Student: NISTIRIUC IRINA
Coordinator: ASIST. UNIV. DRD. MURE?AN MARIA,
“1 DECEMBRIE 1918” UNIVERSITY OF ALBA IULIA
Abstract: The term ‘Social Enterprise’ has quickly picked up momentum as a way of describing an important new movement in business and entrepreneurship. Social enterprise turns life around us. A social enterprise is a cause-driven business, whose primary reason for being is to improve social objectives and serve the common good. Social enterprises apply business solutions to social problems.
Social entrepreneurship is all about recognizing the social problems and achieving a social change by employing entrepreneurial principles, processes and operations. It is all about making a research to completely define a particular social problem and then organizing, creating and managing a social venture to attain the desired change. The change may or may not include a thorough elimination of a social problem. It may be a lifetime process focusing on the improvement of the existing circumstances.
While a general and common business entrepreneurship means taking a lead to open up a new business or diversifying the existing business, social entrepreneurship mainly focuses on creating social capital without measuring the performance in profit or return in monetary terms. The entrepreneurs in this field are associated with non-profit sectors and organizations. But this does not eliminate the need of making profit. After all entrepreneurs need capital to carry on with the process and bring a positive change in the society.
Different types of social enterprises
There are many different types of social enterprise business models and structures which vary according to their core purpose, ownership, management structure and accountability.
Community Enterprises: enterprises which serve a particular geographical community or community of interest and have representatives from the community on their board of directors.
Social Firms: which aim to integrate people who might otherwise find it difficult in the mainstream job market, such as people with learning disabilities or mental health problems.
Co-operatives: organisation owned, controlled, and run for the benefit of their members.
Credit Unions: community based financial institutions providing savings and loan facilities for their members.
Community Development Finance Institutions: providers of Ioans and other types of investment primarily for social enterprises and other small businesses.
Development Trusts: community enterprises which aim to develop a community, usually through the ownership and management of property.
Public sector spin-outs: independent social enterprises set up to deliver services that were previously provided by public sector organisations. Also known as ‘externalised’ services.
Trading arms of charities: set up to undertake trading activity in order to raise money for their charity parent company e.g. charity shops, catalogues, training and consultancy.
Fair Trade organisations: committed to ensuring that producers are paid a fair price for what they produce.
Other types of social enterprise: businesses with social objectives as central as their economic objectives.
2. Who is a social entrepreneur?
Entrepreneurs are people who venture into new areas primarily with intent of making profit out of the same. Of course there they socially responsible also and have the obligation of contributing to the well being of the society in which they operate; but this obligation is secondary. In social entrepreneurship this obligation of contribution to social well being is primary and in a way profit takes a back seat or is more or less secondary but essential to the survival!
A social entrepreneur is somebody who takes up a pressing social problem and meets it with an innovative or path breaking solution. Since profit making is a secondary objective, therefore they are people who are passionate and determined about what they do. They possess a very high level of motivation and are visionaries who aim at bringing about a change in the way things are.
By definition social entrepreneurs are great people recruiters who present their ideas or solutions in a way that many people, who are either part of the problem or surrounding it, recognise a need for change and get onboard the change bandwagon. Thus mobilizing the masses for bringing about change is a hallmark of a social entrepreneur.
Social entrepreneurs operate with an aim of changing the face of society. Be it health, sanitation, education, they are present everywhere. There are people even who work on bringing about change in the modern innovations because their impact has been detrimental to human life. They thus work towards improving systems, creating new solutions, laying down fair practices.
Figure 1. Social enterprise
2.1. Some of the very famous people who inspire others to take up social entrepreneurship are:
Susan B Anthony: was the Co-Founder of the first women’s temperance movement and a prominent American civil rights leader for women’s rights in the 19th century.
Vinobha Bhave: is a prominent figure in Indian modern history and was the founder and leader of the Land gift movement that helped reallocate land to untouchables.
Maria Montessori: a pioneer in education. Developed the Montessori approach to early education in children.
Florence nightingale: she laid the foundation for the first school of nurses and worked to improve the hospital conditions.
Margaret Sanger: she was the founder and leader of the planned parent hood federation of America, championed the family planning system around the world.
