Malcolm Hayday

If you Google social enterprise development in Hungary you get singular references to the CEE Trust and the Euclid Network but almost all the content comes from NESsT, which began its work with nascent social enterprises in Hungary almost 15 years ago. It was therefore no surprise that the first Social Enterprise Day, held in Budapest on 3 June, was organized by NESsT and was a showcase for NESsT and its portfolio’s work in addressing critical social issues.

The Day was actually the culmination of three days of events: a private day among NESsT and its portfolio organizations; the Social Enterprise Marketplace at the Hungarian Venture Capital and Private Equity Association conference and the NESsT-Citi awards for social enterprise performance; and the Social Enterprise Day. The latter was attended by some 120 social enterprises, community organizations, charities, one or two bankers and funders and government officials. A similar event was held contemporaneously in Santiago, Chile but an opportunity was missed to link the two and to appreciate the global reach of social enterprise.

NESsT had previously surveyed the Hungarian market in depth in 1999 and, in a key part of the Day, reported its new findings, ten years on. There has been some improvement but nowhere near enough. Social enterprise development appears focused on social marginalization and employment. While the development of the non-profit Ltd (KfT) corporate legal form is a help, there is still a lack of awareness of the potential of social enterprise among policymakers. With donors also considered to be averse to making risk investments – as opposed to grants – social enterprises have to embrace business tools and become self-financing if they wish to grow.

NESsT issued a call to action based on recommendations for four groups: the audience, funders, social enterprises and government: the development of a more supportive infrastructure; a paradigm shift in the thinking of non-profits about independence; new structures (business skills) and innovation; donor education, risk-taking attitude and combining financial support with capacity building; and policy initiatives at national and EU level.

Therein lie some key challenges. Hungary is not a large economy and the role of social enterprise within it is still tiny. If social enterprise is to flourish it needs a social capital market – probably on a regional basis – to be sustainable. Funders need more case studies. They need advisers to help them invest and understand the impact they can have. Government needs to facilitate much more capacity building and investment readiness. There need to be more sources of finance: social business angels; patient capital; more venture philanthropy; social investors. In time a social bank or two for it is clear that this is a market the commercial banks really don’t get. Above all, right now, social enterprise needs a platform, a voice.

For the past 15 years NESsT has been pioneering most of this on its own. By necessity it is doing too much and must allow others to pick up the call to action it has championed. The NESsT team in Hungary and the wider central Europe has achieved amazing success with its portfolio over 15 years. It has learned what works and what doesn’t but a market will only develop when other actors enter the stage. Then funders, commissioners and purchasers will want to engage. Joint chief executive of NESsT Lee Davis called for a national social enterprise strategy. Government can do more, but does the reality of social enterprise development in Hungary today really connect with the reality portrayed by the government? Be careful what you wish for.

Malcolm Hayday is chief executive of Charity Bank. Email mhayday@charitybank.org