Interview with Bogdan Merfea, co-founder and chairman of the board of AFIN IFN SA

"The differentiating element of AFIN is represented by how we will analyse the eligibility of projects, with the introduction of social impact criteria." An interview with the co-founder and chairman of the board of AFIN, Bogdan Merfea, about the beginning of this institution, its long-term plans and how it intends to support the social economy sector.

You are one of the four co-founders of AFIN. How did the idea of creating this financial institution come about?

Like any business initiative that aims to enter the market, the creation of the non-banking financial institution AFIN IFN SA was born out of a need expressed but also observed by me during my banking activity, that social economy operators have to have access to financing. The need to obtain funding to enable them to develop their business ideas. For this category of actors, mostly micro-enterprises, financing in the understandable sense of banking rules is difficult: very low capitalisation, lack of guarantees, less experienced management, lack of track record. In this context, alongside social entrepreneurs, actors with relevant experience in the non-profit sector, but also entrepreneurs from the real business environment, we decided that it was the right time to establish a non-bank financial institution that would address social economy operators with appropriate products, with small and medium tickets, which would meet the needs of this segment. To grow, to become sustainable, and then be financeable by the financial banking system.


What does the social financing market in Romania look like compared to other European countries? What will AFIN bring new?

Before discussing the financing market, it is important to understand that in the EU, the contribution of social economy operators accounts for 8% of the EU's GDP, with 13 million employees, making it a significant sector that creates jobs, especially with a lot of job stability. In our country, the social economy sector currently accounts for only 2% of GDP and employs only 3% of total employees, indicating a significant opportunity for this sector to develop rapidly in the coming years. And how can an entrepreneurial sector develop without access to financing? In countries with a tradition of supporting this sector, such as France, Italy, Spain, Germany, Austria, to name just a few examples, there are specialised institutions, dedicated investment funds, specialised banks, and cooperative banks that understand the financing particularities of this segment. AFIN IFN SA is a fledgling institution that will integrate into the financial landscape by offering products suitable for this segment and will contribute to its development by preparing social economy operators to qualify for larger financing from traditional credit institutions and meet specific financing criteria. And not only will they have access to credit, but they will also attract capital from private investors from Romania and abroad.


AFIN IFN SA will exclusively provide credit to economic operators in the social economy sector. What types of loans will you offer, and how will the financial analysis be combined with social impact analysis in selecting beneficiaries?

The credit products will be the classic ones: working capital loans and investment loans. Initially, we will focus on small tickets, averaging the equivalent of 20,000 euros. However, the differentiating element of the products will be the way in which we will analyse eligibility by introducing significant weight criteria for the social impact of the financed project in the financing decision. And for this, we have specialists who have the necessary knowledge to evaluate this type of impact. In fact, this is the core of the social economy operator's business philosophy: in addition to achieving a financial impact, it aims to achieve a significant social impact.

Another specific element of AFIN is that you will offer consultancy and mentoring to clients who request financing. Why such a service? 

The social economy sector is growing in our country, but it is still in the phase where it needs to solidify, accumulate specific knowledge of the entrepreneurial and financial sectors. And in these conditions, we will offer consultancy services, mentoring, guidance to become eligible for financing or, as the case may be, for attracting capital, depending on the stage of development. And here, we are innovative through the business model. The founders of AFIN IFN SA have also established the Social Finance Association, an NGO, which is also a shareholder of AFIN but has also started delivering entrepreneurship courses and developing digital tools since last year, which will complement the AFIN IFN SA business model with agility. For example: maybe an entrepreneur will not be eligible for financing by AFIN IFN SA from the first application, but through SFA, we will prepare them for attracting capital or financing from other institutions in Romania, such as banks, and why not, institutions from outside the country. Do you know of any institution in Romania in the field of social economy that aims for this mission?

What is the role of the Social Finance Association?

As mentioned above, the role of SFA is that of a business integrator, contributing to offering a complete package of products to operators in the social economy. Of course, not everything will be perfect from the beginning, but we have over 150 operators in the social economy as shareholders. This supports the need for the existence of AFIN and, through their will and dedication, accumulated experience, we aim to become, in 5 years, a solid financing institution for the social economy with a loan portfolio of over 10 million euros. It should also be noted that SFA is already recognised in Europe, being an associate member of FEBEA (the European Federation of Ethical and Alternative Banks in Europe). 

Very soon, AFIN will also be recognised as a financial institution in the European forum of ethical and alternative banks. Moreover, yet another novelty: AFIN IFN SA is a registered social enterprise in Romania, being unique as a financial institution.