SOCIAL ENTERPRISE AS A STRATEGY TO PROVIDE ECONOMIC

OPPORTUNITIES FOR PEOPLE WITH DISABILITY IN KOSOVO

AN ASSESSMENT OF THE STATE OF SOCIAL ENTERPRISE AND ITS

POTENTIAL

SEPTEMBER 2011

By NESsT

Eva Varga,

Viktoria Villanyi

2

Table of content

Introduction 3

I. Background 4

Brief overview of the political situation 4

Brief overview of the economy 4

Civil society and the NGO (non-governmental organizations) sector in Kosovo 5

II. Overview of the social enterprise sector in Kosovo 7

Social enterprise development programs 9

III. Overview of the disability sector in Kosovo 12

Key challenges for disabled people in Kosovo 13

Employment 14

Social service provision 15

Financing mechanisms: projects and subsidies in the disability sector 16

Niches and opportunities for social enterprise in the disability sector 17

IV. Trends in financing social enterprise 19

V. Social enterprise perspectives: challenges and opportunities 21

VI. Policy makers perspectives 23

VII. Conclusions 26

VIII. NESsT Recommendations 28

Appendix 1: Case studies 29

Hendifers wheelchair manufacturing workshop 29

The coffee shop of Down Syndrome Kosovo 30

Appendix 2: Literature list 32

Appendix 3: List of interviewees 34

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Introduction

In May-September 2011 NESsT conducted research to map out the social enterprise sector in Kosovo with special focus on those enterprises that target the employment of people with disability. This was the first phase of a social enterprise project within the framework of the EBRD TAM project in Kosovo. NESsTs aim was to explore the background of the social enterprise sector and its development trends (does it exist at all, what level of development has it reached?), the support systems it may rely on, the legal environment it operates in, the challenges and opportunities it faces, and the impact social enterprises may have on the employment of and economic opportunities for people with disabilities.

Research methodology:

NESsT research consisted of secondary research, whereby we reviewed existing studies, statements, strategies, policies and legal regulations (printed and online). We supplemented the information found with primary research data, which was taken from 21 in-depth interviews that NESsT staff conducted in Pristina on June 7-10 and via the telephone in subsequent weeks. The interviews were conducted with a variety of stakeholders interested in social enterprise, disability issues and the combination of the two: foreign donors, enterprise development programs, enterprise support schemes, chambers of commerce, business associations, government offices, social entrepreneurs, non-profit organizations and a bank (see the list of interviewees in Appendix 1). This report summarizes our findings from all of the above and gives recommendations based on those findings and NESsTs experience in social enterprise development.

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I. Background

Brief overview of the political situation:

Almost three years after the Assembly of Kosovo adopted the Declaration of Independence resulting in

end of the decade-long UN protectorate of the territory, both domestic institutions and international

missions main focus and biggest challenge is the state-building process in the post-conflict and

transitional Kosovo.

The building and strengthening of the countrys state institutions have been progressing without

noticeable success. The rule of law is weak, not functional, which results in the failure of implementation

of many existing regulations and rules, including those affecting the lives of people with disability. The

Kosovo government and the international bodies main foci are to curb widespread corruption, establish

an integrated country, strengthen institutions and lay the foundation of economic development.

Starting in 2000, the UN-established interim international civilian administration United Nations Mission

in Kosovo (UNMIK), worked not only towards holding democratic elections and developing institutions

with the cooperation of the political leadership of Kosovo, but developed the most crucial laws and

regulations. The currently existing mixture of UNMIK regulations, laws adopted by the assembly and

certain Yugoslav laws still in force, together aim at full compliance with international human rights and

standards. Domestic ownership of these laws seems to be missing though, which combined with the

limited administrative capacity of Kosovos government contribute to their weak implementation.

Brief overview of the economy:

Kosovo has been building an open market economy for 10 years. This has so far resulted in a country

with a very small export-oriented sector focusing on minerals, wood products, charcoal, dried fruit and

leather products. Kosovos economy is extremely dependant on imports; in 2009, it imported $2.3 billion

in goods and services and exported only $238 million, resulting in a trade deficit of approximately 42%

of Kosovo's GDP. Kosovo's leading industries are mining, energy, and telecommunications1.

The existence of a huge informal economy is one of the key challenges of economic development. The

informal sector in Kosovo is assessed to be between 39% - 50%, using indicators such as number of

employees in the formal and non-formal economy, or number of enterprises covering formal and

informal areas2. Unemployment is a staggering 30-40%, which considering the countrys young

population, affects young people (skilled and non-skilled) in a disproportionate manner. GDP per capita

is the lowest in the region, leading to a high poverty rate.

1 http://www.state.gov/r/pa/ei/bgn/100931.htm#econ

2 http://mef-rks.org/en/download/other-publications-and-reports/3558-government-programme-for-prevention-of-

informal-economy-in-kosovo-2010-2012

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The recent global crisis had an impact on Kosovos finances, not only because of reduced export

revenues. It also reduced capital available both externally and internally; capital from financiers became

scarcer, while the inflow of foreign investments (not significant to begin with) has slowed down and the

remittances of the Kosovar Diaspora, which had been essential for the economy since the Balkan wars,

have also seen a major drop3.

Civil society and the NGO (non-governmental organizations) sector in Kosovo

Civil society as a term and social phenomenon entered the South

East European countries in the late 1980s with the strong

ideological support and huge financial donations of different

international organizations. These international actors coming from

many parts of the world have been committed to building and

developing civil society and the NGO sector as a pillar of the

democratisation process. They carry out a wide range of activities in

the social, cultural and human rights advocacy fields and are the

most likely sector for the incubation of social enterprises.

The number of NGOs was 4,882 at the end of the decade4, however

only around 500 were active in practice. Though most of the NGOs

operated in Pristina before the war, this capital-centred structure

has changed and many NGOs have been established outside of the

capital.5

NGOs carry out a wide range of activities in the social, cultural and

human rights advocacy fields. Until recently, the role of NGOs in

catering for disabled people was primarily advocacy and awareness

raising, which is what international NGOs (INGO) and foreign

government donors supported as well. Service provision was out of

the local NGOs scope, as they thought that was the task of the

authorities in Kosovo. Recently however, NGOs realized that there

are gaps in governmental service provision, thus some local

disability NGOs and some donors have started programs that

provide missing services or employment to disabled people.

INGOs have been important not only because of the kick-starting

development, but they have deeply impacted the structure,

3 Create the future, 27-30

4 Ministry of Public Services

5 Third Sector Development in Kosovo: challenges and opportunities. Advocacy Training and Resource Center (ATRC) EUCLID Network; http://www.euclidnetwork.eu/data/files/kosovo.pdf

On Freedom of Associations in Non-

governmental Organizations

Law No. 03/L-134

In 2009, a new law was enacted in the

Republic of Kosovo concerning the NGO

sector. The Act regulates the forms, the

establishment, registration, internal

management, activity, striking rights and

closing of NGOs. The Law differentiates

between associations (membership-based

organizations) and foundations without

membership established to manage

properties and assets. It also devotes a

specific chapter to international NGOs.

NGOs can obtain public benefit status

based on their activities and if they provide

their services to disadvantaged groups or

individuals for free or less than market value.

Those NGOs which operate in the educational

or health care field are obliged to detail the

features of the disadvantaged target groups

and beneficiaries they serve, as well as the

services provided.

NGOs may engage in economic activities, for the purpose of supporting their not-for profit

activities, and provided that the income is

used solely to realize the mission defined in

the NGOs statutes.

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orientation and the nature of the NGO sector in Kosovo. The abundant financial resources also strongly

contributed to the booming of the sector.

