Social Entrepreneurship

Social entrepreneurship is the attempt to draw upon business techniques to find solutions to social problems. This concept may be applied to a variety of organizations with different sizes, aims, and beliefs.

The social entrepreneur is a mission-driven individual who uses a set of entrepreneurial behaviours to deliver a social value to the less privileged, all through an entrepreneurially oriented entity that is financially independent, self-sufficient, or sustainable.

Characteristics of Social Entrepreneur

• The usual ideologies and principals do not holdback social Entrepreneurs. They are always looking at breaking them.
• Social Entrepreneurs are impatient. They do not go well with the bureaucracy around them.
• Social Entrepreneurs have the patience, energy and enthusiasm to teach others.
• Social Entrepreneurs combine Innovation, Resources and Opportunity to derive solutions to Social problems.
• This should be first in the list, Social Entrepreneurs DO NOT loose their FOCUS anytime.
• Social Entrepreneurs always jump in before having their resources in place. They are not traditional.
• Social Entrepreneurs ALWAYS believe that every one can Perform and have the capacity to do so.
• Social Entrepreneurs ALWAYS display DETERMINATION
• Social Entrepreneurs can ALWAYS measure and monitor their results.

Types of social entrepreneurship

1. The Leveraged Non-Profit:

This business model leverages resources in order to respond to social needs. Leveraged non-profits make innovative use of available funds, in order to impact a need. These leveraged non-profits are more traditional ways of dealing with issues, though are distinguished by their innovative approaches.

The entrepreneur sets up a non-profit organization to drive the adoption of an innovation that addresses a market or government failure. In doing so, the entrepreneur engages a cross section of society, including private and public organizations, to drive forward the innovation through a multiplier effect. Leveraged non-profit ventures continuously depend on outside philanthropic funding, but their longer-term sustainability is often enhanced given that the partners have a vested interest in the continuation of the venture.

2. The Hybrid Non-Profit:

This organizational structure can take on a variety of forms, but is distinctive because the hybrid non-profit is willing to use profit to sustain its operations. Hybrid non-profits are often created to deal with government or market failures, as they generate revenue to sustain the operation outside of loans, grants, and other forms of traditional funding.

The entrepreneur sets up a non-profit organization but the model includes some degree of cost-recovery through the sale of goods and services to a cross section of institutions, public and private, as well as to target population groups. Often, the entrepreneur sets up several legal entities to accommodate the earning of an income and the charitable expenditures in an optimal structure. To be able to sustain the transformation activities in full and address the needs of clients, who are often poor or marginalized from society, the entrepreneur must mobilize other sources of funding from the public and/or philanthropic sectors. Such funds can be in the form of grants or loans, and even quasi-equity.

3. The Social Business Venture:

These models are set up as businesses designed to create change through social means. Social business ventures evolved through a lack of funding—social entrepreneurs in this situation were forced to become for-profit ventures.

The entrepreneur sets up a for-profit entity or business to provide a social or ecological product or service. While profits are ideally generated, the main aim is not to maximize financial returns for shareholders but to grow the social venture and reach more people in need. Wealth accumulation is not a priority and profits are reinvested in the enterprise to fund expansion. The entrepreneur of a social business venture seeks investors who are interested in combining financial and social returns on their investments.

Examples of Social Enterprises

1. Aravind Eye Hospital & Aurolab

Social Entrepreneur: Dr.Govindappa Venkataswamy (Dr. V) & David Green

Type of Organization: Trust

Location: Madurai, India

Website: http://www.aravind.org

Mission: Making medical technology and health care services accessible, affordable and financially self-sustaining

Founded in 1976 by Dr. G. Venkataswamy, Aravind Eye Care System today is the largest and most productive eye care facility in the world. From April 2007 to March 2008, about 2.4 million persons have received outpatient eye care and over 285,000 have undergone eye surgeries at the Aravind Eye Hospitals at Madurai, Theni, Tirunelveli, Coimbatore and Puducherry. Blending traditional hospitality with state-of-the-art ophthalmic care, Aravind offers comprehensive eye care in the most systematic way attracting patients from all around the world.

2. SKS India

Social Entrepreneur: Vikram Akula

Type of Organization: For-profit

Website: http://www.sksindia.com

Mission: Empowering the poor to become self-reliant through affordable loans

SKS believes that access to basic financial services can significantly increase economic opportunities for poor families and in turn help improve their lives. Since inception, SKS has delivered a full portfolio of microfinance to the poor in India and we are proud of our current outreach. As a leader in technological innovation and operational excellence, SKS is excited about setting the course for the industry over the next five years and is striving to reach our goal of 15 million members by 2012.

3. AMUL (Anand Milk Union Limited)

Social Entrepreneur: Dr. Verghese Kurien

Type of Organization: Co-operative

Website: http://www.amul.com

Amul has been a sterling example of a co-operative organization’s success in the long term. It is one of the best examples of co-operative achievement in the developing economy. The Amul Pattern has established itself as a uniquely appropriate model for rural development. Amul has spurred the White Revolution of India, which has made India the largest producer of milk and milk products in the world.

