Social entrepreneurship and enterprise

September 15, 2019


Social entrepreneurship is an approach by start-up companies and entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or environmental issues. This concept may be applied to a wide range of organizations, which vary in size, aims, and beliefs. For-profit entrepreneurs typically measure performance using business metrics like profit, revenues and increases in stock prices. Social entrepreneurs, however, are either non-profits, or they blend for-profit goals with generating a positive "return to society". Therefore, they must use different metrics. Social entrepreneurship typically attempts to further broad social, cultural, and environmental goals often associated with the voluntary sector in areas such as poverty alleviation, health care and community development.

At times, profit-making social enterprises may be established to support the social or cultural goals of the organization but not as an end in itself. For example, an organization that aims to provide housing and employment to the homeless may operate a restaurant, both to raise money and to provide employment for the homeless.

In the 2010, social entrepreneurship is facilitated by the use of the Internet, particularly social networking and social media websites. These websites enable social entrepreneurs to reach a large number of people who are not geographically close yet who share the same goals and encourage them to collaborate online, learn about the issues, disseminate information about the group's events and activities, and raise funds through crowd funding.

Social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being—this may include maximizing social impact alongside profits for external shareholders.

Social enterprises can be structured as a for-profit or non-profit, and may take the form (depending on in which country the entity exists and the legal forms available) of a co-operative, mutual organization, a disregarded entity, a social business, a benefit corporation, a community interest company, a company limited by guarantee or a charity organization. They can also take more conventional structures. Social enterprises have both business goals and social goals. As a result, their social goals are embedded in their objective, which differentiates them from other organizations and corporations. A social enterprise's main purpose is to promote, encourage, and make social change. Social enterprises are businesses created to further a social purpose in a financially sustainable way. Social enterprises can provide income generation opportunities that meet the basic needs of people who live in poverty. They are sustainable and earn income from sales is reinvested in their mission. They do not depend on philanthropy and can sustain themselves over the long term. Their models can be expanded or replicated to other communities to generate more impact. A social enterprise can be more sustainable than a nonprofit organization that may solely rely on grant money, donations or federal programs alone. As a for-profit model, you control the curriculum and funding of the program. The incentives of the company are designed such that greater impact directly correlates to a great profit. Investors and business partners today want to know that the companies they choose are doing more than just providing a product or service. They look for companies that are doing good. They will feel a special connection to companies whose values align with their own.

Crowd funding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. Crowd funding is a form of crowd sourcing and alternative finance. In 2015, over US$34 billion was raised worldwide by crowd funding.

Although similar concepts can also be executed through mail-order subscriptions, benefit events, and other methods, the term crowd funding refers to Internet-mediated registries. This modern crowd funding model is generally based on three types of actors: the project initiator who proposes the idea or project to be funded, individuals or groups who support the idea, and a moderating organization (the "platform") that brings the parties together to launch the idea.

Crowd funding has been used to fund a wide range of for-profit, entrepreneurial ventures such as artistic and creative projects, medical expenses, travel, and community-oriented social entrepreneurship projects. Its use has also been criticized for funding quackery, especially costly and fraudulent cancer treatments.

Types of Crowd funding

Reward-based crowd funding has been used for a wide range of purposes, including motion picture promotion, free software development, inventions development, scientific research, and civic projects.

Equity crowd funding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity.

Software value token
Another kind of crowd funding is to raise funds for a project where a digital or software-based value token is offered as a reward to funders which is known as Initial coin offering (abbreviated to ICO).

Debt-based crowd funding (also known as "peer to peer", "P2P", "marketplace lending", or "crowd lending") arose with the founding of Zopa in the UK in 2005 and in the US in 2006, with the launches of Lending Club and Borrowers apply online, generally for free, and their application is reviewed and verified by an automated system, which also determines the borrower's credit risk and interest rate. Investors buy securities in a fund which makes the loans to individual borrowers or bundles of borrowers. Investors make money from interest on the unsecured loans; the system operators make money by taking a percentage of the loan and a loan servicing fee. In 2009, institutional investors entered the P2P lending arena; for example in 2013, Google invested $125 million in Lending Club.  In 2014 in the US, P2P lending totaled about $5 billion. In 2014 in the UK, P2P platforms lent businesses £749 million, a growth of 250% from 2012 to 2014, and lent retail customers £547 million, a growth of 108% from 2012 to 2014. In both countries in 2014, about 75% of all the money transferred through crowd funding went through P2P platforms. Lending Club went public in December 2014 at a valuation around $9 billion.

