in social entrepreneurship that go beyond these scales of activity. Financial instruments for the development of social entrepreneurship Some market-based instruments to support the social economy are still missing or little known in Bulgaria. Only 9 social enterprises have benefited from microcredit, for example, according to SIS Credit. On the one hand, it is key to reduce administrative burdens and make financial instruments more accessible to social enterprises that have limited resources – management and human resources, knowledge in the field. On the other hand, there is a need to offer a variety of instruments. A mix of project finance, microcredit, equity investments, loans and other instruments could support the growth of social enterprise according to the needs and the phase of development. In addition to capital, an important focus of financing is to provide the necessary ongoing support for capacity development.Next steps Whatever steps are taken to accelerate the development of the social economy in Bulgaria, consensus is needed to identify solutions with greater efficiency for the sector. This undoubtedly requires dialogue between stakeholders. A step in this direction is the declaration with recommendations from the forum, which we sent to the institutions responsible for the development of financial instruments for microfinance as an opportunity to support start-ups and social enterprises.