Erste Group’s social banking advances ‘step-by-step’
‘Step-by-step’, Erste Group’s social banking program has been supporting early-stage entrepreneurs, social organizations and low-income individuals in Central and Eastern Europe (CEE) since 2015. Mirjana Šakić from Erste’s Social Banking Development team tells Efma more about this sustainable initiative.
In the seven countries where Erste Group operates – across Austria, Croatia, Czech Republic, Hungary, Serbia, Slovakia and Romania – there are approximately 15.9 million people at risk of poverty or social exclusion. Since its founding in 1819, offering basic banking services to each and every one of them has been Erste Group’s main purpose.
“Over the course of the past decades, the CEE region has consistently proven that it is the EU’s growth region, but at the same time there are many individuals and organizations in the region that do not have access to even basic financial services,” explains Mirjana Šakić.
“None of the traditional commercial banks were willing to finance any micro, non-profit or social business, as they were perceived as being too risky, especially if they were established by young people, women or other marginalized or excluded groups. Driven by its founding principle of supporting the spread of prosperity among the people of its region, Erste decided to address this shortcoming and launched a group-wide social banking initiative in 2015.”
‘Step-by-step’ is Erste Group’s flagship approach to social banking, which focuses on making a positive impact on society through three main lines of action: firstly, by improving financial stability and inclusion for low-income individuals; secondly, by encouraging job creation and self-employment through financial support for budding entrepreneurs; and thirdly, by fostering the development and maximizing the impact of social organizations.
“We believe that social banking contributes substantially to people’s empowerment by providing access to products and knowledge for all, thus enhancing inclusiveness and equality. Through our network of local banks and in partnership with other organizations, we provide traditionally disadvantaged segments not only with tailored financial products, but also with financial literacy, business education and mentoring to support them in growing and making informed financial decisions in the future,” says Šakić.
“In less than 4 years, over 25,000 clients – starting entrepreneurs, social organizations and small farmers – have made use of our social banking offering and contributed to the creation of almost 14,000 new jobs. Our total loan volume has exceeded EUR 250 million, but education is as important as financing, and both are at the heart of our approach to social banking,” she continues.
The first impact assessment of Erste Group’s social banking activities across the CEE region, published in November 2018, showed that over 2,500 starting entrepreneurs have already benefited from the initiative. Alongside business mentoring and e-learning to boost their financial confidence, Erste Group has provided more than EUR 60 million worth of financing to aspiring entrepreneurs, in turn creating almost 5,000 jobs in their communities to date.
In addition, Erste Group has supported around 400 social organizations, helping them tackle more efficiently some of the most pressing issues in CEE, including youth unemployment, social integration and poverty. As a result, over 3,100 and 6,100 jobs have been created and preserved, respectively, in the social sector. Moreover, 82% of the recipient organizations reported that they are now able to better fulfil their social mission, reach more people and start new projects. In total, EUR 40 million of financing was granted by Erste Group, comprising working capital loans to cover late payments of subsidies or grants; bridge loans for pre-financing or co-financing EU/local government projects; and investment loans to support the expansion of these organizations.
“Even before the launch of the Step-by-step initiative, Erste, jointly with ERSTE Foundation, started initiating and implementing projects such as Zweite Sparkasse (a dedicated social bank in Austria supporting people without access to banking services) or good.bee Credit, a microfinance company providing loans to small farmers in rural Romania. In 2015, we also launched a housing finance program for Roma people in excluded communities in Slovakia combining financial education, a saving scheme and micro credit for building a decent and affordable house for their families,” says Šakić.
As of November 2018, good.bee Credit had provided microcredits to 6,500 small entrepreneurs from rural and small urban areas in Romania. The subsidiary granted nearly 10,000 micro-loans, worth more than EUR 70 million in total, mostly to farmers. As a result, 6,000 jobs were created and 70% of clients who registered managed to boost their household income and invest it back into business development as well as improvements in their living conditions.
Watch this clip to find out how Erste Group’s housing finance program helped Adriana and Igor in Eastern Slovakia build a new home:
For another example of Erste Group’s social banking projects, take a look at the story of Cafe Vollpension, a social enterprise that is fighting against social isolation of the elderly in Vienna and uniting them with young people in the workplace: