Photo: Hand in Hand
A Tipping Point in Social Enterprise for Development?
Most of the funding available to date for social enterprise – such as social impact investment - has flown into developed economies. The UK has arguably been at the forefront of impact investment, with more social impact bonds issued in the country than the rest of the world taken together. Big Society Capital, the UK social investment institution was launched in April last year with £600 million capital to invest in British social enterprises. Following suit, the U.S. Small Business Administration announced in June 2013 that it was nearly doubling the funding available to US social enterprises to $150 million (from $80 million).
We may come to see 2013 as a tipping point for social enterprise in international development.
Governments as diverse as Colombia, India, Senegal and Peru have all recently created new national agencies or task forces with a mandate to promote social innovation, in many cases with direct reporting lines to heads of state.
Social impact investment and social enterprises were discussed for the first time at the highest level at the G8 social impact investing conference in London in June. One of the conference’s key objectives was to show the role social impact investing can play in supporting international development.
Show me the money
Money has accompanied policy announcements: in December 2012, DFID launched its Impact Fund, which will make investments of up to £75 million over 13 years in more than 100 social enterprises in Africa and South Asia via impact investment intermediaries and benefit the lives of over 5 million poor women and men.
In June 2013, USAID and DFID jointly announced the Global Development Innovation Ventures (GDIV) fund, worth over £100m over five years, which will invest in “innovative solutions to world poverty”. GDIV is not restricted to social enterprises, but they look best positioned to benefit.
Both the Impact Fund and GDIV have mechanisms in place to catalyze additional private capital.
Good news all round for social entrepreneurship in developing countries?
Perhaps, but any investment deal needs a capable investee as well as a willing investor. Increased attention and funding, while welcome, risk stretching the pipeline of social ventures in Africa and Asia beyond their current capabilities. Some are not yet of sufficient scale to absorb an increase in investment today, while others may not yet be able to deliver the expected level of financial returns and social impact tomorrow.
New flows of social impact investment require a new type of investment – ready social entrepreneurs. Despite a decade of social enterprise in development, how many sizable success stories can the sector offer? We have all heard of Roshan and M-Pesa, but how many other Asian or African social enterprises serving millions of customers spring to mind?
The sudden influx of funding for social enterprises reminds me – albeit at a lower speed and scale - of the dotcom bubble of 2000. What had been a cottage industry of computer geeks suddenly attracted vast amounts. I remember from own experience how seductively easy it was to secure funding in the run up to March 2000 - and how very hard to deliver investors’ expectations in the months that followed. Dominique Vidal - my managing director at the time, who went on to steer ASOS and LoveFilm to success as a venture capitalist at Index Ventures - likened the experience to a novice skiing down a black run.
Sharing the learning
Policy advice on encouraging scalable social innovation is emerging. The Global Social Entrepreneurs Network (GSEN) is a new international peer learning platform, supported by the UK’s Cabinet Office, for the social enterprise support agencies from the UK and other member countries. The Schwab Foundation for Social Entrepreneurship recently wrote a policy guide to scaling social innovation, featuring policy snap shots from Senegal, Colombia, India, China and elsewhere.
Yet for the social entrepreneur operating in a frontier market himself, surprisingly little advice and training is available: for instance, the thirty social entrepreneurship MBAs known to us are all based in North America or Europe, with costs exceeding most emerging market social entrepreneurs’ budgets.
In response, Hand in Hand, the NGO that supports women in Asia and Africa to work their way out of poverty by setting up and running their own businesses, initiated an interactive crash course in social entrepreneurship for development, taught by Harvard Business School Professor V. Kasturi Rangan in partnership with Socient Associates.
With entrepreneurship at the heart of our work, the Social Entrepreneurship Program grew from our desire to share in world-leading academic research and learn from the hands-on experience of others advancing the role of entrepreneurs in development.
Last summer in Kenya, we brought together 30 social entrepreneurs, microfinance experts, social enterprise investors and enthusiasts from over 15 countries. Five intense days later - packed with theory, project visits and debates with local social entrepreneurs - the group started to reach some answers on how social enterprises can grow to keep up with their markets.
One year on, as we look forward to running our third Social Enterprise Program in South Africa this coming August, the environment has changed considerably but finding practical solutions to scaling up social enterprise is more topical than ever.