- Social enterprise has galvanized a sizable global movement!
- The crux of Mohammad Yunus Nobel Laureate speech was about “social business” [social enterprise] not microfinance per se.
- Social enterprise is attracting mega bucks from new break-out foundations (Clinton Foundation, Gates Foundation, Omidyar Network, Skoll Foundation, etc.) and venture philanthropists (bamboo fund, Acumen Funder, LGT, etc) as well as (little by little) the usual development aid donors (World Bank, IFC, IADB, DFID, USAID missions, etc.)
- Strong synergies, overlap, value ad, and duplication of components exist between social enterprise and microfinance, fair trade, base of the pyramid, enterprise development, and value chain approaches to economic development.
- The British Government deemed social enterprise as an essential strategic tool for the social sector development and as a result created a special unit for social enterprise in the Department of Trade and Industry and a legal designation (Community Interest Company.
- Barack Obama presidential campaign also mentions social enterprise as part of its platform.
- Over 80 universities around the world teach social entrepreneurship and social enterprise, many of which have dedicated centers to further the study of social entrepreneurship (among them: Harvard, Oxford, Stanford, NYU, Columbia, UC Berkeley, INSEAD, etc.)
- Social enterprise has broad applications across sectors and thus can be used as an integrated approach for economic development plus health, education, housing, water, etc.
- In its relatively short history, social enterprise has been a regular featured in mainstream press including, PBS series, “New Heroes” hosted by Robert Redford, Fast Company annual Social Capitalist Awards, The Economist, The Guardian, etc.
- Social enterprise methodology is premised on social sector organizations achieving financial sustainability, high performance, strategic social impact and engendering an entrepreneurial culture.
9 Comments
microfinaces are effective
microfinaces are effective mechanisms where the poor are truelly empowered.I Think the best way implement this green side of microfinance enterprises is to mainstream it with the concept of appreciative inquiry.
Hybrid and social enterprise
I think BRAC is a hybrid. BRAC is a NGO enterprise and doing multi sectoral business and social services for poor. It’s motive is mixed. It has balance of mission and market (in practice). It has been creating socila and economic values. The organization reinvested in misson activities or operational expenses and retained for business growth and developemnt. Therefore it is clear that BRAC is a hybrid.
I am not convenced that BRAC is a socila enterprise considering the defination given in the paper. Because BRAC is not completely a non-profit organization and its ultimate goal is both profit making (may be 70%) and social service (may be 30%).
In this connection I would like to request paper writers (working group) to review the defination of social enterprise. Social enterprise are not purely non-profit organization because most of the social enterprise are financial serice provider that is a business. I think in practice hybrid organization are social enterprise.
Mozharul Islam
Sr. Monitoring Officer
Making Markets Work for Small-holder Farmers and Rural Producer project
Markets and Livelihood Program
Practical Action Bangladesh
House 32, Road 13A, Dhamondi, Dhaka, Bangladesh
Tel office +088-02-8111934, 9123
social enterprise is a hybrid
Dear Mozharul Islam -
You are correct that a social enterprise is a hybrid--part buisness, part social. In our view it is a means to achieve social change or social impact using a business vehicle. I think often the definition of social enterprise gets confounded with the legal form. Ideally social enterprise should be agnostic about legal form adopting any legal form or forms (complex structures) that enables the organization/business to execute its social and financial objectives given the legal environment in which it operates.
The definition in the paper follows: "Social Enterprise is defined as a nonprofit organization or socially-oriented venture (nonprofit, for-profit or hybrid) that advances its social mission through entrepreneurial, market-based approaches to increase its effectiveness and financial sustainability with the ultimate goal of creating social benefit or change."
What is social enterprise?
And … what is our purpose in defining it? It seems there are a pretty wide range of perceptions about it. I hear different views:
+Social enterprise is “too soft”: it’s donor dollars packaged with a fancy title to make entrepreneur donors feel more like “investors.” Although they may apply seom business and market principel sin their work, most social enterprises deliver free or highly subsidized products or services to the poor, most are very small. A social enterpisre “business plan” is actually just a proposal for development work, asking for money. The implication is that this may be appropriate for social services – health care, education, counselling, watner and samitation and meeting other basic needs. But, that the social enterprise approach in the private sector is too small-scale, not sustainable and can distort markets. If a “social enterprise” such as a fair trade NGO offers craft producers a subsidized price for a few years while they have donor funds, the trader in the area leave, the NGO shuts down or reduce outreach when funds ar eno longer available, and the market dies.
