2 Social Entrepreneurship

1. Introduction

  We all have heard a lot about entrepreneurship and entrepreneur. In general we can say, entrepreneurship is an activity which works on a business model to achieve its primary goal ie. profit. One of the most positive developments in the business world in the early decades of the 21st century is establishing entrepreneurial activity embedded with social mission, that is social entrepreneurship. It has become an essential phenomenon at a global scale and the use of the term social entrepreneurship is gaining increased popularity. Social entrepreneurial activities mean different things to people in different places because the geographical and cultural contexts in which they appear is different. This modules gives the clear vision on social entrepreneurship.

2. Learning Objectives:

At the end of the module, the learners will able to

• Differentiate the business enterprise and social enterprise
• Identify the opportunity for social entrepreneurship
• State the problems in running social enterprise

3. Social entrepreneurship

Desicrew was started by Ms.Saloni Malhotraas a profit organization focused on creating knowledge-based livelihood opportunities in small towns and rural areas. Its idea is rather taking people for job to taking job to people. Its main focus is to bridge the gap between rural and urban through employment.

It was initially started in Tamil Nadu and is now present in Karnataka and Haryana. Its business model involves setting up delivery centres in rural India and servicing the clients across different countries. Services of DesiCrew include Data Management, Digital Supply Chain and Customer Experience Management.

Desicrew is a profit enterprise which finds a solution to social problem that is rural unemployment. It provides jobs for 500 rural men and women and operating in rural areas.

Desicrew also earns profit but their primary objective is to provide sustainable livelihood for the rural people. These types of organizations are termed as SOCIAL ENTERPRISES.

4. Social entrepreneurship

  Social entrepreneurship is an art of pursuing both financial and a social return on its investment through innovative business model. The social entrepreneurship will have a social mission to solve the existing societal problems in education, poverty, health and etc. It mainly addresses the needs of those living in poverty

The word “Social Entrepreneurship” itself has the word “Entrepreneurship” which implies that it is not entirely different from entrepreneurship, it is a hybrid form of doing entrepreneurship. Alvord, Brown & Letts (2004) defines social entrepreneurship creates innovative solutions to immediate social problems and mobilizes the ideas, capacities, resources and social arrangements for sustainable social transformations.

Mort, Weerawardena & Carnegic (2002) defines social entrepreneurship as a multidimensional construct involving the expression of entrepreneurially virtuous behavior to achieve the social mission, a coherent unity of purpose and action in the face of moral complexity, the ability to recognize social value creating opportunities and key decision-making characteristics of innovativeness, proactiveness and risk taking.

In general social entrepreneurship can be expressed as an art which pursues both financial and social return on its investment through innovative business model. It differs from business entrepreneurship in its primary objective. The primary objective of the business entrepreneurship is the profit, but for social entrepreneurship, the primary objective is its social mission. The stake holder of the business entrepreneurship is their share holders and clients whereas for the social entrepreneurship, the stake holders exist at all levels including the customers. In business entrepreneurship the profit used to maximize the financial returns to the stake holders, but in social entrepreneurship it is used to expand the venture and reach to more people in need.

Social entrepreneurship applies practical, innovative, and sustainable approaches to benefit society, with an emphasis on the marginalized and the socio economically disadvantaged. Social entrepreneurs drive transformative change across all different fields and sectors, including but not limited to health, education, environment, and enterprise development. They pursue their social mission with entrepreneurial creativity, business methods, and the courage overcome traditional practices.

5. Social enterprise

Social enterprise is a dynamic and inspiring way of doing business. Social enterprises are innovative, independent businesses that exist to deliver a specific social and/or environmental mission.

A social enterprise is an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing profits for external shareholders. It is an organisation with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximize profit for shareholders and owners.

“A social enterprise is a business that trades for a social and/or environmental purpose. It will have a clear sense of its ‘social mission’: which means it will know what difference it is trying to make, who it aims to help, and how it plans to do it. It will bring in most or all of its income through selling goods or services. And it will also have clear rules about what it does with its profits, reinvesting these to further the ‘social mission.’”(Social Enterprise, UK )

Social enterprise has following characteristics:

• Having a social purpose or purposes.
• Achieving the social purpose by, at least in part, engaging in trade in the marketplace.
• Not distributing profits to individuals.
• Holding assets and wealth in trust for community benefit.
• Being independent organizations accountable to a defined constituency and to the wider community.

6.  Social entrepreneur

Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change. They are the path breaker with a powerful new idea, who combines visionary and real-world problem solving creativity, who has a strong ethical fibre, and who is totally possessed by his or her vision for change.

Mission related impact becomes the central criterion for the social entrepreneurs, not wealth creation. Wealth is just a means to an end for social entrepreneurs. With business entrepreneurs, wealth creation is a way of measuring value creation.

7. Boundaries of social entrepreneurship

Social entrepreneurship is different from other non entrepreneurial, mission driven initiatives. It is important to set the function of social entrepreneurship apart from other socially oriented activities and identify the boundaries within which social entrepreneurs operate.

A Social enterprise performs hybrid social and commercial entrepreneurial activity to achieve self-sustainability. It operates a business which generates revenues and profits but it will not be used to widening the business primarily but used to enlarge their social benefits. It is important to set the function of social entrepreneurship apart from other socially oriented activities and identify the boundaries within which social entrepreneurs operate.

 7.1. Non-profit with earned income strategies: A social enterprise performs fusion of social and commercial enterprise focus to solve social problem with self sustainability. Here revenues and profit generated is used only to expand the delivery of social values.

7.2. For profit with mission driven strategies: A social-purpose business performing social and commercial entrepreneurial activities simultaneously to achieve sustainability. In this scenario, a social entrepreneur operates an organization that is both social and commercial; the organization is financially independent and the founders and investors can benefit from personal monetary gain.

8. Why Social entrepreneurship?

Social entrepreneurship is a vibrant phenomenon in developing as well as developed countries. These mission-driven businesses improve the lives of the poor and generate a profit

They have only recently entered into the world stage, but they have captured the attention of many who are looking for solutions to today’s greatest development challenges. In India, these businesses have become a national phenomenon in less than a decade, with a robust ecosystem of supporting players growing up around them.

India is referred as “A Social Enterprise Superpower” and “A hotbed for Social Enterprise” by Beyond Profit magazine, a leading Social Enterprise magazine. While part of a global trend, India today is one of the world’s largest breeding grounds for these mission-driven companies called “social enterprises” (socents).

India needs many mission driven enterprises for various reasons. Present global economy makes India as hub for multinational companies and has widened the income gap between people. It benefits the richer to become the richest and a newly created middle class and makes the poorer become poorest due to increased living cost. About 400 odd million people live on less than $1 a day in India and it doubles the income inequality in last two decades.

India has the world’s second largest labour force with 516.3 million people and the recent World Bank report quotes that approximately 350 million people in India live below the poverty line. That is one in three Indian is not accessed to the benefit of even basic necessities like health, education and many are still blighted by unemployment and illiteracy.

The government and Non Government organizations are trying with varying degrees of success, but their interventions fall woefully short of what is needed to combat India’s pressing problems. These efforts of government and non government only will not decrease the existinggap, it needs different mission driven approach that is social entrepreneurship.

Social   entrepreneurship   sector   is   increasingly   important   for   economic   and   social development  because   it   creates  social   and  economic   values   like   employment   generation,innovation and economic equity.

8.1. Employment generation

The first major economic value that social entrepreneurship creates is the most obvious one, ie, job creation. Secondly, social enterprises provide employment opportunities and job training to segments of society at an employment disadvantage.

8.2.Innovation

Social  enterprises  develop  and  apply  innovation  important  to  social  and  economic development and develop new goods and services. It addresses issues related to health, poverty, education etc in an innovative way.

Innovative social enterprise

TB—which claimed 480,000 lives in Africa in 2012, 58,000 of them in Mozambique, according to the World Health Organization—is badly in need of an innovative, rapid, and affordable detection technique. Bart Weetjens , a person holds an NGO in Africa trains giant African pouched rats to locate landmines and help to diagnose tuberculosis by their acute sense of smell. Some of the animals – which are trained by his nonprofit social venture – have been used to search for explosives in Mozambique, a country littered with landmines after decades of civil war. Others are helping doctors to spot tuberculosis in patients when conventional methods of diagnosis do not work.idea.