Grants, however, supported short-term, project-based financial resources. Donors tended not to offer

funding for general goals or for long-term operating costs for the NGOs. This undermined the capacities

and efforts for long-term self-sustainability of local NGOs from early on. Many organizations NESsT

researched had no concrete plans for the future. Some NGOs reported about their belief that

commercialization of their services and profit-making activities can provide more stability. Despite their

entrepreneurial initiatives, none of them had experience selling a service. Services are usually provided

for free to the beneficiaries (based on donors requests), thus revenue from them is low. Service

provision turned NGOs into apolitical organizations, as that is how they could fit into the paradigm

between the market and public services, where the market is the central mechanism of social cohesion

and economic well-being and in which public services should be provided with the involvement of non-

state (particularly non-governmental) actors.

Changing donor priorities also hampered the development of a long-term, strategic approach of the

NGOs. There were three waves of significant priority changes going from human rights, conflict

mitigation, inter-ethnic relations to gender and sexual orientation issues and finally to think-tanks and

advocacy groups. NGOs thus follow these donor priorities, in order to be able to have access to grant

funds, the only significant type of resources ensuring their survival. According to the latest NGO

Sustainability Index of USAID, the estimated number of NGOs with clear mission and strategic goals is

about thirty, the activity of the rest is donor-driven.6 Recent slow withdrawal of the INGOs, however,

has led most NGOs to understand the importance of funding diversification and finding alternative ways

to ensure their sustainability. Their transformation will have to be a long and assisted process. Currently

there is little effort to increase voluntary donations, revenues from sales remain marginal and the

government provided assistance to very few in 2010.7

6 The 2009 NGO Sustainability Index, Kosovo. USAID, 2010. p125.

7 Nations in Transit 2011, Kosovo. Freedom House, 2011. p287, 294-295.

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II. Overview of the social enterprise sector in Kosovo

NESs T defines social enterprise as a business that is created to address or solve a critical social problem in a financially sustainable (and potentially profitable) way. Social enterprises operate with a double bottom-line of generating financial return while simultaneously advancing a social mission. They apply business principles and practices to achieve social good. They reinvest their financial returns into the community to further their social purpose, to create employment and/or other economic and social benefits for marginalized communities. Legal form is not part of the definition, so there are social enterprises in both the non-profit and for-profit sector, but in NESsTs experience in most Central and Southern European countries they are born out of nonprofit entrepreneurial initiatives.

Kosovo does not have a legal definition or a specific legal form for social enterprises, therefore any existing ones have to meet the legal provisions of the following laws: the company law (Law No. 02/L-123 on Business Associations) and the nonprofit law (Law No. 03/L-134 on Freedom of association in non-governmental organizations). Nonprofit organizations (NGOs) are allowed to start businesses, although this legal form presents limitations when businesses start growing. The legal environment could thus be considered enabling, in as much as there are no major obstacles in the way of nonprofits or companies to engage in entrepreneurial activities with a social mission.

The social enterprise sector has not yet developed in Kosovo. NESsTs research revealed some valuable initiatives of startups or young businesses both in the for-profit and the nonprofit sector that may develop into social enterprises, but they are few and far between. We are talking about a small number of micro or small companies and organizations that would qualify as social enterprise. Official statistics do not include such a category and country-specific economic or development reports do not provide relevant figures either. It was thus our conclusion that we cannot talk about a sector or its role in the economy, as social enterprises are only just starting to appear in Kosovo. They are born out of both the nonprofit and for-profit sectors, therefore we needed to examine both in order to identify examples, successes and challenges. There are many promising ideas and a growing recognition that societal actors other than the government can and should take the initiative and use innovative approaches, among them entrepreneurial, in order to solve Kosovos critical social problems.

Example for social enterprise:

Down Syndrome Kosovo is a nonprofit organization whose mission is to raise awareness of Down Syndrome in families and communities, provides information and support to people affected in Pristina and 5 municipalities. It operates a coffee shop in the center of Pristina, which employs 3 people with disabilities who are beneficiaries of the organization. The goal is to make customers aware of the abilities of people with Down Syndrome and to generate revenue for the organization.

In general social enterprise is an unknown term in Kosovo; it is often mixed up with socially owned enterprise, a term that denotes formerly state owned companies, which have been privatized starting in 2004. Currently, there are still about 16 of those in state ownership that appear in official statistics. Government officials, entrepreneurs, business support organizations and civil society organizations that NESsT interviewed are not aware of social enterprise as a term or as a business model; not even of foreign examples. Only once the term was defined form them, were they able to answer interview questions and express an opinion on the topic. Only foreign/multinational donors had an understanding of social enterprise and were able to provide insightful information.

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Most donor organizations agree that there are initiatives that have the potential to become social enterprises, but they have a long way to go till fully developed. In their opinion this potential exists in strong NGOs, which need capacity-building and training to understand the concept. Those NGOs have an understanding of the social need, but do not have a long term sustainable approach to provide a solution. The SME Support Agency and the Kosovo Chamber of Commerce were not aware of any social enterprises, except womens businesses, but the former said that they would be a welcome addition to the business landscape to cater for areas the government does not have the capacity to cover.

The interview with UNDP staff revealed examples that carry social enterprise features, for example 3 business support centers run by NGOs, which offer fee-based advisory services and microcredit to individuals; or womens businesses associations focusing on the needs of disabled people and Roma. Another donor interview mentioned a shop run by a civil society organization focusing on people with disability. We interviewed an NGO called Hendifer from Ferizaj that gave us their own example of a project that could become a social enterprise, producing wheelchairs, walking sticks and other equipment for people with physical disability. Another organization claimed that there was a large number of social enterprises, but very few focusing on the needs of disabled people.

In Kosovo people generally consider themselves entrepreneurial and are familiar with the idea of private enterprise. Economic growth is expected to be driven by the private sector, mostly small-scale retail businesses8. There were 103.755 registered enterprises in Kosovo in 2010. Micro enterprises employing less than 9 employees represented the vast majority of the sector, while the number of large businesses with more than 250 employees was below 60. Micro and large enterprises employed more than 80% of the total workforce. Small and medium size companies represent a tiny fraction of the business universe (1.55%).

Table 1: The enterprise sector by size

Source: SME Development Strategy for Kosova 2012-2016:17

As Table 2 indicates, 90 % of businesses were established by individuals as sole proprietorship. Interestingly enough, the category social enterprise appears in the statistics, however it denotes the old, state-owned form of business, socially owned enterprises (SOE), of which there still exist a few. They are not social enterprises that meet our definition, therefore they were not included in the NESsT research. Thanks to new legislation, it is easy and quick to set up a company; a limited liability company can be launched with startup capital of EUR 2,500 in one week.

In 2009 most of the businesses operated in the retail trade area (around 50 %); that was followed by transportation, storage and communication (14 %), while hotels and restaurants occupied the third place (9 %) along with food products, beverages and tobacco (9%). These business activities target the small domestic market and the breakdown is stable over time.9 Agriculture represents only 2 per cent,

8 http://www.state.gov/r/pa/ei/bgn/100931.htm#econ

9 SME Development Strategy for Kosova 2012-2016: 17

Classificatio

n by Size

Number of

Employees

Number of

Enterprises

Percentag

e of Total

Micro 1 - 9 102,070 98.37

Small 10 - 49 1,406 1.35

Medium 50 - 249 221 0.22

Large 250 or more 58 0.06

Total 103,755 100.00

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while education, health and social care services make up only 1.7 %. One-third of the businesses (36.77 %) operated in the capital.

Table 2: The number of enterprises by type of ownership

Source: SME Development Strategy for Kosova 2012-2016:17

The agricultural sector and agri-business have not recovered following their collapse after the war in the 1990s. Whilst there have been good projects to support agricultural development after 2000, the low productivity and quality, the use of outdated farm technologies, small average farm size, fragmented agricultural production, and lack of access to markets still prevent growth.

