December 21, 2015

Country Focus:The Croatian VP/SI sector: challenges, key players and initiatives

Over 2015, EVPA is producing a number of factsheets detailing venture philanthropy and social investment activities in countries around Europe. The below article is based on our recently published Croatia factsheet.

The venture philanthropy and social investment field in Croatia is at a nascent stage. However, it has a potential to be recognized as emerging field

Owing to the early stage of the movement, social entrepreneurs lack regulation and funding opportunities, but with European Structural and Investment Funds (ESIF) earmarked to fund innovative financial instruments, business competitiveness, employment creation and the growth of the social economy, Croatia is set on a path to social innovation.

The country has a tradition of cooperatives, especially in the agricultural sector, and these have been so far the main recipients of support even though they remain under financed. According to Ex-ante Assessment Report, of 1,198 cooperatives reporting to FINA Financial agency (Register of Annual Financial Statements) there are only approximately 70-100 genuine social enterprises. The bulk of cooperatives are well-established legal entities primarily employing people with disabilities but almost half of all cooperatives do not employ a single individual.

Government initiatives

Social entrepreneurship is not yet fully recognised by the laws of the Republic of Croatia. This causes limitations to their performance and their search for support in the context of unjustified market privilege, due to the lack of public benefit recognition. Similarly, the banking sector, which is stable, does not yet offer alternative financing forms intended for entrepreneurial ventures (microcredit institutions, Business Angels, risk capital funds, etc.).

The Croatian Ministry of Entrepreneurship and Crafts and the Croatian Centre of Cooperative Entrepreneurship and stakeholders are currently co-developing a Croatian Cooperatives Entrepreneurship Strategy. The government also intends to make use of innovative financial instruments when implementing selected activities of the EU Operational Program Competitiveness and Cohesion (OPCC) 2014-2020 and EU Operational Programme Effective Human Resources (OPEHR) 2014-2020. As mentioned before, the rationale and strategy for the use of innovative financial instruments for business competitiveness, employment creation and social economy in Croatia was emphasised within the ESIF framework.

Local initiatives to support Social Purpose Organisations

Croatia is currently awaiting the launch of its first Ethical Bank, which started as a private initiative. EBanka is a democratically run social enterprise designed to provide the best possible banking services to its clients, while actively promoting sustainable economic development for the communities in which it is operating.

The Operational Programme Effective Human Resources (OPEHR) 2014-2020 anticipates support for social enterprise seeking the increase in their number and employment. Subsequently to the roll-out of a pilot grant scheme and the review of its results and outcomes, the Managing Authority may decide whether it shall continue with investment grant funding or implement support through direct collateralised 10 lending facility.

The outlook for the sector

The venture philanthropy (VP) and social investment (SI) field in Croatia is at a nascent stage. However, it has a potential to be recognized as emerging field through presence of VP/SI players such as NESsT (pioneer of VP in the region) or ERSTE Foundation, which is exploring application of VP/SI approach in its activities. Especially, NESsT’s work towards increasing awareness and through direct support to social enterprises, has paved the ground for those new concepts in the country.

Foundations are also starting to explore VP/SI, which brings great promises for the future. The grant giving foundations are on an educational path towards VP/SI efforts, led by the National Foundation for Civil Society Development.

EVPA’s activities in Croatia

EVPA is represented in Croatia by two members: the Cooperative for Ethical Finance (soon EBanka) and NESsT. In 2015 EVPA organised events in Zagreb to connect with local players, to promote social entrepreneurship and encourage the use of VP approach and the development of social investment market.

Interested in finding out more about EVPA’s members in Croatia? Have a look at our factsheet or get in touch with us so we can facilitate connections.

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