I also hear:
+Social Enterprise is business with a social purpose and the “double bottom line” must include financial sustainability or – better yet – profitability for the enterprise. A social enterprise “business plan” in this situation really means – when will this investment break even and become profitable, and what social benefits will it generate? When applied on a large sclae it can make a significant difference in poverty eradication, and it’s sustainable. So, most microfinance work would fall here.
The definition put forward in the paper helps me because it reflects the reality of the broad spectrum of initiatives whose practitioners define their work that way. Broad can be helpful because it is includive and gets us all exchanging strategies. But if the two spectrums – exagerated – presented above are very different – do they want to be associated with each other? Is there some way for organizations focused on financial sustainability to differentiate themselves while remaining part of the movement? Is there a way for the organizations that offer a socail return – rather than a financial return – to be seen as good practice and not “soft”? Does the anser depend on whether we are trying to deinfe ourselves formarkets purposes or for the purpose of development appropriate technical guidance and industry performance standards?
Looking forward to your thoughts,
Mary McVay
Fair Trade as a Preface for Social Enterprise
I agree with majority of the opinions of Mary McVay. I am trying to express my unstructured spontaneous thoughts:
Firstly, my experiances are restricted to India and poorest of the poor artisans majority of whom are women.
1. Fair Trade organisations in India are adopting two pronged approach
a) Developmental approach b)Business approach
Majority of them having seperate strategies for both of them and integrating at the community level. If we look at the poverty alleviation approaches adopted in india for the past five decades,we will understand that in this graduation stage to compete with the global markets handholding is required in several forms. Having said that, i would like to share that FTOs in India at very fast taking the root of Business Approach. But as NGOs they are eligble for community development grants from local governments and at this stage we feel this handholding is necessary to create an equal environment. If we look at SME status in India, we will understand that SME which were closed down are not because of non-availability of Markets but because of non-adoptability of Markets. Financial sustainability is crucial to become ‘Marketable’.
I agree with Mary that, forward and backword linkages are very essential for sustainability. If buyer leaves or NGO closes its operations then what? . If Fair Trade becomes a preface for social enterprise then sustainability is possible. Let me eloborate on this – through fair trade initiatives if we can promote social enterprises which will lead to social change then it is possible. But unfortunately in India situation is different. A poor producer or entrepuener wants to take a loan of Rs. 10,000 (small amount) from bank he has to pay atleast 12 percent. if he wants to take from MFI then has to pay double that interest. Where as a big corporate wants to take a loan of 100 crores then the bank charges them less than 9 percent interest.
In this scenario, let us imagine that same social enterprise is promoted by a non profit NGO and also Big Coorporate, we can easily understand which model will be sustainable. My point is SOCIAL ENTERPISE BY WHOM? FOR WHOM? THROUGH WHOM? is most important to decide what social and ecomic benefits that Social Enterprises will bring!
Secondly, i congradulate virtue ventures for a thought provoking draft paper.I would like to respectfully submit that while appreciating your majority of your views, i request you to provide more information(if possible)on the following:
1. U mentioned about HLL Shakti Project under oppurtunities for BOP strategies – i agree that they highly succeded in selling their products to the poor villagers, but have they fulfilled their social commitments made to respective goverments and to the poor people . Their balance sheets gives us an indication. In the past several years, they earned hundreds of crores from this village product selling program through Self Help Groups! But i failed to gather information in substancial terms what social change or economic empowerment they have brought in through this initiative. With due regards to them and their work, i strongly feel that it is premature to decide that this can be a better BOP stratergy!
