Co-operative for Ethical Financing

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Co-operative for Ethical Financing

Building an ethical bank from the bottom up – Goran Jeras, CEDRA HR and Ebank, Croatia

Case study presented to the OECD high-level capacity-bulding seminar Building enabling ecosystems for social enterprises, Brussels, 22-23 April 2015

The Croatian social enterprise support network CEDRA HR has been instrumental in founding Ebank, a co-operative bank to be launched later in 2015. It is innovating by writing its own software and integrating financial and non-financial support. Loans will follow the business lifecycle and the bank will participate in profits. A process of ‘capacity matching’ will allow co-operative members to support projects. A close relationship with borrowers will enable the bank to proactively find solutions to mitigate risk, such as improving distribution channels to create win-win-win solutions that benefit the bank, the borrower and third parties.

CEDRA HR, the Cluster for Eco-social Development (Cluster za Eko-društvene Inovacije i Razvoj) is Croatia’s national network of support centres for social development and social enterprise. Set up in 2011 at the initiative of several non-profit organizations, it has a national office in Zagreb and five regional support centres in Osijek, Split, Rijeka, Čakovec and Dubrovnik. It has 24 staff members, 21 volunteers and 40 consultants who provide information, advice and training to social enterprises, normally free of charge. It is financially stable and sustainable, and is funded by membership fees, EU and national grant aid, and earned income.

Along with 400 individuals, NGOs, enterprises, trade unions, cooperatives and municipalities, CEDRA is one of the founders of the Co-operative for Ethical Financing, which is in the process of setting up an ethical bank – Ebank – with the support of the European Commission under call for proposals VP/2013/017 ‘Supporting the demand and supply side of the market for social enterprise finance’. It has so far raised some €10 million, and plans to start operations in the second half of 2015.

It proposes to set up a EuSEF, under the aegis of an existing fund manager, which will initially be financed to the tune of €15.5 million from three sources: €7.5 million from the EIF’s Social Impact Accelerator programme, €7 million from the Croatian Ministries of Labour and Entrepreneurship, and €1 million from municipalities. In 2017 it hopes to attract a further €1 million from private investors. Offers of finance from ethical banks abroad have been refused in favour of a bottom-up approach.

The bank aims to fill a gap in the market for loan and equity investments of between €100,000 and €250,000 in social economy enterprises. It will start in Croatia, but there is interest from Slovenia and Greece in expanding into a regional institution. To mitigate risk, it will combine finance with obligatory mentoring support and extensive monitoring, and also intends to obtain a 50% guarantee from HAMAG BICRO, the Croatian Agency for SMEs, Innovation and Investments.

The project is based on close contact and networking. Market research over the past two years indicates that an interest rate of under 4% will be appropriate, so the bank will therefore not pay interest on deposits, but it will also launch an investment fund. The bank will reinvest in excess of 90% of its surplus.Nevertheless, the project is facing a number of problems:

  • long-term funding needs to be found for support structures
  • co-operatives pay more tax than other companies
  • impact measurement implies higher operational costs
  • the Basel Accords impose unnecessary costs as they demand reporting on derivatives etc. that the bank will not use


Speech by Goran Jeras at SEE2 – Scaling up Social Economy Enterprises in South East Europe conference, 24-25 April 2017

It is astonishing that Croatia went from 100% social enterprise prior to independence - to less than 1%. The co-operative started by identifying people who believe that all economy should be social – if it is not social, what is it? So, we started with the money. After 3 years the co-operative has over 1,050 members, one-third of which are companies, including farms, a shipyard and spaceship manufacturer. All share the idea that the economy should ensure the wellbeing of the country. The largest co-operative in Croatia accounts for 5% of the country’s co-op members. There are 80-100 social enterprises in Croatia. Many employers will accept a lower profit rather than lay off employees, so they have some social economy principles. We encourage collaboration since the social economy is close to the collaborative economy. So we focus not on start-ups, but in modifying the behaviour of existing companies, such as food processors, hotels and restaurants. We encourage them to source food locally, which stems rural depopulation. It is all on a small scale, but we have planted a seed – that a firm’s behaviour can have a community impact.

We have a bank licence – the first granted for 18 years – and are collecting a capital of €10.5m. We hope to start a process of transformation. A sister organisation in Slovenia has started, so things are moving in the right direction.