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Social Entrepreneurship: An Asian Perspective

SOCIAL ENTREPRENEURSHIP: AN ASIAN PERSPECTIVE*

Introduction

In Asia, many organizations traditionally known as non-profits are now engaged in wealth creation. Their initiatives have established enterprises linked to the pursuit of development goals. Rather than just capturing existing wealth through grants to finance development programs, these organizations are ensuring the sustainability of their organizations, programs and interventions among the marginalized sectors of society. They have entered the market place and are setting new benchmarks for doing business. In the process, these development players are reconfiguring the market as an arena of engagement, integrating social and environmental objectives with the financial bottom line. Social entrepreneurship is emerging as a useful framework informing these market engagements. In this context, social entrepreneurship research in Asia is evolving a body of knowledge, skills and attitudes on the art of managing enterprises with multiple bottom lines towards democratizing the market.

The Challenge of Sustainability

Sustainability has become a favorite buzzword among development practitioners over the past decade. ‘Sustainable’ has been used not only to characterize a desired future for communities and for society as a whole, but also to describe the desired impact of development interventions and the desired state of organizations working for a sustainable future.

 

In particular, the concern of civil society organizations** (CSOs) for their sustainability has become an urgent item on their agenda because their traditional sources of funds—in the form of grants from public and private sources, both local and foreign—have become scarce. A number of nongovernment organizations (NGOs) that used to be dependent on grants have started to diversify their sources of income. Some have started to charge training, facilitation and other fees for their services. Others have set up enterprises that channel back profits to their development institutions. (Morales, 1997).

 

A well-known example of such an enterprise is the Cabbages and Condoms Resort and Restaurant (C & C) in Thailand, one of the main enterprises set up by the Population and Community Development Association (PDA) to generate income to support its work. As PDA founder Mechai Viravaidya puts it: “We now have two wings—the NGO wing and the company wing. Our companies do business and bring in money for our NGO. In this way, we are our own donor.” (Jaturangkachoke, 2003).

 

A similar strategy is pursued by Bina Swadaya, a nonprofit organization serving the poor in Indonesia. Up to about 90 percent of Bina Swadaya’s annual budget of more than US$5 million comes from the profits of nine subsidiary companies. One of these companies is the Bina Swadaya Tours, which specializes in community-based ecological tour packages covering national parks, primary forests, marine parks, and cultural heritage areas. (Haryadi, 2003).

 

The concern for the sustainability of development interventions beyond finite project time frames has also yielded new initiatives. In the Philippines, many health-care organizations that were built through past government and nongovernment interventions in community-based health have given birth to innovative forms of health-care financing, among them various social health insurance schemes (Flavier, 2003). Beyond the community, another interesting sustainability mechanism that has been put in place in the Philippines is the Kabalikat ng Botika Binhi Inc., or Partner of Village Pharmacies (KBB), a nonprofit corporation engaged in pharmaceutical trading. It was set up to sustain the supply of quality and affordable drugs to a network of botika binhi (literally: seed pharmacies), village-based pharmacies set up in urban poor and depressed rural areas now numbering 993 nationwide (Lee, 2004).

 

For some development actors engaged in organizing marginalized sectors for their socioeconomic upliftment, ensuring sustainability is about economic empowerment. They want to see marginalized groups gain control over strategic resources and market processes, so that these groups can be self-reliant in undertaking development in their own communities. (Serrano, 2004). A celebrated example of a cooperative as vehicle for empowering marginalized producers is the Kaira District Cooperative Milk Producers Union in India. It was inspired by Sadar Patel, a leader in India’s independence movement, and set up with the help of Patel’s colleague, Verghese Kurien, who led the cooperative in its phenomenal growth and development. The cooperative and its hundreds of village milk societies—more popularly known as Amul, after the brand name that they use to distribute their array of dairy products—continue to be a significant development force in the district and beyond (Paul, 1982).

 

All of these case studies show that the concern for sustainability, with its various dimensions, has made market engagements an important part of the development landscape. A mix of experiences has resulted from these initiatives. A number of these experiences have resulted in exemplary practices. Many other experiences, however, have turned out to be problematic, as development practitioners have realized that market interventions are complex, require capacities they may not have, and are affected by policy and market environments that seem to be beyond their control. At the same time, there have been unintended outcomes, including experiences of growing away from their social mission.

