Brussels, 29/07/2011 (Agence Europe) - Encouraging private funding and facilitating public support for social entrepreneurship: these are the two major ideas in the draft exploratory opinion of the European Economic and Social Committee (EESC) on funding social enterprises. The draft was presented at the public hearing on Thursday 28 July, to which civil society players were invited (see EUROPE 10429). The outcome of the debates will be used by the European Commission which plans to publish a communication, “Social Business Initiative”, before the end of the year. Noting that no specific financial instrument exists for social entrepreneurship, the EESC draft seeks to propose a number of avenues to be explored. These can be divided into two main groups. Firstly, to encourage the development of a social investment market, the EESC proposes to encourage the emergence of (so-called, intermediate) “capital providers”, specifically to provide aid for company management and for seeking capital, the examples cited were the Social Enterprise Coalition, Unlimited, Common Capital and Charities Aid Foundation. Initiatives, often by banks, which create “social investment funds”, should also be better supported, in the view of the EESC. The second group is based on public participation, for example, by means of “hybrid capital” which could include a “subsidy component for the start-up phase” and “other forms of low-interest loans”, as well as specific funding from the structural funds. At any rate, with regard to this last point, the Commission representative, Emmanuel Vallens, Policy Co-ordinator, DG Internal Market and Services, stated that “the structural funds can only serve as a lever, as they presuppose already existing public or private involvement at national level”. This is perhaps the key point on the funding of social entrepreneurship. For social enterprises to enjoy an environment that is conducive to their development and to be able to apply for help from the European budget, the political choices of the member states are critical. These differ widely, as was demonstrated by Rafael Chaves of the International Centre of Research and Information on the Public, Social and Cooperative Economy (CIRIEC). A further problem, which relates to both public and private funding, is that “despite having a fine reputation, social entrepreneurship is seen as financially risky and not very profitable”, remarked Frank Hinrichs of Vivatus GmbH. He mentioned three basic reasons. The first is linked to the “issue of socialisation”, banking and financial circles being little used to working with social entrepreneurs. Secondly, investors are unwilling to put themselves in a position where “they feel they could be caught in a trap in the event of difficulties, unable to lay people off or allow a social enterprise to go bankrupt without damaging their image”. The final reason is the lack of any guarantee as to viability, perceived as being more unlikely than for a normal company in the first year. Aware of these difficulties, the EESC called in the draft for the Commission to launch “an EU-wide comparison of public funding options and agreements specifically adapted to these companies”. (J.K./transl.rt)