financial instruments and mechanisms of funds’ allocation to social economy practices in european...

Financial instruments and mechanisms of funds’ allocation to social economy

Practices in European Union member states

JEREMIE Initiative – ESFLombardy Region

Prague, November 8-9th 2011

Agenda

ESF ROP Lombardy 2007-2013

JEREMIE in Lombardy: instruments and context

ESF JEREMIE – How it works

Conclusions

2

Agenda




Conclusions

3

4

ESF ROP Lombardy 2007-2013: priorities

Implementation of ESF ROP Lombardy 2007-2013:• contrast to the crisis• enhancement of competitiveness through human capital development• social inclusion

• More adaptable workers and firms

Axis 1

• Easier access to work

Axis 2

• Combating social exclusion in labour market

Axis 3

• Enhancing human capital

Axis 4

ESF ROP Lombardy 2007-2013: tools

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DOTEPUBLIC

PROCUREMENT

FINANCIAL ENGINEERING INSTRUMENTS

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DOTE:

a mix of financial resources and services assigned to

a citizen to be provided with training and employment services

Pillars:

Person’s centrality

Focus on demand and individual freedom of choice

Competition between public and private operators

Focus on results


DOTEPUBLIC

PROCUREMENT


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• “Dote lavoro” (employment services): 112 M€ in 2009-2011 • “Dote formazione” (training services): 25 M€ in 2009-2011• “Dote” social shock absorbers: 100 M€ in 2009-2011

Main initiatives


DOTEPUBLIC

PROCUREMENT


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PUBLIC PROCUREMENT:

public contracts and in-house providing

Pillars:

Transparency and publicity

Code of ethics for contractors (pending approval)


DOTEPUBLIC

PROCUREMENT



FINANCIAL ENGINEERING INSTRUMENTS:


DOTEPUBLIC

PROCUREMENT


JEREMIE

ERDF ESF

Support to micro and SMEs in the sectors of manufacturing and services to enterprises

Support to micro-enterprises (including individual ones), non-profit bodies and private social service agencies

Two instruments in Lombardy

20 M€ 20 M€

9

Agenda




Conclusions

10

Implementation of JEREMIE in Lombardy

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…promotes financial instruments to easier access to credit to micro and small and medium enterprises

JEREMIE

…promotes access to employment and education to disadv. people in the EU (unemployed, women, disabled, etc.)

ESF

Strict link between financial exclusion and social exclusion

• The OP provides the use of JEREMIE (3rd axis - social inclusion) in order to:• deploy innovative instruments for the provision of loans or small grants to

SMEs and non-profit organizations operating in the social inclusion;• encourage easier access to work for excluded (or at risk of social exclusion)

people and access to credit

ESF JEREMIE

Regional context of ESF JEREMIE

• Around 1.200 social cooperatives operating in Lombardy (16,2% of national no.)• 400 cooperatives dedicated to integration of disadvantaged people into the

labour market • 14 disadvantaged workers are employed per cooperative (> of national average

equal to 12)• Around 600 disadvantaged people in Lombardy are employed by the

cooperatives’ system, divided among: disables (45%), addicted to drogues or alcohol (24%), affected by psychological impairments (19%), with problems with justice (12%)

• 54% of total social cooperatives’ workforce represented by disadvantaged people (>30% imposed by law)

Facts and figures

Agenda




Conclusions

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ESF JEREMIE – How it worksLOMBARDY REGIONLOMBARDY REGION

Loans

Equity

SELECTED FINANCIAL INSTITUTIONSSELECTED FINANCIAL INSTITUTIONS

COOPERATIVESCOOPERATIVES

BENEFICIARIESBENEFICIARIES

JEREMIE FUNDJEREMIE FUNDcreates

disburses

disburses

to

subscribe

to

Phase 2

Phase 1

Phase 3

Phase 4

managed by FINLOMBARDAFINLOMBARDA

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ESF JEREMIE – How it worksLOMBARDY REGIONLOMBARDY REGION

JEREMIE FUNDJEREMIE FUNDcreates managed by FINLOMBARDAFINLOMBARDA

• In-house providing• Funding agreement in 2008

• setting-up of the Fund (10 M€) in 2008• supplement (+10 M€) in 2009

Phase 1

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SELECTED FINANCIAL INSTITUTIONSSELECTED FINANCIAL INSTITUTIONS

JEREMIE FUNDJEREMIE FUND

disbursesPhase 2

• First call in 2010 (10 M€):• 2 Financial Intermediaries selected by FL:

• Banca Popolare di Bergamo • Federazione Lombarda BCC

• Second call in 2011 (9 M€):• 3 Financial Intermediaries selected by FL:

• Banca Popolare di Bergamo • Banca Popolare Etica• Banca Popolare di Sondrio

5 M€ * 2

3 M€ * 3

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ESF JEREMIE – How it worksSELECTED FINANCIAL INSTITUTIONSSELECTED FINANCIAL INSTITUTIONS

Loans (€ 4.000)

FI’s co-financing (50%)

JEREMIE contribution (50%)

Amortizing component

Bullet component

5-year loan, fixed rate, monthly refundable

5-year loan, zero rate, single refund

Loans


disburses

to

Phase 3

Cooperative shareholders

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Equity

COOPERATIVESCOOPERATIVES


subscribe

to

Additional or new shares

COOPERATIVES

TYPE A social coop.

