Good practice:

Model of municipality social enterprise - a way to boost up the local development in the lagging reg

Slovakia is typical for its high level of regional disparities, same as for its high number of local municipalities (2 927 local municipalities for a population of 5,46 mil.,)A number of municipalities suffer from the so-called institutional emptiness characterized by the absence of private or public institutions driving the local development. In such a situation, local municipalities are also taking the roles which, in Slovakia, are not typical for them, such as creating local jobs and driving local economic development. For this purpose, many of local municipalities in Slovakia established an entrepreneurial entity owned and controlled by local municipalities. These entities' main aim is to deliver a measurable social impact; therefore, these are embraced by the legislation on social enterprises and are recognized as "municipal social enterprises" (MSE).
Because of their governance and ownership structure, social economy scholars categorize MSE as an edging form of social enterprises. Regardless of this fact, MSEs, are obliged to socialize their possible income, deliver positive and measurable social impact reported on an annual basis, respect democratic governance and be active on the market.A good example is the MSE from Raslavice. The municipality counts for 2 700 inhabitants, of which approximately 600 are Roma. As of November 2020, 230 social enterprises were officially registered. 59 of them were established by the municipality, thus are recognized as MSE.

The minimal requirements of MSE regarding human resources are one person managing the MSE and at least two employees producing the goods/providing services. The conditions of MSE in Slovakia are eased by job subsidies for disadvantaged employees and investment aid for starting MSE.

The MSE in Raslavice was established in 2015. In 2020, it was employing 19 people, and its business plan focused on construction and agriculture. In 2020, it produced 100 tons of vegetables in a bio-quality, which were supplied to the school cafeteria and a canteen. The construction team´ s primary client is the municipality itself, but also local inhabitants, who order small makeovers. Two people manage this MSE. Its income in 2019 totalled at almost 420 000 Euros.

The main challenge for each MSE is identifying a viable business plan that would embrace both social purposes and be economically viable and sustainable. This challenge is more present in smaller municipalities.

Model of MSE may be inspiring especially for countries from the former east-block, where the administration is fragmented to the high number of local municipalities with weak financial coverage.
The model of MSE may be counted as an effective social innovation that increases the capacities of local municipalities to boost local development and create local jobs. The model is especially effective in localities suffering from the lack of other stakeholders (as business entities or NGOs).
Because of the risk of unfair competition, the MSE model is not feasible for localities with sufficient coverage by standard commercial entities. Otherwise, because of its favourable position, the MSE may enjoy unfair conditions in local contracts bids. Therefore, the leaders of MSE must be cautious in the issues related to state aid, unfair competition or market manipulation. However, these issues are not very pertinent in localities, where almost no marker exists.