Social enterprise development programs:

In terms of specific social enterprise development programs, there does not seem to be any operating in Kosovo currently. Similarly to other countries, development programs targeting NGOs do not include an enterprise component; they focus exclusively on building the capacity of organizations to deliver the social mission, without emphasis on sustainable operations or long term future. At the same time, enterprise development programs targeting the for-profit sector focus on the micro, small and medium size enterprises with general economic development goals. During our research we came across 7 existing enterprise development programs (USAID Young Entrepreneurs Project (YEP), Kosovo Private Enterprise Development Program (KPEP) of USAID, Business Support Center Kosovo (BSCK), KOSVET VI funded by the European Union, a UNDP program creating business support centers, the ongoing support program of the governments SME Support Agency, and SPARK, a program supported by multiple donors). Three of these programs target youth, while the rest is open to everyone. We have identified at least as many that have been run in the recent past and currently operating programs built on their success (e.g. YEP or KOSVET).

Some of the above programs might give priority to businesses or business ideas that have a social component (e.g. KOSVET or KPEP), but they may not communicate these priorities upfront, rather apply them on an ad hoc basis, if they receive interesting applications. KPEP came across the Krusha womens association in that way, KOSVET VI supported disabled individuals, while YEP also indicated that they would welcome applications from disadvantaged groups in their new competition. Unfortunately, these programs are not open to NGOs, which therefore cannot benefit from business related capacity building or financial assistance in this way.

Type No. Type of Ownership

Number of

Enterprises

Percentag

e of Total

1 Sole Proprietor 93,129 90.00

2 General Partnership 3,383 3.20

3 Limited Partnership 90 0.08

4 Limited Liability Company 6,170 5.80

5 Joint Stock Company 368 0.35

6 Foreign Owned Company 486 0.46

7 Socially Owned Company 16 0.01

8 Publically Owned Company 12 0.01

9 Agricultural Cooperative 68 0.06

10 Other under KPA jurisdiction 33 0.03

Total 103,755 100.00

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Example of an enterprise development program:

YEP is a three-year project designed to support young people (ages 18-35) to develop viable businesses.

Using USAID funding it provides matching grants, coaching and mentoring and employment services for

fledgling young entrepreneurs with a focus on private sector opportunities. The second phase of the

program was planned to be launched in September 2011 in the form of a competition, targeting young

people who have a business idea they want to develop and start a business. They are required to risk

some capital of their own, while YEP will supplement their startup capital and with the participation of

local banks, debt financing to the best business ideas. The program will offer very practical training

about business planning and development. It aims to engage and train 400 young people per year in

different tracks. YEP aims to create commercially viable businesses and does not express preference for

social issues. Women, people with disabilities and other minority groups will be welcome to apply, but

NGOs are only eligible if they register a company.

Hence social enterprises that have grown out of the for-profit sector may have received free of charge technical assistance, capacity building and/or financial support, if they participated in the enterprise development programs mentioned above. We could consider that these programs have provided a temporary basic support infrastructure for some enterprises: for startups as well as existing ones; and for the short or medium term depending on the goals of a given program. They focus on general business basics, business regulations and practices in Kosovo, and they offer very little or no specialized capacity building for businesses with a social goal. Thus would-be social enterprises may have been strengthened on the enterprise and management side, while no support would be provided to help them balance that with the social goals of the business. Having interviewed these enterprise development programs we were not able to identify any social enterprises focusing on disabled people that had been incubated. We came across a couple of examples of womens businesses that had received support : one is the well-known example of the Krusha womens cooperative, while the other is an individual business of a blind woman who planned to launch call center services. These enterprise support programs could provide a pipeline for future social enterprise development programs in addition to examples NESsT identified in the nonprofit sector.

The government, which in other countries provides for or operates support mechanisms for social enterprises, does not do so in Kosovo: social enterprises are not yet on the public agenda because their number is not sufficiently high, and therefore their development is not considered to be a priority. Among all the other urgent issues which require state resources, enterprise development receives significant attention as a way to revive the economy and create jobs, so some government support infrastructure has been created for general enterprise development.

In 2006 the government set up the SME Support Agency (SMESA), which is the main authority responsible for the creation, coordination and direction of the development of businesses in Kosovo. It aims to increase the number of enterprises, to foster entrepreneurial culture, to achieve a greater regional expansion of businesses, as well as the development of management capacities, innovation and transfer of knowledge. It is also responsible for the implementation of business development programs from design to monitoring and intermediation (i.e., connecting business services and SMEs). It provides training, helps the establishment of business and incubation parks, and provides programs for different segments of entrepreneurs (e.g. women). Our research indicates that social enterprise initiatives have not used any of the SMESAs services, although they may be eligible. Another key role of the Agency is to

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act as a policy consultant to the government, and it has the lead in the implementation of the 2012-16 SME development strategy10. SMESA is supervised by the Ministry of Trade and Industry.

The SMESA identified a number of challenges to SME development in its 2009 annual report, which included legal, financial and cultural aspects. A year later, based on the EC 2010 Progress Report on Kosovo, the 2012-16 SME development strategy acknowledged that the 3 main barriers to business development are as follows:

Lack of reliable electricity and water supply (mainly affecting manufacturing)

Limited access to finance for SMEs

Insufficient rule of law (affecting all citizens)

NESsTs interview with American Chamber of Commerce (AmCham) staff confirmed that lack of managerial skills, bureaucracy at municipal and central level, lack of proper monitoring in subsidized programs, lack of trust and no availability of startup capital aggravate the situation for small companies. The informal economy (39-50% according to government estimates) facilitates the launch of short term, informal businesses, but creates hardships and unfair competition for regular ones. Social enterprises have to survive in this environment as well; lack of rule of law and non-implementation of government policies and regulations affect them just as much as other economic actors.

In response to the above barriers the SME strategy sets 7 strategic goals. The SME strategy was expected to be approved in mid-2011 and an implementation plan drawn up in June-October 2011. Strategic goals 2 and 3 address lack of access to finance and entrepreneurial culture. These are hurdles for all enterprises in Kosovo, but they impact social enterprises especially, since many are/will be started by NGOs and face additional resource problems compared to regular small businesses . Goal 7, however, has direct relevance for social enterprise development: Improving the position of female entrepreneurs, youngsters, minorities and other specific groups with special needs and support to disadvantaged zones. The strategy considers it important to state that while these target groups should appear in the implementation of all other strategic goals, it was important to draw up a separate goal. This is very important, because it is the first time that at strategy level entrepreneurial approaches are considered as potentially effective models to solve social problems affecting marginalized groups in society. This has the potential to fuel the development of social enterprise in the future, contingent on SMESAs implementation of the SME strategy. Goal 7 is broken down to sub-goals, which list measures to improve the position of women, young people, people with limited abilities, minorities and disadvantaged zones. For example, Goal 7.3 addresses disabled peoples chances in becoming entrepreneurs. It acknowledges the need for needs analysis and special training, as well as financial support.

Goal 7.3 Improving the position of specific groups related to entrepreneurship Special groups, particularly people with disabilities need more attention. Some of them, if proper help is available, could easily be engaged into entrepreneurship activities. However prior to taking any steps an appropriate training needs analyses should take place in order to identify gaps and special needs in starting the business. Nevertheless some financial help and specific tailored training should be offered to these marginalized groups.

10

http://www.sme-ks.org/repository/docs/190711_SME_Strategy_Final_angl__441123573.pdf

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III. Overview of the disability sector in Kosovo

There are no reliable statistics in Kosovo in general, as a result of non-registration of the population since 1981. The existing statistics on the disabled population are unreliable due to a variety of reasons, among which the most relevant for our research are the following:

there is no uniform definition of disability,

there is a serious lack of knowledge of different disability types,

disabled people suffer from stigmatization and discrimination,

rural areas have poor service infrastructure.11

The number of people with disabilities is estimated to be 60,000 100,000 by the Coalition of Organizations of People with Disabilities of Kosovo, and 150,000 by UNMIK in 200112. Recent government estimates13 put the figure at the lower end (40,000), although the National Disability Action plan, which is a strategy document passed in 2009, does not contain figures (more on the Action Plan later). Nonprofit organizations interviewed by NESsT estimate 7% of the population to be disabled, but they only track data on their own specific constituency.14 Precise figures are expected from the 2011 Census conducted in the summer, but disability related results have not been published yet.