These are examples of some people who fought for what they believed in and brought about varying degrees of change in their respective spheres of work.
Social entrepreneurship has witnessed a boom in the past few years with more and more people getting attracted to it. There is now a healthy competition and world class graduates are giving up lucrative jobs to work and contribute in meaningful ways towards the society.
3. Social enterprises around the world
With an aim to generate income if not wealth, the social enterprises come up with innovative as well as people-friendly solutions to bring a positive change in the society. What makes them different from the corporate world is their basic aim; they work for the people who live below poverty line and offer flexible working environment to people. Although the concept of social entrepreneurship has been around since 1960s and is promoted by many individuals but the establishment of The Grameen Bank in Bangladesh was the first instance where the concept was thoroughly used. Under the leadership of Muhammad Yunus, it tried to address the issue of people living below poverty line and gradually has evolved as a strong identity.
The Skoll Foundation-North America
Founded by Jeff Skoll, the first president of ebay, the Skoll Foundation supports the social enterprises and highlights their work by establishing their partnerships with Sundance Institute and NewsHour with Jim Lehrer. NIKA Water Company is another social enterprise in America. The company sells bottled water in the country and brings clean water to the developing world with its profits. It uses its 100 percent profit in the activity.
Grammen Bank- Bangladesh
Social enterprise is not a new concept but it started becoming popular only in 1960s. There may be different rules and regulations for social enterprises around the world but their basic concept remains the same. Their ultimate aim is to serve the people of the society who are at the bottom of the pyramid. In Bangladesh, Muhammad Yunus incorporated the Grameen Bank, a microfinance organization that makes small loans to people living in rural areas without requiring collateral. The bank does not believe in charity but in offering help to people as an initiative to break through the poverty cycle.
Echoing Green- USA
Based in New York, Echoing Green is a non-profit organization that operates in social sector investing. For last twenty years, it has been working in this field encouraging and helping young entrepreneurs to launch new organizations.
Rang De- India
Rang De is a not profit online organization in India that lends small loans to individuals planning to start a new or grow their existing business. It is a successful attempt to bring together the two parts of India one of which is successfully progressing while one is left out due to shortage of resources. Founded in the year 2006 by Ramakrishna NK and Smita Ram, Rang De, today is a major online platform in the country.
Schwab Foundation for Social Entrepreneurship
Founded by Professor Klaus Schwab and his wife, the main purpose of Schwab Foundation for Social Entrepreneurship is to promote social innovation. The foundation does not give grants but addresses social problems and provides platforms at the country, global and regional levels.
Established in 2004, the Omidyar Network is a philanthrocapitalist investment firm that fosters economic advancement. With a network of for-profit companies, the network encourages participation in the areas of government transparency, microfinance, social media and property rights. Headquartered in Redwood City, California, it was established by Pierre Omidyar and his wife Pam.
3.1 One of the greatest social entrepreneurs of all time
Lack of clean and accessible drinking water is sadly something that millions of people (some estimates put it at more than a billion) worldwide face every day. After a moment of clarity in Liberia, club promoter Scott Harrison decided to make it his mission to change that, heading up the non-profit organization charity: water. Since it began, the charity has delivered clean drinking water to more than a million people in 17 different countries around the world. Harrison is perhaps one of the most successful social entrepreneurs of all time, with his organization growing more than 100% in the first quarter of 2011, despite a major economic crisis that paralyzed many similar ventures. Harrison says he regards charity: water as a for-profit startup that has no profits, saying, “We give away 100% of our profits. Our shareholders are people in 17 countries around the world waiting for a rig to drive into a village and provide clean water to a few hundred people living there. We use the word business so much more than nonprofit, even though that’s what we are.” The model seems to be working for him, and Harrison has quickly created a new model for social entrepreneurs to emulate.
4. Advantages of Social Enterprises
Social enterprises tend to operate with a purpose of creating value for the society and also generate income (if not wealth). As a thumb rule, the solutions they offer are supposed to be innovative, unique, people and environment friendly; Cost effectiveness is also a huge consideration. All of these are challenges to the sustainability of social enterprises, but the ones that are able to scale these are the ones that are able to create a huge impact! They are the enterprises that are advantageous to the society, people and the environment.
