Bulgaria is one of the countries with an underdeveloped social economy sector in Europe. Enterprises and organisations that work primarily for social benefits rather than profit hold a relatively low share of paid employment – 2.8% compared to an EU average of 6.3%. On this indicator, our country falls into the least favourable group of "developing" countries. The social economy sector is highly developed in countries such as Italy, France and Belgium, where solidarity enterprises account for over 9% of paid employment.
This is according to the new EU social economy portal https://social-economy-gateway.ec.europa.eu. The portal was launched this month and is part of the EU's efforts to adopt a new incentive framework for the development of the social economy in member states.
Businesses and organisations that pursue social objectives first and foremost, reinvest their profits in them and operate in a participatory democratic governance have great potential in terms of employing disadvantaged people and finding workable solutions to serious social and environmental problems. While some member states have developed this potential and managed to earn a large share of GDP in the social economy sector - such as France with a 10% share of GDP in this sector, in other European countries the incentive laws adopted do not work well enough. Bulgaria is an example of a country with many adopted laws in this area - there are a total of 5 laws aimed at regulating the structures of the social economy, which, however, do not create sufficiently effective incentives for the development of this part of the economy. The special law for the sector, the Law on Social and Solidarity Economy Enterprises, is very restrictive in terms of definitions and this is evidenced by the small number of organisations registered under it – 35, as a recently published impact assessment commissioned by the Bulgarian Centre for Not-for-Profit Law showed.
To make it easier for member states, the EC this month presented a proposal for a common European framework to promote the social economy, which provides for a series of incentives in the areas of funding, public procurement, taxation, territorial cooperation and more. Countries are expected to develop strategies for the development of the sector, with a strong focus on providing funding opportunities through various schemes - grants, public procurement, financial instruments.
Bulgaria stands relatively well in terms of tax treatment of the social economy with incentive tax schemes and reliefs in place, as the review of the tax policies applied in Bulgaria and in the EU shows. However, our country is far from the desired policy of promoting the social economy through public procurement - here it is recommended that Member States move away from the principle of awarding on the basis of lowest price and include social criteria in the awarding of activities, and approve selection criteria that are not restrictive and do not exclude social economy enterprises from the circle of stakeholders.
Opportunities for using financial instruments and mobilising private financial opportunities are also not well developed and known. For example, only 9 social enterprises have benefited from microcredit so far, despite the targeting of significant resources for this purpose, SIS Credit said at the annual forum of the Microfinance Centre for Central and Eastern Europe held a few days ago. The key to developing this financing model is to simplify conditions and improve access to financial instruments, because many social enterprises have limited management and human resources. A variety of different instruments should also be offered. A mix of project finance, microcredit, equity investments, loans and other instruments could support the growth of the social enterprise according to its needs and development phase. In addition to capital, an important focus of financing is to provide the necessary ongoing support for capacity development, experts point out.
There are more than 2.8 million social enterprises operating in Europe, creating more than 13 million jobs. However, the development gap between EU Member States remains significant. In France, for example, social enterprises contribute 10% of the country's GDP. Meanwhile, in Central and Eastern European countries, these firms account for between 1% and 3% of GDP, said Andriana Sukova, Deputy Director-General of the European Commission's Directorate General for Employment, Social Affairs and Inclusion, at the forum. The Bulgarian Centre for Not-for-Profit Law is also pushing for a faster pace. "Whatever steps are taken to accelerate the development of the social economy in Bulgaria, a consensus is needed to identify solutions with higher efficiency for the sector. This undoubtedly requires dialogue between stakeholders," BCNL said.
The project is implemented with the financial support of the Active Citizens Fund Bulgaria under the Financial Mechanism of the European Economic Area. The entire responsibility for the content of this document lies with the Bulgarian Center for Not-for-Profit Law and the Association of European Journalists - Bulgaria and under no circumstances can it be assumed that this document reflects the official opinion of the European Economic Area Financial Mechanism and the Operator of the Active Citizens Fund Bulgaria.