There are five official definitions and terms for disability:

In education, based on the law on primary and secondary education the term children with special needs is used.

A set of laws, (e.g. the law on pensions for the disabled) define and use the term person with disability.

work invalid, civil invalid of war and invalid of war are also terms encountered

Regulation 2004/34 on criminal procedure, where perpetrators with mental disabilities are involved, the term person with mental disability is used.

The labour law and the law on social assistance use the term person with physical or mental disabilities.

The clarification of the term and an exact, reliable methodology for data collection has been part of all of the relevant strategic documents produced in the last few years. Nongovernmental organizations working on disability issues have been heavily involved in solving the definition issue, raising awareness in government, the general population and among the disabled persons themselves about their rights and problems and advocating for solutions. As a result of the first years of advocacy and awareness raising campaigns assisted by foreign partners and donors, NGOs have successfully lobbied the government and disability is now understood in the human rights context. It is now accepted and rights

11

National Report for People with Disabilities in Kosovo, 2007:7; Comprehensive Disability Policy Framework for

Kosovo 12 Shifting the paradigm in social service provision: Making quality services accessible for people with disabilities in South East Europe, 2008:64

13 NESsT interview with staff of the Office for Good Governance, Human Rights, Equal Opportunities and Gender

Issues at the Office of the Prime Minister 14

Down Syndrome Kosovo estimates people with Down syndrome to total 2,000-4,000 and has 649 people in their

database. The Association of the Deaf estimates 7,000-8,000 people with hearing difficulties. Kosovo Mental

Disability Rights Initiative estimates the number of people with mental disability to be around 40,000.

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are enshrined in laws as well as the National Disability Action Plan 2009-2011, though implementation and monitoring of the laws remain weak. Society and Disabled Peoples Organizations (DPO) themselves expect mostly everything to be provided by the government, as access to services, jobs and opportunities is everyones basic right. While that is true, this attitude prevents many active DPOs from overcoming dependence on the government and launching their own initiatives, for example to create support mechanisms using entrepreneurial solutions.

Key challenges for disabled people in Kosovo:

NESsT interviews with donors and DPOs confirmed that the key challenges faced by disabled people in Kosovo are as follows:

Lack of access to services (health, social and other support): service infrastructure is poor to begin with, especially in rural areas, where 50% of the disabled population lives.

Lack of access to education: there are not sufficient special schools and teaching and nursing staff for disabled children, while many of them are not accepted to regular schools. Lack of transportation options and disabled access means that children from rural areas simply cannot get to school at all15.

Lack of means of transportation: adults with disabilities suffer from poor and non-accessible public transportation systems and bad roads too. Limited ability to get around limits their chances of getting a job or participate in other non-local initiatives (oftentimes they cannot even make it to a job interview).

Lack of economic opportunities: soaring unemployment affects the entire population, but disadvantaged people are even worse off. Low educational levels mean that they dont qualify for many open jobs, while access barriers prevent them from even trying. Enterprise approaches, such as individuals setting up small businesses, could offer solutions, but lack of business skills and startup capital are major challenges to be overcome.

Stigma and discrimination by family, immediate community and society at large. Many disabled people, especially in rural areas are still hidden, locked up or abandoned by their families.

Persistent institutionalization of disabled people: the system of the past is hard to dismantle due to all of the above challenges. The institutions were large, impersonal, segregated places, where violence and sexual abuse occurred frequently. Although the transformation of large residential settings and de-institutionalization have been on the agenda, only a few pilot projects can provide lessons learnt to date. (See the cases in Success Stories 2005-2007 by KMDRI from 2008.)

Poverty: as a result of these multiple disadvantages 80% of all disabled people in Kosovo belong to the poorest segment of society16. The problems affect women disproportionately, as they make up 70% of the disabled group17.

15 According to 2009 data (Disability Action Plan, 2009: 35-36) 384 pupils were studying in special schools. Breakdown by type of disability: intellectual (114), hearing (82), seeing (55), physical (4), multiply (129). There were only 100 teachers in special

schools in the 9 main towns, while nursing staff consisted of only 18 nurses. 487 students were enrolled in special classes in

regular schools, most of them with intellectual (277) and multiple (181) disabilities. However, there is no data on pupils in

mainstream schools or those that didnt attend school at all.

16

Estimated by Hendifer in interview with NESsT 17 Estimated by the NGO Little People of Kosovo in interview with NESsT. Little people of Kosovo works in the field of human

rights; it fights against poverty and for the dignity of people with disabilities and to provide opportunities for people with

disabilities.

14

Under pressure from foreign donors, partners and civil society, the government tried to respond to the

above challenges by improved legislation, including all aspects of life. The result was a set of laws that

incorporate provisions for people with disability. The most relevant ones are the following:

Regulation on Self-Government of Municipalities (2000),

The Law on Primary and Secondary Education (2002),

Law on Disability Pensions (2003)

Anti-Discrimination Law (2004)

Law on Social and Family Services (2005),

Law on Vocational Ability, Rehabilitation and Employment of Persons with Disabilities (2008 see below for more details)

Strategic planning to improve the life of disabled people started only in 2008 and consistent

commitment was shown for the first time, when the National Action Plan for People with Disabilities

2009-2011 (2008) was drawn up. The preparation of the Action Plan was launched by the Government

of Kosovo and was supported by Italian partners. Many Kosovar civil society organizations were involved

in the various working groups.

While success can be commended in the field of legislation and planning, implementation is lagging behind when addressing disabled peoples needs. The biggest criticism from DPOs as well as donors was that the government was unable and unwilling to implement existing laws, therefore EU-conform regulations were only window-dressing and no real progress is made.

Employment: An often cited example of failing implementation of policies is connected to employment opportunities of disabled people. The government offices themselves do not have disabled access and they do not comply with the provisions of the Law on Vocational Ability, Rehabilitation and Employment of Persons with Disabilities, which obliges all organizations to employ one disabled person per every 50 employee18. Government does not have the capacity to monitor and sanction non-compliance of other employers, so non-discrimination and equal opportunity regulations are simply ignored. DPOs and their partners have been at the forefront of raising awareness about the desperate situation of disabled people. One example of success in that front is a major annual campaign organized by DPOs and supported by large companies and government offices. The Disability Mentoring Day campaign is based on international practice. It succeeds to employ a number disabled people for a short period of time (ranging from a few days to a couple of weeks) in participating companies and government offices. The campaign is supposed to raise awareness about disabled peoples values as part of the labour force. While it has successfully increased the number of participating disabled people year after year, the campaign has had no long term effect so far, as none or very few people obtain a permanent job following their short-term (test) employment during the campaign.

18

Law on Vocational Ability, Rehabilitation and Employment of Persons with Disabilities 03-L-019, http://www.assembly-kosova.org/?cid=2,191,322

15

The Law on Vocational Ability, Rehabilitation and Employment of Persons with Disabilities opened an alternative avenue, by defining protected workplaces as enterprises which aim to provide work and appropriate employment, with place, space and respective equipment for people with disabilities. In Kosovo we have not come across such protected workplaces; only USAID mentioned having given grants to two such models of income generation; one of them made honey, while the other opened a copy shop. No further information was available about them. In other countries legal provisions like the one above on protected workplaces fuelled the establishment of sheltered workshop that provide thousands of disabled people with permanent jobs.

