Cyprus passes Social Enterprise Law

Social enterprises in Cyprus now have their own legal framework. In December 2020, the House of Representatives of Cyprus passed, for the first time, a Social Enterprise Law. The bill was initially introduced in 2013 and it has taken seven years for it to be approved, reportedly due to many modifications, debates and delays. 

Prior to this, Cyprus had no legal framework for social enterprises. According to a social enterprise mapping report for Cyprus, carried out by the European Commission, there were only seven organisations that could be described as ‘social enterprises’ in Cyprus in 2014. A recent survey by CyprusInno of entrepreneurs in the Greek Cypriot and Turkish Cypriot communities found that 11% of the 359 entrepreneurs surveyed said they ran social enterprises.

Maria Nomikou, the youth, skills and inclusive communities sector lead for Europe at the British Council, says: “A law on social enterprises can have a very positive impact as it fosters visibility, growth and the development of this type of business.”

Visibility surrounding social enterprises is key to encouraging the growth of the sector in Cyprus. For years, the lack of a legal definition of the term social enterprise meant that social enterprises in Cyprus operated as either limited liability companies or charities. The problem with this, as identified by Andrea Solomonides, the lead of Cyprus operations at enterprise support organisation Cypriot Enterprise Link, was it created an image problem - many people did not think that working full time for social enterprises was financially sustainable, and thus the sector struggled to attract staff. 

A law defining social enterprises as separate, unique entities, distinct from other types of businesses or non-profits, helps increase awareness. The law also means that social enterprises will have access to EU grants available only to the social enterprise sector, and receive various tax benefits, which, Maria Nomikou hopes, will motivate people to set up their own social enterprises.

Eleni Mavrou, a member of the House of Representatives of Cyprus, who was involved in shaping the legal framework, points out another benefit of the new law: it offers protection to genuine social enterprises against those who try to exploit the sector purely for private profit.

Legislation on its own is never enough

“This is significant,” says Dr Alexander Apostolides, regulatory research lead MENA-MED of the Cambridge Centre for Alternative Finance at the European University Cyprus. “Another reason for the lack of social economy activity is the idea that profit is always created by ill means, a belief that has taken root because of the way that so many saw the accumulation of profit in our society happening through means that are unethical.” 

Maria Nomikou agrees that creating a legal framework for social enterprises legitimises them in the eyes of the public and “contributes to building trust around their commitment to social impact”.

However, Andrea Solomonides warns that “legislation on its own is never enough”. As a sector, the social economy is relatively young in Cyprus, and thus agencies need to be trained in how to implement policies, for example in the field of taxation, and the public needs to be educated on what social enterprises are and the issues they tackle.

Despite the challenges, Eleni Mavrou is optimistic about the opportunities for social change that this law presents, citing potential for growth in particular in the sustainable agriculture sector and the opportunities for social enterprises to collaborate with local authorities.

Social enterprises can offer a better future for young people – one they are instrumental in building themselves

The definition of social enterprises under the new law is as enterprises with a social cause that reinvest a proportion of their profits back into their work, or enterprises that hire a certain proportion of their staff from vulnerable groups.

A key demographic that this law could benefit are young people. Social enterprises throughout Europe are instrumental when it comes to tackling youth unemployment. The younger generation is often the one to start social enterprises, be employed by them, or use them as means to gain work experience. 

With a significant youth unemployment rate of nearly 16%, the new law could present 15 to 25-year-olds in Cyprus with a new way of entering the job market. 

Maria Nomikou believes that for a generation who are “increasingly questioning the traditional practices of businesses and economic growth, social enterprises can offer a better future for young people – one they are instrumental in building themselves”. 

Header photo: Honey produced by the Cypriot social enterprise Agia Skepi, which provides rehabilitation for people recovering from long-term substance abuse.

Alexandra Fougala-Metaxa is an early career Cypriot journalist who is taking part in the British Council's COOPower project, which is raising awareness about co-operatives and social enterprises among young people in Greece, Croatia and Cyprus. As part of the project, she received training from Pioneers Post editors about reporting upon the social economy.