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Social Innovation Funding: SIE speaks to ERSTE Foundation

As part of SIE’s feature on Innovation in Philanthropy, we spoke to Franz Karl Prüller, Member of the Board at ERSTE Stiftung (ERSTE Foundation). As a Foundation that not only develops and implements projects itself but also gives grants to non-profit organisations, we were keen to understand their perspective on social innovation in Europe and how it can be supported in terms of both finance and sustainability. Below you can find a summary of the discussion, highlighting the concepts, changes and challenges to funding social innovation. 

Based in Vienna, Austria, ERSTE Foundation actually has its roots in one of the first social businesses. In 1819, several Viennese citizens founded a private association to enable ordinary working class people to make savings for the future and provide a secure and independent livelihood for themselves and their families. Previously a service reserved only for the wealthy, ERSTE Österreichische Spar-Casse (first Austrian savings bank) was truly innovative.

This original savings bank is now known as the Erste Group, a retail banking group with subsidiaries in seven other countries across Central and South Eastern Europe servicing 17 Million customers. Still in operation almost 200 years later, it is one of the largest savings banks in Eastern Europe and evidently sustainable. From this savings bank, ERSTE Foundation emerged as its legal successor. The Foundation currently controls just over 20% of stock in the Erste Group Bank AG and invests its dividend revenue in the development of societies in Austria, Central and South Eastern Europe.

Born out of social innovation, ERSTE Foundation aims to pioneer this movement today. Their work focuses on three key programmes – Social DevelopmentCulture, and Europe – in order to create development, give access to ideas and people, and support positive change.

Funding Innovation

According to Franz Karl Prüller, ERSTE Foundation aims to fund activities which will have a multiplier effect. He outlined three key means of achieving this: 

1. Competitions to award outstanding social innovations 

For example, the ERSTE Foundation Award for Social Integration highlights and showcases social innovations that have a proven impact, are inclusive of communities and have a replicable structure. Aside from the financial prizes, finalists and winners receive media recognition and capacity building workshops in the Foundation's NGO Academy. In addition, the ERSTE Foundation supports the Social Impact Award in partnership with the Institute for Entrepreneurship and Innovation of the Vienna University of Economics and Business. The project is an ideas competition which challenges students to try to solve current social problems in an innovative and entrepreneurial way. Through awards and competitions with financial incentives, ERSTE Foundation aims to inspire others to get involved in the social innovation movement. 

2. Banking for the unbankable

In 2006, ERSTE Foundation founded the Zweite Sparkasse, the bank for the unbankable. Zweite Sparkasse is an extension of the original ERSTE Österreichische Spar-Casse (‘zweite’ is German for ‘second’ and ‘erste’ translates as ‘first’) and provides bank accounts to those who, for various reasons such as unemployment, divorce or illness, have fallen into debt and therefore have been denied access to banking services. As an issue that affects an estimated 40,000 people in Austria, ERSTE Foundation aims to reconnect these marginalised groups with a vital piece of infrastructure in our modern society – the bank account. In partnership with other NGOs in the field, Zweite Sparkasse offers financial counselling to support customers in regaining control of their finances. Franz Karl Prüller explained that staff from the Erste Group Bank volunteer their time and make up the entire workforce at Zweite Sparkasse. He described how these volunteers, originating from the harsher corporate environment, often undergo both a personal and professional transformation when they witness the positive impact of their work at Zweite Sparkasse. This banking for the unbankable initiative seeks to help people help themselves and foster financial sustainability. 

3. Micro financing in Eastern Europe

ERSTE Foundation co-founded good.bee Credit, a micro lending operation in Romania that provides micro loans and consultancy to low income clients and small entrepreneurs from rural areas and small towns. The initiative promotes local economic development and job creation, as well as examining wider social banking issues such as geographic isolation. Franz Karl Prüller identified the Roma population as a primary challenge in ERSTE Foundation’s mission to foster social development and integration. He explained that the Foundation use both local and global methods to tackle the issue. Firstly, through the applications to the ERSTE Foundation Award for Social Integration, ERSTE Foundation has a good knowledge of grassroots initiatives in these communities. At this local level, they work with contacts to further their mission and support community development with the goal of social inclusion. Secondly, through modern media, ERSTE Foundation promotes Roma to start a career in journalism. This leads to a double effect: stories from this marginalised community highlight the possibilities for integration and support job creation. This global activity fosters the sharing of ideas, knowledge, training and understanding.  

The development of social innovation funding in recent years

Franz Karl Prüller stated that there was not a clear cut answer for whether or not funding for social innovation had changed over the last couple of years. He agreed that there was a new focus on reaching out to young social innovators, through initiatives such as the Social Impact Award (as mentioned above). There is an increasing realisation that young people across the world can be inspired to take part in the movement. As they’re integrated into the global network through modern technologies, today’s youth – wherever they may live – have access to both the information sources and the contacts to pursue social innovation. They are becoming more and more connected and involved with social challenges and their potential solutions, which has opened up new funding initiatives to support this engagement. However, he was pessimistic about the overall political and economic environment for social innovation in Central and Eastern Europe, describing it as “stagnant” at best. The high levels of corruption, still prevalent in many countries, kill the innovation movement and its development. 

The challenges to funding social innovation

Franz Karl Prüller explained that social innovation has one of two impacts: it tackles either the root cause of an issue or its resulting symptoms. Current funding appears to focus more on the latter which, though effective in easing the symptoms, will not bring about long-term solutions. Prüller argued that we must change our outlook and concentrate funding on initiatives that will directly tackle the underlying problems in order to have a sustainable impact.

Social innovation funding must also be aware of the evolution of social innovation needs. For example, in the past it was the industrial masses that were the target of social innovation. This has now changed to concentrate on smaller, marginalised groups and more specific causes of exclusion and non-participation. Social innovation funding must constantly reassess its focus and make sure it meets the needs of society.

In addition, Prüller highlighted that social innovation means different things to different people. What might seem new and innovative in some Eastern European countries may seem like old news in Western Europe. Essentially, it is subjective. Social innovation funding should therefore concentrate on enabling networking, learning and the transfer of tried and tested ideas across borders, instead of investing in the discovery of old ideas.

Franz Karl Prüller concluded by saying that he did not believe there was one specific region that should be held as the exemplar for social innovation development. Various countries have various approaches with various results. It is only important that we identify examples of best practice and share this knowledge globally to replicate successes. As such, ERSTE Foundation views its role as an enabler that propagates ideas and develops initiatives.

SIE would like to thank Franz Karl Prüller and Erste Foundation for taking the time to speak with us. 

If you would like to learn more about the Foundation and their work, please visit the ERSTE Foundation website: www.erstestiftung.org/