8.3. Economic equity

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. Social entrepreneurship offers new competition, and as such promotes improved productivity and healthy economic competitiveness. It tries to bring economic equity among people in society.

9. Characteristics of social entrepreneurs

Social entrepreneurs are conceptualized as individuals who see the world differently, take up activities innovatively and visualize the future better than others do. They seize unnoticed opportunities. They perceive and ready to take up risks differently than others .

The job of a social entrepreneur is to recognize when a part of society is stuck and to provide new ways to get it unstuck. He or she finds what is not working and solves the problem by changing the system, spreading the solution and persuading entire societies to take new leaps.

Identifying and solving large-scale social problems requires a committed person with a vision and determination to persist in the face of daunting odds. Ultimately, social entrepreneurs are driven to produce measurable impact by opening up new pathways for the marginalized and disadvantaged, and unlocking society’s full potential to effect social change.

  9.1.Ambitious -A social entrepreneur is someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives. They take up business activity embedded with social cause and relentlessly work towards that mission even beyond the obstacles at any stage.

9.2. Mission driven: They adopt a mission to create and sustainable social value not just private value. Their action will not be limited by the available resources. They will ready to undergo continuous process of innovation, adaptation and learning. They are willing to take up risk to create positive change in the society.

9.3. Strategic: As business entrepreneurs, social entrepreneurs, observe and act upon what others fail to spot: opportunities to improve systems, generate solutions and conceive new approaches that generate social value. And like the best business entrepreneurs, social entrepreneurs are intensely focused and hard-driving in their pursuit of a social vision.

9.4. Resourceful: Because social entrepreneurs operate within a social context rather than the business world, they have limited access to capital and traditional market support systems. As a result, social entrepreneurs must be skilled at mobilizing human, financial and political resources.

9.5. Results oriented: Social entrepreneurs are driven to produce measurable returns. These results transform existing realities, open up new pathways for the marginalized and disadvantaged, and unlock society’s potential to effect social change.

Table 1 illustrates the core characteristics of entrepreneurs and these characteristics highlight the economist’s view of an entrepreneur as an individual with an exceptional mind-set; individuals with such a mind-set are seen as key to venture growth maximization and economic prosperity.

11. Opportunities for social entrepreneurship in India

As in other countries, India too, social entrepreneurs are a growing phenomenon bringing positive change to several social areas ranging from education to healthcare, renewable energy, waste management, e-learning and e-business, housing and slum development, water and sanitation, violence against women, other issues related to women, children and the elderly etc.

India is said to have the largest number of social enterprises in the world. A sum of US$ 1 billion is expected to be coming into the Social Entrepreneurship space in the next five years. The ‘Bottom of the Pyramid’ Approach is a widely used concept in Social entrepreneurship. This strategy encourages enterprises to approach the market with ‘small unit packages, low margin per unit, high volume, and high return on capital employed’.

Abundant opportunities are there in India for the social entrepreneurship in the following areas.

11.1. Healthcare – Health care sector has nascent opportunities for social entrepreneurship. The affordable healthcare in India is vital need of the hour. Affordable healthcare providers reduce the cost of service delivery through innovative operating models. More than 60 per cent of the people in India lives in villages and small towns while metros and large towns are suppose to have 70 per cent of medium to large hospitals. In addition, 80 per cent of the demand is for primary or secondary care and only 30 per cent of hospitals provide these. Thus it has large potential opportunities for the growth of social entrepreneurship.

11.2. Agriculture – Agriculture and allied sectors provide livelihood to over 70 per cent of the rural population in India. Social enterprises working in this sector create economic and social value by eliminating inefficiencies from the current value chains. These enterprises are broadly categorized as: those supporting the value chain pre-harvest or post-harvest market links as well as those involved in the dairy production and market linkage

11.3. Energy – Social enterprises enter this space in order to enable access to environmentally friendly, affordable energy. They play a key role in improving living standards of poor households. Roof-top solar lighting and low smoke cook stoves are some of the initiatives in this space.

