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AFIN will grow slowly but surely, along with the social investment market in Romania

 

Interview with Ancuța Vameșu, co-founder of AFIN IFN S.A. and member of the Board of Directors. Ancuta Vamesu has been working in the social economy sector for over 25 years and believes that the traditional financial market logic is not designed to support the development of economic operators with social impact. This is the context in which AFIN appeared - the first non-banking financial institution that will offer exclusively dedicated lending products for social economy operators. However, AFIN cannot do everything alone - it will need an entire financial ecosystem for the social economy.

 

You are one of the four co-founders of AFIN IFN S.A. Why did you choose to get involved in this project?

At the beginning of my career, back when I was running an important foundation, we were trying to start a major program in Romania; we had a funding contract signed with the European Commission and the project payments from the funder were late. We wanted to start, we were ready - we tried to get a bank financing with a signed financing memorandum, and we couldn't find a financial-banking institution that would even talk to us.

We faced similar situations in the next 15-20 years, and each time we encountered the same difficulties. I told myself that when the opportunity arises, I will try to change this situation - so that non-profit organisations can be treated like any other business in Romania. A company should not be penalised for choosing the non-profit legal form - quite the contrary, I would say. The criteria that should take precedence in a financial institution's assessment of the application for funding of an institution/enterprise are the ability to pay and, of course, the social and economic impact.  

 

You discovered the social economy more than two decades ago. How does this sector look today, three decades after the Revolution, and why is it important for a functioning economy?

Yes, that's right - 25 years - I did the first study on cooperatives in 1998 with a colleague who is now in the US, Daniel Saulean,  http://www.fdsc.ro/documente/29.pdfOf course, for a long time we considered the third sector as the non-profit sector - associations and foundations - according to the internationally accepted definitions of the United Nations and its statistical accounts defined by Professor Lester Salmon of Johns Hopkins University with whom I had the pleasure of collaborating on the first international comparative study on the non-profit sector, which included Romania, a study conducted under his coordination. The non-profit sector is also the institutional framework of civil society - which, of course, includes many initiatives and social movements that are not all clearly institutionalised. Meanwhile, all international institutions have accepted that the third sector is the social economy which includes the non-profit sector as an integral part. Only in the last year three international institutions - the International Labour Organisation (ILO), the Organisation for Economic Co-operation and Development (OECD), to which Romania is in the process of joining and the United Nations - have given their recognition to the social economy. This sector, in fact, groups together the non-profit sector with the cooperative sector and, most recently, the social enterprise sector. It is the recognition of an economic and social reality. In capitalist societies, there are many types of firms and forms of organisation of capital, workers, producers, firms with other purposes than shareholder profit, with purposes related to the benefits of members workers, producers, consumers or with social purposes. This sector is, of course, larger and stronger in countries where it has had an uninterrupted evolution of political change. In former communist countries, the situation became more complicated because of the political, economic and social reforms of the period 1944-1989 and the transition 1990-2000. For example, in Romania, the agricultural cooperative was destroyed by forced collectivisation and the workers' and consumers' cooperative was demutualised and privatised in the period 1990-2000.
Sectorul non-profit este și cadrul instituțional al societății civile – care include desigur multe inițiative și mișcări sociale care nu toate sunt clar instituționalizate.  Între timp toate instituțiile internaționale au acceptat că sectorul al treilea este economia socială care include sectorul nonprofit ca parte integrantă. Numai în ultimul an trei instituții internaționale – Organizația Internațională a Muncii (OIM), Organizația pentru Cooperare si Dezvoltare Economica (OCDE)  la care și România este în proces de aderare și Organizația Națiunilor Unite – au dat recunoașterea lor economiei sociale. Acest sector grupează de fapt sectorul non-profit cu cel cooperatist și, cel mai recent, cu cel al întreprinderilor sociale. Este recunoașterea unei realități economice și sociale. În societăți capitaliste există mai multe tipuri de firme și forme de organizare a capitalului, a lucrătorilor, a producătorilor, firme cu scopuri altele decât profitul acționarilor, cu scopuri legate de beneficiile membrilor lucrători, producători, consumatori sau cu scopuri sociale. Acest sector desigur este mai mare și mai puternic în țările în care a avut o evoluție neîntreruptă de schimbări politice. În țările foste comuniste situația a fost complicată de reformele politice, economice și sociale ale perioadei 1944-1989 și tranziția 1990-2000. De exemplu, în România, cooperația agricolă a fost distrusă de colectivizarea forțată, iar cooperația lucrătorilor și consumatorilor a fost demutualizată și privatizată în perioada 1990-2000.

In the Barometer of the Social Economy, you documented the issue of social funding in Romania. What challenges do social entrepreneurs face in this respect?

There is a general mismatch between traditional business financing instruments and the realities of social economy enterprises. Their specific business models are insufficiently known and understood. Lack of full understanding of the specificities of these models (such as limited or non-distribution of profit, user/consumer or needs-based focus, participatory decision-making, democratic governance or shared ownership) makes it difficult for them to access traditional financing and instruments supporting SMEs in general. The financial market logic is not designed to support economic and social development. Financial markets do not capture and compensate for the social added value of the social economy and the mission of enterprises in this sector of general or more limited interest to members. Social economy enterprises are often paid only for the cost of the service they provide, not for the social value they create, and their financial return is limited. The fact that the social mission takes precedence over profit maximisation can lead to the false impression that they are higher risk and less reliable than other types of enterprises. In reality, some studies, facts and data show the opposite. Specialised financial institutions, social, ethical and cooperative banks offer tools specifically designed for social enterprises.

AFIN positions itself as a unique financing institution in Romania through its mission, the way it attracted the first investors, etc. Where do you see AFIN IFN S.A. in 5 years?

AFIN can't do everything alone. We need a financial ecosystem for the social economy based on a multilateral approach that brings together diverse resources and instruments, including multi-stakeholder systems (social economy enterprises, private depositors/investors, public sources, pension funds - why not?) specific to social and solidarity finance institutions that bring together both monetary and non-monetary resources - based on trust and building social and supportive relationships, sharing common goals and norms. There are no social or solidarity investment funds in Romania as there are in France, for example, which has a law on social and solidarity financing that also provides tax incentives for investment in this sector, including private pension funds. AFIN will grow steadily along with the social investment market in Romania, potentially becoming the catalyst for an important development in this sector.