2. I would like to conclude my point by proposing thefollowing issues for further discussion- How do we see ‘Social Enterprise’ in the context of NGOs, SMEs, big corporates, traditional business houses etc. – What are the challenes posed by Globalisation for the sustainability of social enterprises. – Could Fair Trade become a preface for ‘sustainable social enterprise’ – Is it possible for ‘Social enterprise’ to shift from market driven approach to market integrated approach?
Please forgive me for my unstructured thoughts, but we are desparate to evolve a ‘sustainable fair trade social enterprise model’ in India
Looking forward for your comments / suggestions / critisism for improvement in my thinking
With warm regards
Mallikarjuna. Iytha
Executive Director
Fair Trade Forum-India
Social enterprises and social entrepreneurship
Dear All,
I found various interesting postings in this discussion and encouraged me to go thro some of the literatures on social enterprises and social entrepreneurship. While reading some literatures on this topic, I found the following definition form From Wikipedia, the free encyclopedia and some interesting facts on successful entrepreneurs from called “How to change the world”
From Wikipedia, the free encyclopedia:
Social enterprises are social mission driven organizations which trade in goods or services for a social purpose. The need to deliver on financial, social and environmental performance targets is often referred to as having a triple bottom line.
It could be that the profit (or surplus) from the business is used to support related or unrelated social aims (as in a charity shop), or that the business itself accomplishes the social aim through its operation, say through the employment of people from a disadvantaged community including individuals and existing business who have difficulty in securing investment from banks and mainstream lenders.
In this context, I would like to refer the book called how to Change the world written by David Bornstein.
The book has mentioned the following six qualities of successful social entrepreneurs:
1. Willingness to self correct
2. Willingness to share Credit
3. Willingness to Break Free of Established structures
4. Willingness to cross Disciplinary Boundaries
5. Willingness to work quietly
6. Strong Ethnical Impetus
Quoting some line of this book (How to change the world): The most successful entrepreneurs were the ones the one most determined to achieve a long term goal that was deeply meaningful to them. Accordingly, they tended to be more systematic in the way they searched for opportunities, anticipated obstacles, monitored results, and planned a head. They were more concerned with quality and efficiency and more committed to the people they employed and engaged with in business or as partners.
In my opinion, the social entrepreneurs would able contribute this world poverty through their innovations and openness. With various examples of successful entrepreneurs that they have a power to change this world with their innovations.
With best regards,
Ekanath
Dear Ekanath: Thank you
Dear Ekanath:
Thank you for your further research into helping define and understand social enterprise. I also appreciate your highlighting David Bornstein’s book and his six key characteristics. One of the characteristics that he does not address is financial sustainability. I wonder what the participants think about this.
In my conversations with David, it is clear to me that he is defining social entrepreneurs rather than social enterprises.
Can social entrepreneurs who are not interested in creating market-based solutions create social enterprises, or are they creating something else?
Graham
Thanks Graham for your
Thanks Graham for your quick turn around
Regarding your question on about the market based solution in relation to social enterprise, yes there are various social entrepreneurships that only depend on external support/ funding and they are themselves not sustainable that also leads the failure of their innovations.
I was just looking a paper written by Charles Leadbeater on: What are the future scenarios for social enterprise”. He explicitly distinguishes the social enterprise natures in to the following four board categories. I have attached his short paper for our reference as well.I hope the descriptions of the following points will help your argument (What the special entrepreneur are doing)
Scenario 1: socialisation of business
Scenario 2: socialising public services
Scenario 3: politics – social enterprise and social movements
Scenario 4: social enterprise and new forms of volunteerism
with best regards,
Ekanath
Value addition
Social enterprise is an appropriate tool to fix the gap that most micro finance institutions, the private and public sector usually find difficulty in filling, and this is normally due to additional operational costs (especially for MFIs and private sector) and non-informed thinking. Social enterprise complements the work of these players, it provokes and increases the philosophy and spirit of entrepreneurship within communities. Through this, it becomes relatively undemanding to develop market systems that work for the poor. A communiy’s social tissue is a major aspect in defining and designing approriate economic programs.In fact, social a successful social enterprise program makes such economic enviroments easier for investments, both from within and without. Micro economic elements are kept active and income levels are improving. What is needed is audience,support and comprehension of the social enterprise phenomenon by donors.