Social service provision: The Ministry of Labour and Social Welfare (MLSW) and the Department of Social Welfare (DSW) supervise social service provision. Interviewees often mentioned the Disability National Council (KNAKK) as a consultative body at the governmental level, which includes the Deputy Prime Minister, 5 deputy ministers and 9 representatives of DPOs. This was supposed to be the national coordination and consultation body on disability issues. Everyone involved seems disappointed about the Council by now, which has stopped functioning and is now completed ignored, having become a victim of local political battles.

For social service provision, regulations envision a decentralised system of services for people with disabilities, based on local service providers including not only state actors (municipalities) but non-state providers as well. Local municipalities still remain the key stakeholders. They must ensure basic services, they are in charge of identifying local needs and provide advice and guidance to non-state actors. In these functions they are supervised by the Ministry of Labour and Social Welfare. Kosovos municipalities have two sources of financing available: own revenues and government transfers. They are very much dependent on these government funds, since their own revenues are not sufficient to meet their needs. This has a significant impact on the provision and quality of social services.

The paradigm of providing social services for disabled people has been shifting in the last decade in Kosovo from a centralized, paternalistic and medical model towards a social and holistic approach. The main priorities of the changes are human rights, as an overall requirement, inclusion instead of segregation, the abilities and choices instead of patients and passive beneficiaries and also accessibility to services. The new approach tries to introduce individualized or tailor made social services. These could include early intervention programs, education, day care and rehabilitation services, vocational training and access to employment, housing, primary health care, leisure services and various support services (from technical devices to transportation, from sign language interpreters to special advisory services etc.). The concept of welfare mix the division of labour between state and non-state actors has also been an important term in the new dialogue.

Law on Social and Family Services

Law No. 02/L-17

The Law specifies the tasks of

municipalities. Municipalities provide social

services through Directorates or by Centres

for Social Work (CWS). Directorates are

permitted to provide or facilitate through

the CSW or non-governmental

organizations, the provision of the following

additional services: domestic help, direct

personal care in their own home, centre

where individuals in need can attend on a

daily basis, specialist counselling services for

people with addiction or other psycho-social

problems, residential care for the elderly

and people with special needs and any other

suitable provision related to Social and

Family Services. (Article 6)

The Ministry of Social Welfare is permitted

to make grants and provide any other material assistance, including premises, or

advice to licensed non-governmental organizations providing specific Social and Family Services across Kosovo.

16

A new decentralised and individualized approach potentially opens up a niche for social enterprises specializing in social service delivery, a huge segment of the social enterprise sector in other countries. Unfortunately, in Kosovo the conditions of contracting out have not been defined yet at the central level, thus implementation is failing. Another crucial issue is that of resources, namely whether the contracting municipality has the funds to pay for the services, which is oftentimes not the case. At the same time, most of the disabled people that need the service cannot afford to pay for it fully or at all. In order to provide some solution for people in need, starting in 2000, NGOs initiated pilot projects and obtained funding from international donors. NGOs were able to raise funds externally and hoped to win municipal or other domestic support on the long-run.

Example of pilot project for social service provision: Community Based Rehabilitation

One such pilot project was Community Based Rehabilitation (CBR) (2001-2002) supported by international and local partners. The projects main goal was to break away from institutionalized care and to promote the development of citizenship and equal participation in society for people with disabilities through CBR education, service and policy development. A significant number of CBR workers (rehabilitation practitioners, medical doctors, psychotherapists) had been trained and a psychotherapy school opened in 2001.

At present, CBR services are provided by a local NGO called Handikos. Its operation consists of 14 community centres in 26 municipalities, including North Kosovo, with a total workforce of 69 employees and several dozen volunteers. They provide basic physiotherapy and psychosocial services and advise parents who have children with disabilities. CBR services are free for beneficiaries, as they are funded by external donors, only a small portion of the centres operating costs being funded by local municipalities.19

After the slow withdrawal of foreign donors, the sustainability of donor funded services and programs becomes questionable. Even if donors continue to subsidize and beneficiaries pay a symbolic fee, only proper contracting out procedures and more municipal funds can provide a satisfactory answer.

Financing mechanisms: projects and subsidies in the disability sector

With notable exceptions, the central government and the municipalities lack the resources to finance

educational, employment or service provision programs for disabled people. According to the disability

pension law, people between the ages of 18-65 are entitled to a monthly benefit of a meagre 45 EUR

from the state. If families have children under 18 years of age, they can receive 100 EUR per month, and

(in according to the law) education, healthcare, travel and equipment (e.g. wheelchairs) is free for all

disabled people in need. As mentioned above, this is all in writing, but hardly implemented at all.

19

NESsT interview with Handikos in June 2011 and study by Turmusani, 2002.

http://www.aifo.it/english/resources/online/apdrj/apdrj102/kosovo.pdf

17

Example of a potential social enterprise, with the state as paying client

If the letter of the law is to be respected, the state should be the paying client to wheelchair

manufacturers or providers of transportation services on behalf of its disabled citizens, but it refuses to

do so, due to lack of funding. Hendifer, one of the enterprising organizations NESsT interviewed, used to

run a workshop where it produced wheelchairs and walking sticks. The workshop was initially a project

funded by the World Bank and World Vision, while Italian Caritas donated raw materials. Hendifer

provided its clients with the equipment for free. Unfortunately, once the donor money ran out,

manufactured equipment couldnt be given away, as the operation needed revenue. Disabled people

could not afford to buy the wheelchairs and sticks at full price, while the Ministry of Social Welfare

refuse to subsidize the operation blaming lack of sufficient funds. Hendifer looked for other donors and

is now running a volunteer-based operation, sharing 3 salaries among the workshops 11 employees.

They claim that there would be demand for 15 wheelchairs a month and the future plans are to enlarge

the workshop with land provided by the municipality. If it became fully operational, such a social

enterprise could provide jobs to people with disabilities, as we saw in examples in other countries, such

as Romania.

The above example illustrates how non-profit service providers have generally been funded by

international donors and have limited access to public funds. When they do, it is mainly through grants,

subsidies and in kind support. For example, Down Syndrome Kosovo and Handicap International have

received modest government support for co-financing EU grants, mostly for education and awareness

raising projects. The contracting practices between local authorities and non-profit organizations, which

could form the basis of business-like, sustainable activities, are still very limited.

Up to the recent past, international donors were generously supporting projects and programs targeting

disabled people. The key objectives were to reform legislation, raise awareness and provide equal

opportunities for this beneficiary group in Kosovo. They worked very closely with DPOs and funded pilot

programs, campaigns as well as operating costs. Today several donors are still willing to support

disability issues, but donor fatigue has started to kick in. Many Kosovar organizations have become

dependent on these external donations and are finding it very hard to diversify funding sources.

Sustainability and enterprise development programs have not been widely supported, so organizations

that want to engage in such activities are now finding very few funding sources. Handicap International,

which played a major role in Former Yugoslavia in the past 10 years, closed its Kosovo office about a

year ago and offers no further support. UNDP has committed to the long term support of disability

issues and is cooperating with the Ministry of Social Welfare on design, implementation and monitoring.

UNDP Kosovo has not funded specific social enterprise support programs for people with disabilities, but

seems open to include social enterprise in other programs.

Niches and opportunities for social enterprise in the disability sector:

Existing social businesses have been set up mostly by NGOs and aim at raising awareness (e.g., coffee

shop that employs disabled people) or at responding to local needs (e.g., wheelchair manufacturing).

18

Some interviews suggested that agricultural social enterprises could be set up using a combination of

local resources and tradition; the cooperative of the women in Krusha is a successful case in point.

Business strategy:

When asked about potential niches for social enterprise, interviewees gave us a wide range of ideas. It

was interesting that most of them are employment generation models; they would not target disabled

people as customers of the product or service offered by the social enterprise, but wish to benefit them

as employees in the businesses. This is probably due to the very low purchasing power of this

beneficiary group, so potential business owners (even NGOs) do not expect them to become their target

audience. Ideas such as printing house, carpentry workshop, cake shop, candy shop, car wash,

restaurant, laundry or cleaning service could target end users in the general population and employ

disabled people after appropriate skills training. Manufacturing, such as production of gift items and

food stuffs was also mentioned, probably based on foreign examples. Market research could validate or

discard these ideas, as some are very local in nature and could well find a niche in the market.

