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CEE’s Surge in Social Entrepreneurship Challenges Historic Perceptions of Government

Despite overall economic convergence with its Western neighbours, Central and Eastern Europe still has one of the world’s largest deficits in ‘social capital’ – defined broadly as trust in institutions and civic engagement. But a rapid rise in social enterprise suggests a significant shift is afoot; it has the potential to improve the region’s prosperity and economic resilience, and expand its already dynamic start-up landscape.

Dita Prikrylova has the potent mix of tech skills and business prowess to be a formidable businesswoman. Her successful start-up, Czechitas, “brings tech to girls”, selling low-cost technology training to women in Czechia so they can qualify for jobs in IT. But for Prikrylova, success isn’t measured in currency but in graduations and jobs.

Czechitas is a social enterprise, a mostly self-financing operation whose goal is to enable people to secure meaningful jobs. “We did Czechitas without any state, EU or municipal grants,” Prikrylova says. “We financed our costs and activities with our own income.”

Just as regular start-ups are mushrooming across CEE, so are social enterprises – sustainable businesses with a social agenda – and for countries like Czechia, this trend is highly noteworthy, marking a dramatic and important departure from the past.

Just three decades ago, Communist governments were solely responsible for social welfare. They provided all services. Private organisations – even socially constructive ones – were deemed a threat. Volunteering was in fact involuntary and imposed by the state through mandatory youth groups as opposed to being motivated by civic participation, explains Alisa Moldavanova, Associate Professor of Political Science at Wayne State University and editor of a book on nonprofits in the former Soviet bloc. People helped friends and family. They didn’t help strangers in the community, Moldavanova says.

Now this is changing.

Czechitas epitomises the slow metamorphosis. The idea sprang from a university course that Prikrylova attended in 2014 addressing the skills mismatches affecting women in the region. Once the course was complete, Prikrylova and some friends decided to continue the work they had been doing, in their own time, unpaid.

“It didn’t cost anything at first,” she says. “Just time.”

Within a year, Prikrylova had quit her well-paid job as a programmer and data analyst to work on Czechitas full time. A grant from Google got the ball rolling and now Czechitas has regular classes in eight Czech cities. They charge just a tenth of the commercial price, Prikrylova says, but hold hundreds of courses per year, which is enough to be viable.

Education is not the only sector attracting social enterprise. Public services across the board are perceived to need modernisation, which is motivating the region’s younger population in particular to lean towards greater civic engagement. In 2012, Oana Gheorghiu and Carmen Uscatu co-founded Daruieste Viata, an NGO whose stated mission is “to challenge the status quo”. It has managed to raise €26 million from more than 260,000 individuals and 1,700 companies to build and equip the country’s first paediatric oncology and radiotherapy hospital.

Romania does not have any clinics or hospitals where children with cancer can receive end-to-end treatment. “When I saw around 30 children with cancer and their families having to queue outside the toilet in a Bucharest hospital, I was so sad that I said to myself, ‘Something has to be done’,” says Gheorghiu. Her colleague Uscatu observes: “Within three weeks, we'd received €4 million from corporate donors. It was a social phenomenon – an unprecedented outpouring of empathy and common action." Daruieste Viata’s biggest coup was a €10 million donation from OMV Petrom, a Romanian energy company. Last year, OMV and Petrom gas stations across Romania raised more than €50,000 in customer donations.

As encouraging as these examples sound – still, overall, attitudes change slowly. According to a 2017 poll by the Pew Research Center, 89-94 per cent of people across CEE thought it was the government’s job to help the poor. Only around a third said they had done charity work in the previous year and less than half had donated money to a charity, Pew found. A similar global survey by Gallup, conducted in the same year, showed that donations, charity work and volunteering tended to be conducted by more than half of respondents in most Western European countries.

The Legatum Institute’s 2019 Central and Eastern European Prosperity Report, released in partnership with Erste Group, shows that social capital is low throughout the region and extremely so in some CEE countries. This social capital deficit, a legacy of communism, means that the bonds of trust between citizens and institutions are substantially weaker than those elsewhere in the world. When trust between people extends only to immediate family and friends, it weakens civil society and civic engagement.

In the meantime, while attitudes change organically, from the youth up, the need for support and cooperation from policymakers becomes obvious. Governments can support social enterprises by reducing bureaucracy that hampers their creation and by providing capital more efficiently. Currently, accessing government funds requires an abundance of paperwork. “We did get a grant but for the amount of money we were given, we used half for administration,” says Dita Prikrylova of Czechitas.

Young entrepreneurs like Prikrylova are more pro-business, educated and socially minded than their parents and grandparents. They’re more demanding of their governments too but unlike older generations they’re more likely to believe that change is their job. But while contributing to building up social capital, social entrepreneurs cannot single-handedly manage societal change. “You cannot expect them to do all the work,” says Oana Toiu, Co-founder of Social Innovation Solutions, a solution incubator based in Romania and former State Secretary in the Ministry of Labour.“They cannot completely replace regular public and private investment to solve the most pressing societal problems.”