TYPE B social coop.

“WORKER” coop.

provide health, social or educational services

integrate disadvantaged people into the labour market

owned and democratically controlled by its workers-owners (at least 30% from disadvantaged target groups)

Phase 4

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ESF JEREMIE – How it worksDisadvantaged target group

• physically, mentally or sensory disabled• former patients of psychiatric institutions or subjects in psychiatric treatment• drug-addicted• alcoholics • people under 18 who live in a difficult family environment• condemned people that make use of alternative to detention measures

but also any person who…• is between 16 and 25 with a completed time education• is a woman older than 40• is a man older than 50• is a migrant worker• has not attained an upper secondary educational qualification or its equivalent• is a long-term unemployed person (12 months)• lives as a single adult looking after a child or children

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Equity subscriptionEquity subscription

Refunding Refunding

Amortizing componentAmortizing componentBullet componentBullet component

• If the beneficiary works in the cooperative for the duration of the loan and refunds the amortizing component: no refunding

• If not: covered by the guarantee fund (10%)

• If the beneficiary does not work in the cooperative for the duration of the loan: advanced refunding

• Coverage of the guarantee fund (10%)

Agenda




Conclusions

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22

Conclusions

• Supporting cooperatives in achieving the ESF ROP objectives in terms of social and professional inclusion of disadvantaged people

Motives

• Development of business and employment of cooperatives that deal with social inclusion and have difficulties in acceding to credit

Needs

• Promoting access to credit to cooperatives’ shareholders that are excluded /at risk of exclusion

• Promoting recapitalization of cooperatives that pursue programmes of social inclusion

Objectives

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Conclusions

• FL’s monitoring system measures efficiency and effectiveness of the instrument in order to re-programming

• Use of SFC• RL’s M&E system measures coherence with ROP’s objectives

M&E

• Financial, economic and structural strengthening of the cooperative system as a key actor playing an important role in promoting the inclusion of excluded people in the local labour market

• Strengthening of the awareness of being shareholders and turnover reduction• 8.700 target people reached• 35 M€ of total capital’s injection towards the cooperatives’ system

Achieved results

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Conclusions

Focus on results

Asset consolidation30%

Further access to credit50%

Investment in energy20%

Main investment destinations

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Conclusions

Focus on results

M51%

F49%

Beneficiaries by gender

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Conclusions

Focus on results

15-24 2%

25-5480%

55-6419%

Beneficiaries by age

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Conclusions

Focus on results

Type A44%

Type B39%

Workers16%

Beneficiaries by cooperative

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Conclusions

• Hypothesis of a further supplement of the endowment of the fund• Evolutions and modifications of the tools must consider:

• results achieved (i.e. synergy with foundations and ethical banks)• rules (complex instrument, long procedures, strict regulation)

• Possible evolutions are:• strengthening of guarantees• simplification• more focus on disadvantage• contrast to poverty• guarantee for youth (r&d or new sectors such as green economy,

sustainability) and new emergencies (women, youth, etc)

Future

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Conclusions

• Respect of EU regulations’ provisions concerning information and publicity • Calls are published and FI provides information (information desks)• Transparency of selecting procedures

Information

• Only FL’s management costs are covered by the Fund• No FI’s operating cost is eligible• The funding agreement provides that FL’s management costs can not exceed

2% of the ROP contribution (actually less that 1%)

Operating costs

• De minimis

State aid

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Conclusions

• Pros and cons…• synergy of interventions is an opportunity• eligibility of expenditure is a restriction• focus on social inclusion is both an opportunity and a restriction

• Possible combination with other mechanisms and tools:• Combination with private sector: ethical finance• Combination with public policies: ERDF, typical tools of Active Labour

Market Policies

Use of ESF

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Conclusions

• Focus on disadvantaged people• First case in Europe• Coherence with ROP and EU

provisions and recommendations• High level of co-financing by the

private sector ensured• Coverage of the target and good

draugh of the instrument

Strengths

• Risk of discrimination for non-disadvantaged people

Threats

• Interest of the private sector (FI and social agencies)

• Presence of new needs in a context affected by the global crisis

Opportunities

• Complexity of the instrument• Limitation ESF (inclusion)

Weaknesses

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Thank you for your attention!

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