Some ideas were more innovative and did consider the strategy of selling new services to existing

clients, i.e. disabled people, for example a specialized disability-friendly gym.20 This could respond to a

huge unmet demand, namely lack of accessible sports facilities. The provision of special equipment and

assistive devices that support functional disabilities, such as hearing, vision and moving capacities, could

also be considered here. These devices are usually produced by for-profit companies (or imported), and

are often too expensive to buy. Social enterprises could act as intermediaries here, leveraging their

networks and alternative financing sources to make the devices accessible for disabled customers.

Revenue model:

In terms of revenue source, the above mentioned models rely on end user payments mostly. Social

enterprises wishing to provide products or services (social or other) to disabled people cannot rely on

the state as a customer, so the third party payment revenue model could only target foreign donors for

the time being. This is a significant limitation, considering the great unmet needs (see challenges

earlier) and the success of social enterprises to move into the space of social service provision in other

countries. Defining contracting out procedures by local governments and ensuring funds for their

disposal would be a very important direction to develop.

Required skill levels:

The various business ideas can be sorted according to skill levels, and the varying abilities, the

productivity of disabled people, as well as their type of disability has to be taken into account. Few ideas

that require advanced education or skill levels were brought up, since one of the challenges for

employing disabled people is their low skill level due to lack of education. IT services, call centres or

operating radio stations fall into this category. Farming and agricultural activities and the sales of the

produce were especially popular ideas, typically requiring low levels of skills.

20

Note that a disability-friendly gym could also provide employment opportunities for people with disabilities.

19

In NESsTs experience all of the above models could work. Investing in declining industries (e.g. textile)

probably does not make sense, as labour costs in the regular economy are not so competitive in Kosovo,

and they would be even less so in social enterprises, where social costs are added to regular startup and

operating costs. On the other hand, social enterprises targeting disadvantaged communities should not

totally disregard poor people as paying customers. Sliding scale fees or other subsidized models should

be considered, if the demand exists for the service or product. More specific market research and fit

with national business development strategies will be key factors for identifying further opportunities.

The corporate segment as a potential customer group will grow and mature over time, and can become

the target group for social enterprises too. Currently due to the overwhelming dominance of micro

enterprises engaged in retail trade, companies are more competitors, rather than customers, of social

enterprises.

IV. Trends in financing social enterprise

There are no specific social enterprise funding offers or financing mechanism available, either in the

private or the public sector, while some of the donors that NESsT interviewed have experimented or

would like to experiment with such programs. UNDP had run programs where financial support had

been given to social enterprise type initiatives, although it was mostly with a different focus, e.g. to help

build a social service center network. KOSVET V. and VI. were programs that targeted individuals and

had pre-defined quotas to include disadvantaged communities, disabled people and minorities; in

Kosvet V. 25%, in KOSVET VI. 10% of program participants were from disadvantaged backgrounds.

Handicap International also had business and microfinance initiatives with the aim to introduce business

and finance concepts to their disabled beneficiaries, but evaluated the program as mostly unsuccessful.

The reasons mentioned were people not being able to turn ideas into feasible proposals and lack of skills

to run a business. We heard about a couple of successful examples too, where sustainable businesses

were established, while also meeting the social goal (e.g. Krusha womens association).

Several foreign donors and certainly the European Union condition their support on the availability of

co-financing (allowing in-kind contributions). This is an obstacle for organizations in any project,

including enterprise development, and in very few occasions can they count on state support for co-

financing. Young people and people with disabilities have no savings, they depend on their family or

relatives working abroad, so for them it is even more difficult to come up with co-financing. Remittances

are still very important parts of the support for disabled people, but they are used mostly for

consumption and not invested in setting up or growing companies21. One of the challenges for Kosovo

would be to channel more of the remittances of the Kosovar diaspora into building businesses, among

them social enterprises.

Enterprise development programs, such as KOSVET VI, KPEP or YEP generally offer finance along their

mentoring and capacity building support; amounts for startups range from 1,000 to 20,000 EUR. Follow-

21

Confirmed by KOSVET VI. Manager as well as SME Agency representatives.

20

up financing is often lacking. KPEP is offering up to 50,000 EUR, but its beneficiaries are more

established registered SMEs that are investing or expanding their business, buying new technology or

developing new inventions. KPEP made an exception with the Krusha womens association, as they are

not a private sector company, and supported them with technical assistance as well as 28,000 EUR in

grants.

Banks are not alternative financing options for social enterprises for the time being. There are 8 of them

in Kosovo, and there was consensus in the interviews that their conditions are hard to meet, even by

for-profit companies. Interest rates are considered high (9-14%) and banks do not finance startups. The

only bank NESsT was able to interview was ProCredit, which applies the same lending criteria to

potential social enterprise and NGOs as to any regular business: they have to have a meaningful

business model, a minimum business management capacity and they have to have a registered

company which has existed for at least 6 months to a year. Since NGOs dont own assets, ProCredit does

not consider them eligible for loans. Banks prefer to donate money and consider their involvement in

social issues a CSR affair, rather than business. They support highly visible events, such as Disability

Mentoring Day. Interestingly enough, ProCredit has not seen any significant impact on its lending from

the enterprise development programs.

Banks may be more willing to consider lending, if they can share the risk with someone. A good example

for that would be YEP, which is cooperating with 4 banks that would offer loans to the best business

ideas that the YEP expert committee selects for support. Startup capital would be covered from YEP

grants of up to EUR 5,000 and the entrepreneurs own money, while YEP also hopes to obtain support

for grants from other donors such as the World Bank or CDF.

Microfinance could potentially fund social enterprises, FINCA was mentioned as an MFI that is willing to

lend to disabled clients, but interest rates seem very high, 12-14% on the EUR. Microloans are easier to

obtain (less paperwork), but they are more expensive than bank loans and offer much smaller amounts:

1000-2000 EUR.

Capacity building offered by the above programs takes into account lack of basic skills: KOSVET for

example helps entrepreneurs write a viable business plan, promotes them and trains them to be ready

to meet with clients and suppliers. YEP, at the same time, offers matching grants, coaching and

mentoring and employment services to participants. They provide very practical business planning

training to startup entrepreneurs that are selected in their contest and the best ones receive advice

from a committee of experts, who also advise them on loan options. A 6-month monitoring period

(follow up after launching the business) is also included, which, unfortunately, is rare among the

programs we have learnt about. YEP also used to run a fast track, which supported more advanced

businesses. The SME Support Agency runs a consultancy scheme based on vouchers, involving local

consulting companies for startup businesses.

Challenges expressed by donors and enterprise support program managers in supporting social

enterprises:

21

Many NGOs are weak and donor driven

Many NGOs lack basic skills to plan and run a business in a competitive market

NGOs lack connections in the private sector

An enterprise has to be viable first and then it can think about meeting social goals

Social enterprises may suffer a disadvantage, if they have to compete with other companies in the market

Lack of co-financing capacity No debt financing, high interest rates

While expressing concerns and challenges, interviews suggested social enterprise appeals to donors as a

model, and they would be open to integrating social enterprise into their strategies in the future,

especially if they find partners for implementation.

V. Social enterprise perspectives

All of the social enterprise examples and initiatives that NESsT came across in the research aimed to

solve a critical social problem and less of an emphasis was placed on the financial gains that a business

could bring to its owners. Not even NGOs, suffering from a reduced pool of funding, considered the

revenue potential of social enterprises. This immediately points to a couple of the challenges that can be

identified in the emerging social enterprises: lack of entrepreneurial attitude and experience, and lack of

basic business skills. The challenges presented below were compiled from interviews with social

enterprises, and these challenges are faced by regular micro and small businesses, as well as NGOs

incubating social enterprises.

