There is no profit in philanthropy” is a phrase that stems from the belief that while some business owners may desire to give back to society, there will come a time when social initiatives clash with business goals. The growing phenomenon of social enterprises show that this is not true, and that one can do good and make good profit at the same time.
The Switzerland-based Schwab Foundation for Social Entrepreneurship describes a social entrepreneur as someone who “drive social innovation and transformation... and pursues poverty alleviation goals with entrepreneurial zeal, business methods and the courage to innovate and overcome traditional practices.”
Some say that social entrepreneurship should be regarded as a subset of business entrepreneurship, rather than a separate entity. Both share many similarities. They require vision, the ability to identify a gap or need in the market and the innovation to find the solution.
Despite the perception that social entrepreneurship is not concerned with profit, the focus is still on the bottom line. The fundamental difference is the currency. For business entrepreneurs, profits are measured in dollars and cents. For social entrepreneurs, a profitable venture is one that has a positive impact on society.
This is not to say that social entrepreneurships are not financially viable, just that their main objective goes beyond making money. The Body Shop is a prime example. Founded by the late Dame Anita Roddick in 1976, it has become one of the biggest brands in cosmetics and skincare. It has also done well financially, recording pre-tax profits of Euro873 million (US$948 million) in 2014. However, its primary aim is to advocate for campaigns such as fair trade and the anti-vivisection movement by using its products as platforms for these goals.
In a 2010 interview with Harvard Business Review, Nobel Peace Prize laureate Muhammad Yunus explained the difference between what he termed “social entrepreneurship” and “social business.” For him, both social enterprise and social business involve making a difference in people’s lives. The distinction is that the former does that and makes money for the shareholder(s) through dividends, while the latter plies profits back into the business and community, with very little to no financial gain for the shareholder(s).
The latter is the business model of Grameen Bank, a microfinancing organisation founded by Yunus. It makes micro loans (small collateral-free, low-to-no interest loans) to the underprivileged in Bangladesh. Most of its customers are women, who use the money to finance small businesses.
While some may question the wisdom of lending money to the poor, the repayment rate has proven the viability of such a move. From the time Grameen Bank was founded in 1976 to June 2015, it had disbursed US$18.079 billion worth of loans and recouped US$16.577 billion. This is a percentage that few if any major finance companies can match.
This is not a Handout
As seen in the example of Grameen Bank, social entrepreneurship is not charity. Although both seek to enhance lives and the community, their operational systems differ from each other. Funding is one big distinction. Whereas charities are mostly dependent on donations, social enterprises are self-sustaining and generate their own value.
Another dissimilarity is the rationale behind the organisation’s mission. The website for the US-based non-profit Unite for Vision states, “While charity reflects the benefactor’s compassion for humankind… social entrepreneurship reflects more than the good intentions of its practitioners, who are not merely driven by compassion, but are also compelled by a desire for social change.”
At the same time, social entrepreneurship is not corporate social responsibility (CSR). The key difference is that CSR programmes are supplementary to the main profit-making objective of the company. For example, Microsoft gives millions away to charitable foundations, but their core focus is to sell ICT, not to alleviate poverty or change the world for the better.
Social Entrepreneurship in Southeast Asia
Southeast Asia is a potential hotbed for social entrepreneurship. Rapid economic growth has sparked urbanisation, improved standards of living, and encouraged the growth of businesses. However, many have also been left behind, and the gap between the haves and have-nots has further widened.
Countries like Indonesia and the Philippines are good examples of this divide. On the one hand, there are modern metropoles like Jakarta and Manila. On the other hand, there are significant parts of both countries, particularly rural areas, where there is a lack of basic infrastructure including healthcare.
Social enterprises are stepping in to fill the gaps governments cannot plug because of budget constraints. During the Asian Development Bank’s (ADB) Philippine Social Enterprise Forum in 2012, ADB official Bart Edes highlighted the role that these organisations are playing to improve socioeconomic conditions.
“Social enterprises are building sustainable business models to address poverty, joblessness and a lack of reliable access to basic services like education, energy, health and water,” the Guardian quoted him as saying.
Helping Fulfil Development Goals
The phrase “sustainable business models” is a clue as to why governments in the region are becoming increasingly supportive of social entrepreneurship. Because social entrepreneurship utilises the community which it aims to help. It builds capacity, encourages talent development, and spurs the growth of local businesses.
The Philippines has been named as one country with the right ecosystem for social entrepreneurship to thrive. Speaking to the Guardian Tommy Hutchinson, the founder of social entrepreneur community i-genius, said “There is a lot of entrepreneurial talent (in the Philippines), a lot of knowledge and awareness. And there is a strong sense of community.”
Human capital development is one aspect of social entrepreneurship that is gaining popularity in the region. This is driven mainly by the demand for talent which will help drive socioeconomic growth. Initiatives by the Wadhwani Foundation in Indonesia and Malaysia is one example.
Founded in 2000 by Silicon Valley Entrepreneur Dr Romesh Wadhwani, the foundation has established a network to help train entrepreneurs. In Malaysia, it works with venture capital company Cradle Fund to organise mentoring sessions and workshops, while in Indonesia, it collaborates with the Business Innovation Centre (BIC) in Jakarta.
Government support is also vital, and this can either be in the form of tax breaks and incentives or financial grants. Thailand is particularly good at that, and Hutchinson has said that, “outside China and India, it has the most sophisticated structural support for social enterprise.”
One example of the Thai government’s commitment to social entrepreneurship is the Thai Social Enterprise Office (TSEO), which is a body set up to coordinate the various social entrepreneurs and enterprises in the country.
In 2012, there were an estimated 112,000 social enterprises in the country. An organisation like TSEO ensures that the social entrepreneurship agenda is part of the national plan. It also helps that Thailand’s revered king is a strong supporter of social entrepreneurship.
Even the more advanced Asean economies are welcoming social entrepreneurship. Malaysia has a Social Enterprise Blueprint, unveiled in May 2015. Speaking at the launch, the country’s Prime Minister Datuk Seri Mohd Najib Tun Razak said, “The Government recognises the potential of social entrepreneurship in not only addressing our country’s pressing issues but in also redefining how business should work in order to achieve a people-centric economy.”
The Malaysian Global Innovation and Creativity Centre (MaGIC) has been tasked with executing the three-year blueprint. According to MaGIC’s executive director for social enterprise Ehon Chan, “Commitments laid out in the blueprint include a policy review to develop the social enterprise ecosystem. The Government is also currently looking into a legal entity or certification to help support the sector further.”
“Give a man a fish, and he’ll eat for a day. Teach a man to fish, and he’ll eat for a lifetime”, the old saying goes. Social entrepreneurship is about teaching people to fish. It is about offering them seeds and fertiliser rather than fruits and vegetables. By working together, governments, social entrepreneurs and the community can create the infrastructure and ecosystem that will spark economic growth, social development and improved prosperity.