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Erste Group’s Social Banking reaches milestone of EUR 600 million in loans granted

Press Release by Erste Group - Vienna, 20 March 2024

• 125.5 million euros in new social financing awarded in 2023

• Total volume of social loans granted since 2016: 600 million euros

• 2030 target: 1 billion euros in social loans and 200,000 new jobs

Last year, Erste Group provided 125.5 million euros in new financing for social organizations, start-ups, and small businesses in Austria and Central and Eastern Europe. Since its launch in 2016, Erste Group’s Social Banking has provided social financing loans amountingto around 600 million euros. Erste Group aims to provide a total of one billion euros in social loans by 2030.

For over 200 years, we have seen it as our mission to create prosperity for all people in the region. Environmental, social and governance issues are essential for promoting a just and inclusive society. Based on this insight, Erste Group's Social Banking has been focusing on people - and especially on their financial health - for almost ten years", says Willi Cernko, CEO of Erste Group.

Social banking: creating 200,000 jobs by 2030

Social banking means providing financing to help improve the social situation of people and the economic situation of social companies or organizations. In 2023, Erste Group’s Social Banking supported around 6,400 new customers in this manner. Since the launch of Erste Group’s social banking initiative in 2016, nearly 50,000 customers have already benefited sustainably. In addition to supporting innovative social enterprises, the financing helps to create and secure jobs, namely almost 100,000 jobs since 2016. Almost two-thirds of these are jobs for women, while 30% are for people from marginalized social groups. Through its financing, Erste Group’s Social Banking aims to support the creation or retention of a total of 200,000 jobs by 2030.

The survey of Erste Group’s Social Banking customers conducted as part of the banking group’s newly published Social Impact Report shows that 67% of participants said they were able to improve their overall economic situation. Peter Surek, CEO of Erste Social Finance Holding:

"Through our activities, we make a significant contribution to creating and securing jobs, strengthening social organizations, financing affordable housing, and empowering people from marginalized social groups. We will continue to intensify our efforts in advising and providing financing and will remain a reliable partner for our almost 50,000 customers in Austria and CEE."

Innovative financing solutions for social enterprises

For social organizations, micro-enterprises and start-ups, financing their ongoing operations or implementing new projects is a major challenge. The reasons are manifold: from low equity capitalization, lack of collateral to untested innovations. Proven financing methods often reach their limits with social enterprises due to the difficulty of measuring "success". This is why Social Banking makes use of innovative financial instruments such as "quasi equity" (mezzanine financing). As a subordinated loan, quasi-equity is an effective method of strengthening the capital base of companies and organizations without affecting the existing ownership structure. The strengthened capital base also makes the company more attractive to lenders. In addition to social enterprises, quasi equity also supports social housing and infrastructure projects as well as non-profit organizations.

Social impact bonds are another innovative instrument. The public sector uses them to test innovative solutions for urgent social challenges such as unemployment, homelessness or tasks in the healthcare sector. These solutions are designed and tested by social organizations and pre-financed by impact investors. If the contractually agreed impact targets of the initiatives are achieved, the public sector pays back the pre-financed investments, including a success fee, to the investors. It should also be emphasized that this instrument can be used to initiate social innovations without taxpayers' money. This enables social enterprises to take risks and launch new projects. A best practice example of this is atempo, a social enterprise from Graz, which enables people to retrain as carers with its digital training, thereby helping to combat the shortage of carers.

Erste Group’s Social Banking

Erste Group's Social Banking supports people at risk of poverty in all core markets by promoting job creation through the financing of start-ups, micro-enterprises, and social organizations. In addition, the social banking programs for people in financial difficulties offer special advisory and financial solutions for individuals and families in need and help them, for example, to overcome problems that threaten their existence, such as over-indebtedness. In addition, Social Banking's pilot projects in the field of social housing are testing innovative approaches to facilitate access to affordable housing for marginalized population groups. With its initiatives and projects, Social Banking is making a valuable contribution to achieving nine of the 17 Sustainable Development Goals (SDGs) that the member states of the United Nations have set themselves by 2030.

Check the report HERE or download the document below.