Hi Alvin, and thanks for your post.

This is a complicated subject, and well beyond my knowledge – does anyone reading this post have any suggestions on how international trade policies may affect social enterprises’ ability to serve their intended clients?

Alvin brings up a good point: When implementing a social enterprise in local markets, is there a way to ensure that the benefits (economic, social or otherwise) accrue to the intended beneficiaries? His example of ‘leakage’ probably pertains to other sectors besides tourism and agriculture.

Does anyone else have any examples of how some social enterprises may actually do harm to local markets?

Dear Mary:

I very much liked your thoughts to the question of “Drawbacks of Social Enterprise.”

As one who works for a social enterprise that is trying to create a market, I am particularly interested in your comments. My organization, VisionSpring, is working in a market that is on both sides of your equation-weak and little-to-no activity AND monopolized by exploitative businesses or groups. In the case of our market, expensive eye doctors in capital cities control a commodity-like product (OTC reading glasses) while those customers who live in remote, rural villages have little-to-no access to our product. So, we are working to shift the paradigm that reading glasses should be sold exclusively by eye doctors (they currently aren’t in large, developed cities) and that they can be made available and affordable at the village level being sold by local entrepreneurs.

To get to your question, VisionSpring recognizes that for us to be truly successful, we will have seeded the market for others to come in. So, in many respects, we are a first-mover that is willing to forgo any of those advantages so long as the public benefit will be realized. We are happy to lay the foundation of public good in the hopes that others will come in a build on top of our efforts which is why we are able to take public funds. We anticipate that if we are most successful then large corporations will take note and start investing in these markets where true economies of scale can be realized and, ultimately, benefit the customer.

Thanks,

Graham

Mary,

Always interesting comments/questions.

I think that one of the factors to look at is existing obstacles/market failures. Certainly Business development services (BDS) is a case in point where often time Social enterprises are competing with private practitioners. However, at least in my experience (mostly in Latin America), for MSMEs the market does not reflect the costs of the services, nor can many MSMEs afford market rates. It’s a balancing act of building the market and demand for services so that it becomes viable for others to enter the market.

Another area that I have some first hand experience is where Social Enterprises can stimulate the market would be in market information. Social Compact (here in the US and I’m on their advisory board) works with cities, business and community groups to conduct market analyses in under-served urban markets. www.socialcompact.org

There are private sector information providers (that are also their partners) and in the US they are based on census data which is not set up well to measure accurately dense, underserved urban areas. Social Compact is able to, as a social enterprise, work with a variety of private sector and public sector organizations and gain access to transactional data that a private sector enterprise would not share with another company. As a catalyst for both improving local analytical capacity and market information this kind of social enterprise is able to help repair a major market failure that promotes increased investment and access to credit to micro markets that are not currently be served well.

Finally, Social enterprises have to continue to evaluate themselves and submit to greater transparency and evaluation (internally/externally) to grow and adjust as changes take place. A great organization that does not change when the market/circumstance do, starts to contribute to the problem rather than address it.

Best,
Jeremy

Mary,

VCD is that it thrives on a mature state of decentralization to be effective. Openness of the public-private-CSO sector-academe or a multi-stakeholder partnership.

Philippines, like any developing countries (slipping from #2 economy in the 60’s to bottom in SE Asia), is characterized by traditional trading system, inadequate socio-infrastructure and producers limited network to market their projects. With 2% of the population owning 70% of the land, export sector affected by the continued appreciation of Philippines Peso (from liberalization and cheap products from other countries.

While it is important that SE development focuses on the market gap, consider the CONTEXT – market failure. Or no private business is interested because of its remoteness – therefore, poverty and conflict prevails.

SE’s are in the MICRO-ENTERPRISES (level 1 to level 3 – from US$ O to $6800 in terms of assets and employees from 1 to 9 ) which are either: PRIVATE SECTOR (with employees) or individual MEs OR GRASSROOTS SE’s with loan size of maximum to US$3400 dollars.

Basic Commodities trading. National NGOs have supported Grassroots SE’s or individual MEs through market consolidation, market price information, alternative trade and marketing including e-trading (www.prrm.org ; b2bpricenow.com), linkages with industrial partners. This also includes capacity building of MFIs.

Micro-finance. While the commercial banks are mandated to provide micro-finance, it is only the rural banks who have supported micro-finance. Hence, the prevalence of cooperatives and NGO cum MFIs (SE’s) but still underserved.

CLIMATE CHANGE MITIGATION. Community-based RENEWABLE ENERGY because Phils have 7,100 islands! ECO-TOURISM is supported either by private sector with social purpose or grassroots SE’s supported by national NGOs/SE’s and international NGOs.

EXPORT OF HANDICRAFTS, ETC, Limited presence of Fair trade organization but support is from processing to global marketing. Most frequent strategy is to support sub-contractors ME’s which materials indirectly support the SME including the other services – tracking, warehousing, etc.

Private BDS only in big cities with the government sector still with biggest outreach. BDS capacity building in the underserved areas have been initiated involving national SE’s cum BDS provider as consultants by government programs.