Litigation crowd funding allows plaintiffs or defendants to reach out to hundreds of their peers simultaneously in a semiprivate and confidential manner to obtain funding, either seeking donations or providing a reward in return for funding. It also allows investors to purchase a stake in a claim they have funded, which may allow them to get back more than their investment if the case succeeds.

Running alongside reward-based crowd funding, donation-based is second as the most commonly used form of crowd funding. Donation-based crowd funding is the collective effort of individuals to help charitable causes. In donation-based crowd funding, funds are raised for pro-social or pro-environmental purposes. Donors come together to create an online community around a common cause to help fund services and programs to combat a variety of issues including healthcare and community development. The major aspect of donor-based crowd funding is that there is no reward for donating; rather, it is based on the donor's altruistic reasoning. Ethical concerns have been raised to the increasing popularity of donation-based crowd funding, which can be affected by fraudulent campaigns and privacy issues. In the context of Maldives, Donation-based crowd funding is most commonly used form of crowd funding which is being called Donation mainly for seeking medical assistance for not affordable patients.

Elements of Social Entrepreneurship

Social Impact 
Social impact is a key element of a social venture. A social venture can make impact at different levels (for example: community, local, regional, national) or with varying degrees of depth.   How a social venture makes the impact and where it wants to make the impacts are important strategic decisions. 

Social Innovation
Social ventures break new ground, pioneer new approaches, or develop new models.  These ventures need to creatively navigate the economic, social, and institutional barriers to addressing the social need.  Social entrepreneurs develop new approaches to addressing social problems or utilize technology to facilitate problem solving. 

A sustainable social venture is financially viable and positioned to fulfill its mission over the long-term.  Many social ventures are not sustainable because they rely upon unstable grant-making or government institutions for their funding. Alternatively, earned-income or fee-for-service business model are generally more effective strategies for social ventures.  Some social ventures are not sustainable because they have not organized their internal resources effectively to fulfill their mission. 

Measurement and evaluation are essential to social entrepreneurship. In addition to the financial metrics used by traditional ventures, social ventures must measure their impact and evaluate its effectiveness.  There are many ways to gather and evaluate the social impact of a venture.  The key is that the social venture is using an appropriate type of measurement tool that is in line with their theory of change.

Elements of a successful Social Enterprise

1. Sustainable
The goal of every enterprise is to become self-sustaining. Relying on donor aid and funding isn’t practical any more as policies from around the world are limiting the amount of aid and funding countries and organizations receive. As a result, it is important that any enterprise adopts strategy which ensures that the business becomes an ongoing concern.

2. Socially Inclusive
Social enterprises are attractive in modern society because they strive for inclusion in the workplace. Brownies and Downies in South Africa employs staff who suffer from downs-syndrome. The BEEHIVE in Malawi (Blantyre) employs as many women as they do men for their construction projects. This has enabled families from within the area to essentially become dual-income earning households, thereby improving the family`s disposable income, savings and investments. 

3. Diversifiable
The BEEHIVE provides staff with virtually free day care for toddlers and a primary school for children. At present they offer these services at a fee to the general public but still free for their staff. This strategy also ensures sustainability. What began as a solution for parents who couldn’t afford babysitters became a school within the community.

4. Professional
Social enterprises also demand a high level of professionalism, as you would find in the private or public sector. Kwithu Kitchen in Malawi is made up of women from within the rural community and apart from providing them with an income, they also take time to train them in basic business management and accounting.

5. Easily Replicated
During the program, learners were shown videos of other social enterprises from across the world such as Iyeza Health in South Africa, Social Bite in Scotland and WeCyclers in Nigeria. Interaction after the videos was centered on being able to start similar businesses in Malawi using similar models.

6. Value Addition
Kwithu Kitchen in Malawi (Mzuzu) takes tomatoes from the fields and turns them into pastes, purees and sauces. After being packaged they are sold in supermarkets across Malawi. This limits waste as processed goods are made to last, and they can be easily exported thus bringing in forex into the country.