4. Grameen Bank

Social Entrepreneur: Muhammad Yunus

Type of Organization: Body Corporate

Website: http://www.grameen-info.org

Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable. Professor Muhammad Yunus, the founder of “Grameen Bank” and its Managing Director, reasoned that if financial resources can be made available to the poor people on terms and conditions that are appropriate and reasonable, “these millions of small people with their millions of small pursuits can add up to create the biggest development wonder.”

As of May 2009, it has 7.86 million borrowers, 97 percent of whom are women. With 2,556 branches, GB provides services in 84,388 villages, covering more than 100 percent of the total villages in Bangladesh.

5. Shri Mahila Griha Udyog Lijjat Papad

Type of Organization: Society

Website: http://www.lijjat.com

Shri Mahila Griha Udyog Lijjat Papad is a Women’s organization manufacturing various products from Papad, Khakhra, Appalam, Masala, Vadi, Gehu Atta, Bakery Products, Chapati, SASA Detergent Powder, SASA Detergent Cake (Tikia), SASA Nilam Detergent Powder, SASA Liquid Detergent. The organization is wide-spread, with it’s Central Office at Mumbai and it’s 67 Branches and 35 Divisions in different states all over India.

The organization started of with a paltry sum of Rs.80 and has achieved sales of over Rs.300 crores with exports itself exceeding Rs.12 crores. Membership has also expanded from an initial number of 7 sisters from one building to over 40,000 sisters throughout India. The success of the organization stems from the efforts of it’s member sisters who have withstood several hardships with unshakable belief in ‘the strength of a woman’.

Especially since Muhammad Yunus, founder of the Grameen Bank and a renowned example of a social enterprise, won the Nobel Peace Price in 2006 there is increasing interest in social entrepreneurship for development yet the current academic literature does not provide is a sufficient link between social entrepreneurship and economic development policies. How important are social entrepreneurs for economic development? What value is created by social entrepreneurship?

The social entrepreneur sector is increasingly important for economic (and social) development because it creates social and economic values:

1. Employment Development

The first major economic value that social entrepreneurship creates is the most obvious one because it is shared with entrepreneurs and businesses alike: job and employment creation. Estimates ranges from one to seven percent of people employed in the social entrepreneurship sector. Secondly, social enterprises provide employment opportunities and job training to segments of society at an employment disadvantage (long-term unemployed, disabled, homeless, at-risk youth and gender-discriminated women). In the case of Grameen the economic situation of six million disadvantaged women micro-entrepreneurs were improved.

2. Innovation/ New Goods and Services

Social enterprises develop and apply innovation important to social and economic development and develop new goods and services. Issues addressed include some of the biggest societal problems such as HIV, mental ill-health, illiteracy, crime and drug abuse which, importantly, are confronted in innovative ways. An example showing that these new approaches in some cases are transferable to the public sector is the Brazilian social entrepreneur Veronica Khosa, who developed a home-based care model for AIDS patients which later changed government health policy.

3. Social Capital

Next to economic capital one of the most important values created by social entrepreneurship is social capital (usually understood as “the resources which are linked to possession of a durable network of … relationships of mutual acquaintance and recognition”). Examples are the success of the German and Japanese economies, which have their roots in long-term relationships and the ethics of cooperation, in both essential innovation and industrial development. The World Bank also sees social capital as critical for poverty alleviation and sustainable human and economic development. Investments in social capital can start a virtuous cycle.

(1) Endowment

The first job of social entrepreneur is to take whatever endowment of social capital he is given and to use these relationships to create more social capital,by getting more people and organizations involved with the project,by building a wider web of trust and cooperation around the project.

(2) Physical capital

The initial endowment of social capital often brings access to physical capital,usually in the form of rather run-down buildings.Getting access to a physical base is vital. It provides a focus, a base for new services and a tangible sign that the project is achieving something.

(3) Financial Capital

The initial network of supporters and helpers is vital to bring access to funds, through fundraising, donations and corporate giving. The more diverse and richer the network, the easier it will  be to raise the funds.

(4) Human Capital

The project has to recruit and pull in more key people to help it move from start-up into growth,creating products and services.

(5) Organisational capital

As the project grows,becomes larger and more complex,its management will need to become more organized.It will need stronger financial systems and legal help.With more staff involved,people management may become more complicated.So the project needs to develop organizational capital,a more formalized management structure,financial systems and a stronger set of relationships with partners.

(6) Paying dividends

In the first phase of project,the social entrepreneur inherits and creates social capital.Then he starts to accumulate more capital in the form of buildings and finance.Then the capital is invested in creating new services and products.In the final phase,if the investment has been successful the project starts to pay dividends in several different forms.Perhaps  the most valuable dividend is yet more social capital,in the form of stronger bonds of trust and cooperation,within the community and outside partners and funders.

(7) Equity Promotion

Social entrepreneurship fosters a more equitable society by addressing social issues and trying to achieve ongoing sustainable impact through their social mission rather than purely profit-maximization. In Yunus’s example, the Grameen Bank supports disadvantaged women. Another case is the American social entrepreneur J.B. Schramm who has helped thousands of low-income high-school students to get into tertiary education.

To sum up, social enterprises should be seen as a positive force, as change agents providing leading-edge innovation to unmet social needs. Social entrepreneurship is not a panacea because it works within the overall social and economic framework, but as it starts at the grassroot level it is often overlooked and deserves much more attention from academic theorists as well as policy makers. This is especially important in developing countries and welfare states facing increasing financial stress.