Since social enterprises typically deal with people who live at the bottom of the pyramid, therefore they are the ones who are benefited to benefit hugely from the former. In other words social enterprises are beneficial to the poor, generally by providing them with a means of livelihood.
Since social enterprises do not work typically the way corporate setups or private firms work, they offer flexible working environment which is as per the liking of many people groups.
There are advantages of a social enterprise that are entrepreneur specific like:
Social entrepreneurs find it easier to raise capital. There are huge incentives and schemes from the government for the same. since the investment industry here is ethical, it is easier to raise capital at below market rates.
Marketing and promotion for these organisations is also very easy. Since a social problem is being tackled with a solution, it is easier to attract attention of the people and media. The degree of publicity often depends on the degree of uniqueness of the solution.
It is easier to garner support from likeminded individuals since there is a social side to the enterprise. It is also easier to get people onboard at lower salaries than compared to other industry.
Similarly there are advantages that are specific to the environment, society and the people concerned. Some of them are as under:
Services in whichever section they may be offered are customized better to suit the needs of the individual or the problem. This is also designed in harmony with all other systems like the environment, society or the people.
Cost effectiveness is another advantage of a social enterprise. The solutions offered by these organisations in the form of either products or services are reasonable than compared to the same service provided by a profit making organisation. No wonder basc amenities like healthcare, education etc have become very affordable to people world over with the help of these institutions. Micro finance, for example, today caters not to the poor but to the poorest!
Although lots of organisations have also made corporate social responsibility an integral part of their business functioning but not many actually mean to create a difference. It is just a means to achieve more profits; there is an increasing need to watch out for the same and help and advocate those who really aim to add value.
4.1 Disadvantages of social entrepreneurship
Social entrepreneurship is when one starts a nonprofit business to create or sustain social value. The disadvantages are the risk of losing nonprofit status, lack of support or funds, possibility of poor reputation due to disaster . Also, a disadvantage for an entrepreneur in many aspects is that your accounting and your tax preparation are much more difficult than if you just work a standard job.
Another disadvantage is that an entrepreneur must be involved in every single aspect of their business.
An entrepreneur is an individual who owns, organizes, and manages a business and, in so doing, assumes the risk of either making a profit or losing the investment.
4.2 If you want to launch a social enterprise you should ensure that:
It is a good fit with the agency
You know your industry
You treat your enterprise as a business
You hire the right people
You set realistic expectations
You improve your financial literacy
5. Social Enterprises – FINCA InternationalMicrofinance is the original social enterprise and market-based innovation supporting the world’s poor. As a pioneer in microfinance, FINCA knows what it takes to look past the skeptics, embrace the unknown, and tenaciously push forward.
For more than thirty years, FINCA has enabled bottom-up growth in markets others found uneconomical to serve and too difficult to reach by providing financial services to entrepreneurs at the bottom of the pyramid (BOP). FINCA was built by entrepreneurs for entrepreneurs.
As the owner-operator of a global microfinance network, FINCA is uniquely positioned to grow social enterprises faster and smarter, and reach BOP populations more effectively and responsibly. This is achieved through a platform we call FINCA Plus.
FINCA Plus programs aim to improve the standard of living for the world’s poor by supporting the rise of social enterprises devoted to the development of high-quality and extremely affordable products and services across six sectors. It is a platform to explore innovation and collaboration with the purpose of providing breakthrough and diverse approaches to serving BOP customers.
Figure 2. Sectors
Social enterprise has a number one priority of achieving a social mission such as providing healthcare or safe drinking water for the poor, introducing renewable energy, creating jobs for the unemployed or advancing education initiatives. Although profits are not the primary motivation behind a social enterprise, revenue still plays an essential role in the sustainability of the venture. In fact, sustainable revenue differentiates a social enterprise from a traditional charity that relies on outside funding in the form of donations or grants to achieve its social mission.
The problem is that these social enterprises are usually operating in an environment that doesn’t support them, and sometimes is outright hostile. This doesn’t mean that social enterprises can’t be highly profitable, it simply means that when they are, their priority is the reinvestment of profits into their social mission rather than payouts to shareholders.
A successful social enterprise is one that balances the tension between upholding the social mission of their organization and maximizing the productivity of their business venture to ensure sustainability.