Ambiguous entrepreneurial attitude and motivation:

DPO managers seem to have entrepreneurial attitude. Several ideas and a couple of operating projects were mentioned. Ideas operating or operated in the past (most already described or mentioned): coffee shop run by Down Syndrome Kosovo, wheelchair and equipment manufacturing (run by Hendifer). Ideas: coffee house, cooling facility, production of honey and candles, chicken breeding, laundry service for hospitals and for KFOR troops, candy shop, etc. They indeed seem to be promising and fit the abilities of people with disabilities, who in most cases would be employed in the enterprise. The income from these businesses, however, is or would be low, since for the managers it is more important to bring the community together through service provision (e.g., in a community centre), than the financial viability of the operation. So services continue to be provided free of charge, rather than charging clients. The coffee shop operated by Down Syndrome Kosovo offers coffee to its customer for free, as it receives ingredients as donations. Some of the enterprise development programs find that the business ideas are not business-like or creative enough, they tend to stick to traditional ideas such as retail trade or the restaurant business, which have limited market niche and growth opportunity. KOSVET VI. manager thought that most entrepreneurs were not interested in growing their business, they were not prepared to take risks. Ideas

22

such as assembling different toys and different components, park and garden management would have more potential in his view.

Lack of sufficient human resource:

The staff of the organizations are usually small (except for HANDIKOS which is one of the largest DPOs in the country). They are not really managed by disabled people, though disabled people can be part of larger teams. DPOs and social enterprises rely on volunteers to a large extent, who come from the families, household members or schools. This makes enterprise operations extremely cost-efficient, but very risky at the same time, as volunteers do not work full time, cannot be held accountable like an employee and can leave any time. Creative organizations that have launched several enterprise initiatives lacked the capacity and business management capacity to sustain their activities.22 The phenomenon of small staff may be a result of lack of resources or due to the fact that many organizations are young and at the beginning of their life cycles.

Lack of business and planning skills:

Organizations build their skills and seek ideas from very different sources. On the one hand, they learn

by doing, as many specific services were piloted by NGOs/social enterprises for the first time. They

developed technologies and service methodologies, which could be modelled and replicated in the

future. On the other hand, DPOs seemingly like to learn about foreign experiences and to gather know

how and adapt these ideas to the Kosovo reality. Many interviewees mentioned they or members of

the staff took part in domestic or foreign trainings in order to learn strategic planning (to increase

organizational sustainability), fundraising, or service provision. Interviewed donors confirmed having

provided or funded such training. None of the interviewees have attended management or business

planning courses, and most donors never provided that either. Lack of skills in market research,

competitive strategies, marketing and public relations - in other words market orientation - was named

as critical in sustaining promising initiatives. 23 As mentioned in section I, enterprise development

programs have offered basic business capacity-building or technical assistance to small and micro

enterprises; nonetheless, few potential social enterprises were eligible to take part in those. Programs

like YEP, which target university students (many with business degrees) could also remedy this, if they

opened their competitions to social entrepreneurs as well.

No procedures for contracting out public services (social services):

Public service delivery and contracting out is not well defined at present. Some patterns of local co-

operation exist between local municipalities and NGOs/social enterprises (see Club Deshira24 or

HANDIKOS) but the expectations are hard to fulfil: legislative conditions for contracting are unclear, local

22

NESsT interview with Handikos, which operated a coffees shop, sold roasted coffee beans and ran a handicraft

shop in the past 23

NESsT interview with Handikos, which was forced to close a business (coffee shop) because of a lack of

competitive strategy. 24

Club Deshira is a nonprofit organization in Kosovo, which provides education, social and employment programs

to 185 people with intellectual disability. They ran daycare centres with municipal support in the past.

23

governments lack funds, and DPOs also are not always sure, if they are ready to take over tasks from the

state. It will be important to clarify the contracting procedure, ensure funds are available, and train local

organizations to develop this area of potential social enterprise activity.

People with disabilities are a challenging target group:

Some challenges concerning the target group also came to the surface and these are important aspects both for the donors, the NGOs and social enterprises. One of these challenges is the legal situation of employability: when disabled people start to work they may lose their state pension/benefits. Many of them prefer to retain a small but secure income from the state, rather than risk working in a private business/social enterprise that may not pay them higher salaries.

Lack of finance:

There are no financing opportunities available specifically for social enterprises. As described in sections

above, donors or the government do not target them specifically, while enterprise development

programs tend to overlook them. When looking around for commercial finance options, we found that

banks do not offer anything to social enterprises. They do not usually finance startups anyway, which is

what social enterprises in Kosovo would be. Thus enterprise development programs are a crucial first

stage, which can help launch promising companies, who could later turn to commercial banks.

Enterprise development programs often combine financial support with technical assistance or capacity

building, in order to strengthen the businesses they fund. Because of their focus on startups, these

programs tend to offer relatively small amounts of money and only for startup capital, very rarely for

expansion or growth. Some like YEP have looked beyond the startup phase and offer to broker

commercial bank loans, which could help a companys growth phase. In general, the high interest rates

requested by banks on loans prohibit debt financing. KPEP, which also targets bigger companies and

finances investment costs, does provide larger amounts of money, but its focus is on SMEs and no

special programs exist for social enterprises. Banks do not give priority to social businesses; they believe

that social enterprise should be eligible for regular small business loans, if they have a strong business

case, therefore no special consideration is given to them.25

VI. Policy makers perspectives

As we described in Sections I and II , government strategies and attitudes have just started to be

formulated about enterprise development and disability, and social enterprise is not on the agenda as of

yet. There are no reliable statistics on the number of people with disabilities, and estimates of affected

populations oscillate in a wide range. Everyone expects the recent census to shed light on the issue and

inform decisions.

25

NESsT interview with CEO of Pro Credit Bank (the only bank willing to take part in the research)

24

The Office of Good Governance is one of the government offices responsible for disability issues, among

many others, such as childrens rights, human rights and gender issues. It believes that there are some

positive policy changes for disabled people, because of new measures and the fact that the government

has supported a small number of organizations that wanted to set up a business (no specific examples

given). Additionally, it has provided grants to some NGOs (e.g. Down Syndrome Kosovo). The key

challenges for disabled people are access to school and services, as well as social welfare. The Office of

Good Governance would like to see disabled people more integrated in mainstream schools, but

because of stigmatizations, this remains a challenge.

The government is happy to be able to provide support for families with disabled children as well as

other services such as free education, health care, free transportation and specialized equipment. We

learnt in our interviews that while this is subscribed in laws and strategies, little is implemented in

practice. The government admits that it falls short on this; the specific task for the Office of Good

Governance is to monitor implementation in addition to preparing plans. But as there are several

offices in charge of disability issues (e.g. the Ministry of Social Welfare), responsibility is often diluted. In

addition to ministries, each municipality has a unit for human rights and they can run projects funded

from local budgets, as well as jointly with the Prime Ministers Office and the Office for Good

Governance.

The government does not have enough resources to finance social services for people with disability,

and so it constantly tries to obtain donor funding from the European Union as well as other bilateral or

multilateral partners (e.g. Italy). It also tries to be an example of accessible workplace for disabled

people (though it has not been very successful to date) and encourage others to do the same.

According to the Office of Good Governance, the relationship between the government and DPOs has

improved. The joint completion of the Disability Action Plan is a success. The National Disability Council,

which used to be a joint forum as well, is not a success story, unfortunately. NGOs stopped being active

participants and it is no longer functional. It was also admitted that the Council had become too

politicized, therefore the government itself was reluctant to maintain it. The Disability Mentoring Day is

a flagship initiative of the government and the objective is to raise awareness about disabled people by

campaigning annually for their employment. They admit though that public institutions are way behind,

but there is some role for municipalities, which have local resources.