 

In this context, social entrepreneurship has emerged as a useful conceptual framework in Asia. Supported by the Social and Development Entrepreneurship Program (SDEP) of the Asian Institute of Management-Asian Center for Entrepreneurship (AIM-ACE), regional and national civil society networks such as the Conference of Asian Foundations and Organizations (CAFO) and the Philippine Social Enterprise Network (PhilSEN) have embraced social entrepreneurship as a framework in their efforts to create a space in the market for pursuing development objectives. ACE is one of four schools in AIM, an internationally recognized management school seeking to make a difference in Asian societies by developing professional, entrepreneurial and socially responsible leaders and managers (AIM, 2002). CAFO is a network of grant making and operating foundations, implementing and intermediary organizations, research institutions and individuals from 11 countries and territories in Asia. (CAFO, 2001). PhilSEN on the other hand is composed of non-profit NGOs, institutions/agencies and social enterprises committed to build a critical mass of social entrepreneurs and people’s enterprises in the Philippines.(PhilSEN, 2005)

 

Such partnerships between academics teaching and researching on social entrepreneurship and development practitioners engaged in market interventions has unleashed a pioneering process of research, knowledge generation, and model development. In this way, building capacities and competencies of development practitioners for market engagements have become better informed and more effective. A concrete manifestation of this is how the partnership between AIM-ACE SDEP and CAFO has yielded a book, Creating a Space in the Market: Social Enterprise Stories in Asia, that has enriched the readings and cases for teaching AIM’s Master in Entrepreneurship for Social and Development Entrepreneurs (MESODEV) and the course on Social Entrepreneurship and Enterprise Development (SEED) offered as an elective in AIM’s Master in Development Management Program, and as a non-degree course for aspiring leaders or managers of social enterprises or social enterprise development programs.

 

This paper shall draw heavily, but not exclusively, from the results of this research initiative.

Defining Social Entrepreneurship

How is social entrepreneurship defined by this group of academics and practitioners in Asia?

 

Social entrepreneurship involves the promotion and building of enterprises or organizations that create wealth, with the intention of benefiting not just a person or family, but a defined constituency, sector or community, usually involving the public at large or the marginalized sectors of society.

 

This description of social entrepreneurship has many elements. First, it focuses on the study of wealth creation for development ends. The functional definition refers to organizations that operate in the market, a place where the exchange of goods and services takes place. Simply put, these organizations are engaged in selling a product or service to a specific market or set of customers. In this sense, it excludes development initiatives that do not involve wealth creation. Secondly, it does not include all wealth-creating endeavors, particularly those of business enterprises whose main reason for being is to generate profits for the enrichment of a few individuals or their families. Social entrepreneurship’s primary stakeholders are the marginalized sectors of society.

 

The concept of social entrepreneurship may also be appreciated by studying the term social enterprise. In his book, Social Entrepreneurship and Enterprise Development, Eduardo A. Morató (1994), a professor who started social entrepreneurship research at AIM in the early 90s, articulates the following definition: “The social enterprise exists for a community of worker-

owners who seek to jointly improve their lot through collaborative, cooperative, and prosperity-sharing mechanisms.”

 

This is a useful benchmark for a social enterprise. However, when the AIM-CAFO Research on Social Entrepreneurship surveyed market engagements that were assisting the poor and marginalized sectors improve their lot in various ways, many of the initiatives were not worker-owned. Of the four examples earlier cited, only Amul in India is worker-owned. So as a result of the AIM-CAFO research, the definition of social enterprise broadened.

 

The Oxford American Dictionary (Ehrlich et al., 1980) defines an enterprise as “an undertaking, specially a bold or difficult one.” It goes on to include in its definition “a business activity, a private enterprise.” This, especially the reference to a private enterprise, provided a good starting point for broadening the definition.

 

In social entrepreneurship, one is dealing not with “private enterprise” but with what is best called the “social enterprise.”

Private Versus Social Enterprise

The research defined at least three key elements that differentiated a social from a private or traditional business enterprise: (1) their primary stakeholders or beneficiaries; (2) their primary objectives; and (3) their enterprise philosophy (Dacanay, 2004)

In the traditional business enterprise, the primary stakeholders and beneficiaries are its stockholders or proprietors. These are usually individuals and their families who own the capital invested in the enterprise. In contrast, the primary stakeholders and beneficiaries of the social enterprise could be a sector, a community, or a group, usually involving the marginalized sectors of society, who may or may not own the enterprise. There may even be no stockholders, as the forms of organization of a social enterprise may vary. One form may be a nonstock, nonprofit corporation.

 

In terms of primary objectives, the traditional business enterprise has a clear bottom line: profit. The social enterprise, in contrast, is characterized as an enterprise with a double or triple bottom line. Like its business counterpart, it needs to generate surplus or profit. But such a financial sustainability objective is not the only bottom line. Depending on the nature of its constituency, the social enterprise may have a second bottom line: to achieve social objectives such as the capacitation or empowerment of a sector or group, or the improvement of their quality of life. A third bottom line, such as an environmental-sustainability objective or the preservation of cultural integrity, may also be part of these primary objectives. In reality, the achievement of these development objectives, whether social, political, cultural, economic, or ecological, is often at odds with the profit objective. This is why social entrepreneurship may also be called the art of managing multiple bottom lines in an enterprise setting.