7. Reactive
Social enterprises respond actively to social needs and provide answers to problems within the community.
Perhaps the biggest problem is having to distinguish a social enterprise from a for-profit enterprise and a non-profit organization (like NGOs).
Non-profit`s are usually donor funded and don’t trade but if they do, profits are not primary to the organizations survival; for-profits are interested in trading and paying out dividends to shareholders or investors; whilst social enterprises are concerned with the triple bottom line and profits are often seen as a way to build up the local economy.

Advantages of Social Entrepreneurship

If you are seeking ways to build a business and leave your mark on society, social entrepreneurship can help you do both. Social entrepreneurs use their business and creative skills to help identify and solve social problems on a large scale. According to the Schwab Foundation for Social Entrepreneurship, a social entrepreneur is a passionate risk taker who applies innovative and practical solutions to benefit society through their business practice. There are several benefits to being a social entrepreneur from both a business and societal standpoint.

1.      Implementing Societal Change
Perhaps the most rewarding advantage of being a social entrepreneur is the impact you can have on society. Social entrepreneurs create businesses in a variety of industries that can have a positive impact on society, including alternative energy, health awareness and education. According to David Bornstein, the author of "How to Change the World: Social Entrepreneurs and the Power of New Ideas," social entrepreneurs view communities as the solution and not as the beneficiaries of products and services. Social entrepreneurs provide the resources and expertise that help communities improve their qualities of life.

2.      Creating Inspiring Solutions
Another benefit of becoming a social entrepreneur is the freedom to explore and create innovative solutions that can inspire change. Social entrepreneurs are constantly on the lookout for new and inventive solutions to problems and often enlist leaders within their field to assist in project development. Social entrepreneurs are rewarded by taking risks, thinking outside the box and looking for create ways to address problems.

3.      Working as Your Own Boss
Entrepreneurs do not work under a boss, so they have the freedom to trust their own intuitions and make their own decisions. According to the PBS website, there has been a surge of both entrepreneurship and social sector competition since the last decade of the 20th Century. Social entrepreneurs are zealous problem solvers whose leadership skills and passionate nature might cause them to feel unsatisfied in a traditional employer-employee relationship.

4.      Creating Jobs and Income Streams
As business owners, social entrepreneurs benefit the economy by generating jobs and income. In addition to providing jobs, social entrepreneurs also use part of their profits to fund projects that can benefit the community as a whole. This combination of business acumen and social awareness is a big lure to many people interested in becoming social entrepreneurs.

Disadvantages Social Entrepreneurship

1.      It Can Be Difficult to Make Money 
Although some social enterprises receive grants and donations from outside donors, many businesses just break even when bringing money into the business. For your social enterprise to succeed and have the impact you are looking to achieve, you also need to make money.

2.   You Need to Constantly Monitor Changes in the Market
Social enterprises offer unique ideas and products that target specific communities. Since communities and audiences are always changing, you must constantly monitor your market. Falling behind can result in your business missing the chance to make sales or update your strategy to maintain interest. 

In conclusion, whilst social enterprise is not entirely new in the Maldives but it is still a relatively unfamiliar concept which has great potential to develop society. 

The key points that are taking in to consideration about Social entrepreneurship and Enterprise are as follows:  

  • To be successful in sustainable business practices often requires entrepreneurship and innovation.
  • Entrepreneurship and innovation are relevant in for-profit and nonprofit ventures.
  • Entrepreneurship can be viewed as recognizing change, pursuing opportunity, taking on risk and responsibility, innovating, making better use of resources, creating new value that is meaningful to customers, and doing it all over again and again.
  •  Being an entrepreneur requires taking on significant responsibility and comes with significant challenges and potential rewards.
  •  Entrepreneurship is a mind-set, an attitude; it is taking a particular approach to doing things.
  • The motivations for becoming an entrepreneur are diverse and can include the potential for financial reward, the pursuit of personal values and interests, and the interest in social change.
  • For innovation to be relevant for sustainable businesses, it has to be meaningful and affect a large number of stakeholders.
  • Successful entrepreneurship often requires creativity and innovation in addressing a new opportunity or concern in a new way.

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