Some disability NGOs have managed to work in partnership with the government, but there are many

disgruntled organizations, which feel that they are being left out and that processes are not transparent.

This seems to be especially true when funding is involved. The government has made some small grants

to a select number of NGOs, and has even showcased some of them publicly. This is part of the

governments growing awareness that the nonprofit sector has an essential role to play in solving social

problems including disability and bringing more funding to the country.

In the interview with NESsT, the officer at the Office for Good Governance expressed that the

government should focus on two elements in the near future:

Monitoring plans and making recommendations for each implementing institution

25

Finish drafting the law for blind people and have it approved

Policymakers do not seem to have a clear idea of their role in creating an enabling environment for

social enterprise, so no such statements and plans were shared with NESsT. It is not yet acknowledged

as a model for economic development and for creating social change. Enterprise development strategies

do exist and some programs have delivered results, but they do not consciously include social enterprise

initiatives though this will change with the new SME strategy and support to businesses owned by or

benefitting marginalized groups. At the moment there is no need to pass new legislation. Instead, the

focus should be on compliance of existing regulations (at all levels, municipalities, companies, and public

institutions). The government needs to strengthen implementation of existing regulations and continue

the dialogue with private sector and civil society actors.

26

VII. Conclusions

The social enterprise sector as such does not exist in Kosovo. However, during the research we were

able to find NGOs and DPOs with a business orientation and also enterprises with a social purpose.

Social enterprise initiatives are in most cases driven by external donors and their actual/available funds,

and they usually operate without additional government resources. There is no national strategy for

social enterprise and the government has not allocated any funds to support its development. Some

promising pieces of legislation may point to changes in the social enterprise landscape in the years

ahead, specifically in the new SME strategy that will support businesses benefiting marginalized groups;

and in the Law of Vocational Ability, Rehabilitation and Employment of Persons with Disabilities that

promotes the setting up of protective workplaces for the employment of people with disabilities.

The main findings concerning social enterprises:

There are no social enterprises in the micro and small enterprise segment, as the majority of the businesses is set up as a small family and retail business, with no additional social goal in mind.

NGOs/DPOs business activities have a strong community orientation to raise awareness about people with disabilities, while business factors (i.e., sustainability) seem to be less relevant. At the same time, they seem to be the incubators of social enterprise initiatives. In this respect Kosovo is no different from other countries.

NGO/DPO business initiatives are operated usually as projects with little or no business planning, though this may be enough for the start-up phase. For incubation the formulation of a business concept is inevitable.

Training for sustainability and business skills are essential for both non-profit and for-profit social enterprises targeting people with disabilities.

NGOs have many good ideas for developing disability social enterprises, but the chances to finance startup and further development are slim. The few available opportunities require co-financing, which many of the organizations cannot provide.

The banking system is not prepared to give special consideration to social enterprise; only if they meet the same criteria as regular businesses, can they access debt finance.

The few social enterprise initiatives that enjoyed the support of enterprise development programs have usually been transferred into a for-profit form, such as cooperative or private company in order to facilitate their growth (e.g. Krusha womens cooperative). Donors believe that it is the best way to grow, as the non-profit form does not allow growth and profit distribution, so viable business ideas and their financiers preferred company structures. In these situations business aims and professionalism were sometimes emphasized over social or community targets.

Donors have a consensus about the need for social enterprise to be introduced in Kosovo. Some donors suggested that they would take it into account in their future planning.

Donors targeting NGO sector development and occasionally supporting business initiatives are also aware of the sectors project mindset but they do not really have the will and skills to change it.

Donors are aware of the dependency of NGOs on their funding.

The situation of people with disabilities in Kosovo:

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Kosovo is still in the transition phase from considering the disability issue as a human right issue to the next phase, which is about activating disabled people and reintegrating them into the economy and society. Both government and NGOs are finding this transition very challenging and they need more support of donors, investors, as well as best practices from other countries in order to succeed.

The social and economic environment is underdeveloped; labour market (re)integration of disabled people is insufficient (although regulations oblige to employ disabled people for companies of 50 employees or more), and there are no adequate (part-time jobs, infrastructural support etc.) workplaces for the disabled people on the open market. Considering these conditions, it is not surprising that the research did not find enterprises employing people with disabilities.

Though DPOs have piloted some services their integration into the formal service provision system is far from becoming reality. The conditions for contracting out social services are unclear, although the legal framework is supportive. On the other hand, non-state service providers can hardly get appropriate financial support or cannot obtain a financing framework from the state or at the local level. Commercial financing for those initiatives is not available. Due to these problems the sustainability of these innovative services is questionable.

VIII. NESsT recommendations

For next phases within the EBRD project:

1. Given that we have not found social enterprises in the private sector, but have identified promising initiatives in the nonprofit sector among DPOs, we should consider including those organizations in the training program, so that strong local examples can be developed and showcased. Our experience shows that it will take years for social enterprise to become more widespread and appear in the for profit sector.

2. Launch a business plan competition for social enterprises in the disability sector, inviting those initiatives and organizations we have identified during the research, as well as those from the general public. This would be the first social enterprise business plan competition in Kosovo, targeting peole with disabilities. The competition could be promoted through the existing enterprise development programs and other donors NESsT interviewed. This would widen its reach, although we expect that it would probably be mostly attended by nonprofit organizations because of the disability angle. Selected applicants with interesting business ideas (approximately 10 participants frm 5 businesses or organizations) would receive basic social enterprise training including sustainability delivered by NESsT. One potential risk is low number of applications for the social enterprise competition, given the very few models we were able to identify through the research.

3. Consider giving a monetary prize for the best business plans and concepts: at the end of the competition a joint Committee composed by EBRD, NESsT and ECLO in observer status would select the best business plans and provide grants to cover their startup costs. Grants would be essential to motivate participants as well as to provide finacing that is very hard to get from other sources. Grants would be provided by the European Union through the TAM/BAS Project implemented by EBRD.

4. Consider partnering with existing enterprise development programs (e.g. UNDP, YEP, etc.) in order to leverage their experience, contacts and logistical capacity in the for-profit enterprise sector.

5. Share best practices and examples of social enterprise from other countries in order to broaden the range of business ideas, as well as to show how to overcome challenges.

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6. We recommend further research into womens enterprises in Kosovo, as they may provide lessons learnt for the disability sector. The few social enterprise examples we identified in the research were of womens businesses.

7. When disseminating research findings and later project outcomes, EBRD should consider in its dialogue with the government to provide funding directly or leverage such funding to set up a guarantee facility for social enterprises. This would be a longer term objective, for which conversations can start as a result of the current project.

To policy makers

1. We recommend, as an immediate consideration, promoting sheltered workshops in order to link to strategic goal 7 of the SME Strategy:

a. Research sheltered workshops and find out, why they are not more widespread in Kosovo, even though legislation exists

b. Raise awareness in government as well as DPOs and municipalities about this option of employing people with disability

c. Share best practice examples from other countries Sheltered workshops exist in Kosovo legislation, but their potential perhaps has not been realized.

This model exists in most European countries in order to provide appropriate training and working

conditions to people with disabilities. They enjoy the support of governments in the form of

subsidies, as sheltered workshops provide employment opportunities to disabled persons and thus

implement the equal opportunity regulations that the state must respect. Sheltered workshops are

able to produce high quality marketable services and products with the right business support and

incentive schemes, thus they are prime candidates for social enterprise development. The

government subsidy is essential for them in the initial years to cover social costs, i.e. those costs

associated with working with a disabled group, but over time sales revenue will replace a large part

of that subsidy, and the sheltered workshop social enterprise becomes more and more self-

sustaining. One such example is the Moznosti tu jsou in NESsTs Czech portfolio26, which employs

mentally disabled youth in its sheltered workshop cafe and generates sales revenue, which is a vital

source to cover salary costs of the disabled employees.

2. On the longer run, consider sert