 

In terms of enterprise philosophy, the traditional business enterprise is accumulative, while a social enterprise is distributive. The traditional business enterprise minimizes cost and maximizes profit to enrich the individual or family owners of the enterprise. In the process, the costs of doing business more often than not exclude social and environmental costs. A concrete example is when mining or logging companies create social and environmental problems or disasters in their host communities. Health problems caused by pollution, or livelihoods and lives lost through erosion and deforestation, do not figure in the feasibility studies of these companies or in their financial statements. Ecological economists call this externalizing social and environmental costs (Costanza, 1991). These costs are not borne by the companies but passed on to other parties, such as the communities and the general public. In other words, just as there’s no free lunch, a firm’s gain is somebody else’s cost.

 

In contrast, the wealth derived by the social enterprise is distributed to a broader segment of society, instead of just enriching individuals or families. The social enterprise sees what are simply considered costs to be minimized by the traditional business enterprise, such as payments for raw materials and labor, as benefits to primary stakeholders such as farmers or the unemployed. At its best, the social enterprise generates profit or surplus with due regard to social and environmental costs, and makes a pro-active contribution to resolving social and environmental problems as part of its reason for being.

 

Table 1 encapsulates these three differentiating elements.

 

TABLE 1

Key Elements Differentiating a Social Enterprise from a Private Enterprise

 

Private Enterprise

Social Enterprise

Stockholders or proprietors: individuals, families who own capital and invest such in the enterprise

Primary Stakeholders/ Beneficiaries

A sector, community, or group usually involving the poor/marginalized sectors of society who may or may not own the enterprise

Single bottom line: profit

Primary Objectives

Multiple bottom lines: empowerment/improvement of quality of life of the poor/marginalized; environmental sustainability or cultural integrity; financial viability

Accumulative:

Minimization of costs, maximization of profits towards enrichment of the individuals or families; social and environmental costs externalized

Enterprise Philosophy

Distributive:

Benefits distributed to a broader segment of society; profits are generated with due regard to social and environmental costs

The Social Entrepreneur and Primary Stakeholders

Given these characteristics of social entrepreneurship, the research defined a social entrepreneur as an innovative person or institution that promotes the successful creation and operationalization of enterprises, enterprise systems, or enterprise development projects or programs to achieve defined development objectives.

 

This built on the definition of a social entrepreneur made by Morató (1994): “A social entrepreneur is an innovative person or institution, who promotes the successful creation and operationalization of enterprises or livelihood endeavors for those in need.”

There are important elements to the definition that need to be emphasized.

 

The definition considers social entrepreneurs as leaders and practitioners of social-enterprise development, and not simply advocates. It also insists that their initiatives—including single enterprises, multi-enterprise systems, or even programs and projects that develop social enterprises—need to exhibit success, in terms of achieving the social entrepreneurs’ development objectives.

 

Finally, the definition includes institutions as social entrepreneurs. These institutions may be a government agency, a civil-society organization, or even a business enterprise practicing corporate social responsibility. This is because, in many cases, social entrepreneurship initiatives involve institutions, not just individual leaders, as life-givers of social enterprises (Morató 1994). There are many cases in Asia where institutional social entrepreneurs from the NGO community set up social enterprises.

 

A sample of social enterprise cases featured in Creating a Space in the Market: Social Enterprise Stories in Asia (Dacanay, 2004), shows a variety of social entrepreneurs and primary stakeholders among the marginalized sectors of society. This is shown in Table 1.2. While the research initially hypothesized that the phenomenon of social entrepreneurship was characterized by the entry of civil society actors in the marketplace, the research results showed a broad cross section of development players from civil society, the government and the business sector playing the role of social entrepreneur. The cases studied however still showed a majority of the social entrepreneurs either as non-government organizations or as leaders of civil society.

TABLE 1.2

Variations of Social Entrepreneurs and Primary Stakeholders

of Selected Social Enterprises

 

Social Enterprise

(Country)

Social Entrepreneur (Type)

Primary Stakeholders

Barangay Lati United Multipurpose Cooperative (Philippines)

Philippine Rural Reconstruction Movement (NGO)

Municipal fishers

Maireang Farmers’ Group (Thailand)

Prayong Ronnarong (rubber farmer and community leader)

Rubber farmers

Prae Phan Women’s Weaving Group (Thailand)

Kanda Sakolkiat (NGO leader)/Handicrafts Center for Northeastern Women (NGO)

Indigenous women

PEKERTI (Indonesia)

V. Wullur, C. Partowidodo, B. Ismawan, B. Sianipar, W. Laliseng

(NGO activitists)

Indigenous handicraft producers and marginalized artisans

Datamation Consultants (India)

Chetan Sharma (individual entrepreneur)

Marginalized women

Basix (India)

Vijay Mahajan, Bharti Ramola, and Deep Joshi (individual entrepreneurs, two with NGO background)

Poor and employers of the poor (subsistence workers; landless poor; small, marginal, and commercial farmers; micro and small enterprises)

Philippine Educational Theater Association (Philippines)

Cecile Guidote, Beng Cabangon, and others (artists and cultural workers)

Filipinos

Source: Dacanay, Marie Lisa. 2004. Getting a Handle in Social Entrepreneurship in Creating a Space in the Market: Social Enterprise Stories in Asia. Makati City: AIM and CAFO

Social Enterprise Objectives and Strategies

In the course of the author’s involvement in social enterprise research, she observed four types of social enterprise development strategies. These four are: resource mobilization, social inclusion, empowerment and intermediation. One of the main ways of differentiating these four types is according to the main objective or intent of the social enterprise development project. (Dacanay, 2004)

Empowerment strategies enable marginalized sectors to own and control social enterprises, so they may reap maximum benefits from it. The Barangay Lati United Multipurpose Cooperative, a social enterprise of municipal fishers in the province of Bataan in the Philippines was assisted by its partner NGO, the Philippine Rural Reconstruction Movement to own, control and reap benefits from managing a sari-sari store (a village grocery store) and a microfinance project. (Beasca, 2004). Also exemplifying the empowerment strategy was the Maireang Farmers’ Group that was organized by Prayong Ronnarong to help the rubber farmers in his area in Thailand to process their rubber latex and trade their rubber sheets collectively. (Anukansai, 2004). The earlier example of the Kaira Milk Producers’ Union in India also exemplifies an empowerment strategy of social enterprise development. A variation of the empowerment strategy is manifested by the Prae Phan Women’s Weaving Group in Thailand. Here, the social entrepreneur, Kanda Sakolkiat and the Handicraft Center for Northeastern Women she set up, worked towards helping the indigenous women of northeastern Thailand revive their weaving tradition, and empower them over time (1987-1996) to own and manage a social enterprise that produced and marketed their woven products. (Anukansai and Boonrod, 2004) The latter exemplifies a devolutionary empowerment strategy as contrasted to the direct empowerment strategies observable in the other cases.

 

Social inclusion strategies assist groups of people who are stigmatized or marginalized by virtue of their physical, psychological or social circumstance, to restore their dignity and create avenues for their participation as productive members of society. Such strategy is exemplified by the Children Are Us Foundation (CAUF) and the Sunshine Social Welfare Foundation (SSWF) in Taiwan. These foundations have successfully set up and managed social enterprises -- a world class bakery and restaurant for CAUF and a gasoline station for SSWF. These social enterprises not only provide employment but more importantly, nurturing work environments for differently-abled people comprising the majority of their workers. (CAFO, 2005)

 

Intermediation strategies are exemplified by Basix of India and PEKERTI of Indonesia. Basix provides financial, agricultural, business development and institutional development services to the entrepreneurial poor and employers of the poor in India. (Loonker, 2004). PEKERTI Nusantara on the other hand provides product development and marketing support using the principles of fair trade to marginalized artisans in Indonesia. (Faizah and Saidi, 2004) Basix and PEKERTI are not owned by the marginalized stakeholders but provide immediate access to services among a critical mass of these marginalized stakeholders. The earlier example of the Kabalikat ng Botika Binhi in the Philippines also exemplifies an intermediation strategy in social enterprise development.

 

Resource mobilization strategies generate income from the sale of products and services to finance the operations of the core program of their respective development agencies. The Philippine Educational Theater Association (PETA), an organization of artists believing in theater as a vehicle for education and empowerment, stages theater plays patronized by university students and provides production services to institutions wanting to use theater for advocacy. PETA uses the revenues it mobilizes from such to subsidize their conduct of theater workshops and organizing of theater groups among the youth in poor communities (Basco-Sugay, 2004). The earlier examples involving the Population and Community Development Association in Thailand and Bina Swadaya in Indonesia also exemplify the resource mobilization strategy of social enterprise development.

 

Without exception, all these aforementioned social enterprises pursued at least two types of objectives: a social objective directed at providing access to a service, improving the quality of life or empowering its primary stakeholders on one hand, and doing so in a financially sustainable manner, on the other.

 

In addition to the social and financial objectives, some social enterprises pursue a third bottom line. In the case of PETA, ensuring the cultural and artistic integrity of Filipino theater was a third objective. (Basco-Sugay, 2004). For other social enterprises, a third objective is the pursuit of environmental sustainability. This is exemplified by the Kooperatibang Likas ng Nueva Ecija or KOOL-NE

 

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