11.4. Education – It is estimated that 4 per cent of children never start school, 58 per cent do not complete primary school education because of reasons ranging from inadequate infrastructure to lack of motivation, and poverty. Social enterprises are very active in the education of the under privileged children. They work around these challenges through advocacy and capacity enhancing solutions. These enterprises cater from early childhood to adulthood and exist in formats such as pre-schools and after-school classes, e-learning and vocational and skill development institutes.

11.5. Livelihood promotion – Social entrepreneurs in this space are broadly classified into two categories: entities that promote livelihoods and those that facilitate skill development. In most livelihood enterprises, the producers or artisans hold majority ownership. Entrepreneurs in the skill development sector are mostly structured as for-profit entities, but with low or subsidised or free education to the beneficiary.

11.6. Affordable housing – According to the Twelfth Five Year Plan document, the gap in the urban housing market is estimated at 18.8 million dwelling units. Moreover, about 73 per cent of the self-occupied units are in bottom 40 per cent of the urban households. Affordable housing developers create economic value by minimizing construction cost and completion time through integrative technical solutions and process innovations.

11.7. Water and Sanitation – Water sector can be broadly classified into three areas: water harvesting and storage, water supply and distribution, and piping and waste management. Social Entrepreneurs in water space are both for and not-for profit enterprises. Social entrepreneurs are typically involved in rain-water harvesting, community water treatment, point-of-use filtration, and small-scale water networks. Typical working models for sanitation management are household toilets, pay-and-use community toilets and ‘ecosan’ toilets where toilet waste is used to create biofuel.

12. Challenges faced by social entrepreneurs

In India, a social enterprise can be registered in any one of three ways: as for-profit entities, not-for profit entities, and as non-profit entities. Despite the legal distinction between for-profit and non profit enterprises, getting early-stage investments has been a universal barrier for all social entrepreneurs.

The biggest hurdle for them is the poor access to finance, which severely hampers their growth. Since the social investment climate in India is still assuming evolving, most often, they are left to find funds for themselves. They get financial assistant only after an enterprise has been stabilised. They hardly get any support systems during the initial period at their existence stage, barring the fellowships offered by a very few foundations.

For this reason, non-profit social enterprises have suffered due to their complete dependence on external agencies for their sustenance. Their options to raise funds for themselves from financial institutions have been highly limited.

The weak financial structure in the Indian context has made it extremely difficult for a social entrepreneur to avail concrete financial support from formal financial systems. With no standardised legal model to cover the social enterprises in India, this issue of financing gets further exacerbated. Together, these factors result in a fragile environment with regard to the sustainability of these enterprises, often causing them to shut shop.

Social enterprises face the problem of getting money, clients, and working capital, which meant that they did not have enough turnover. Additionally, these enterprises have to pay various forms of taxes. The problem of working capital is a majorpain point as getting loans from banks and financial institutions is not easy for social ventures.

Therefore, when a social venture chooses to opt for borrowed funds instead of equity, there are fewer options available. The working capital for social enterprises should be included in priority sector lending norms for banks; this would help them to obtain capital at a cheaper cost and would allow borrowing from banks. The fact that social ventures are addressing social causes that relate to the vulnerable and weaker sections of the society qualifies them for the priority sector category of the banks; this could also qualify them for cheaper and softer loans from financial institutions, instead of being valued on standard commercial lending norms.

A similar dilemma occurs in the case of for-profit social enterprises. It is easier for them to access finance compared to the non-profit enterprises; however, compared to the purely commercial entities, they lack the firm support of investors. When they manage funds, most often their investors are not too concerned about the social cause that they are working for; instead, investors are generally focused on the possible monetary returns that come with the scalability of the venture models. Additionally, once these for-profit operations scale up, there are fewer regulatory measures (i.e., in the private limited company format that they assume) to prevent investor pressure and mission drift.Thus, for non-profit as well as for-profit social enterprises, there is no proper legal structure that can help them obtain funds by showing their good governance mechanisms to potential investors.

Further, there is no legal form that can address the danger of mission drift that can happen due to investor pressure at the time of scaling up. Another recommendation put forward by a for-profit social entrepreneur was the introduction of tax breaks for private limited social enterprises. The tax breaks should be provided according to the location in which these enterprises are working, because many such enterprises work in difficult terrains and in areas that are extremely backward.

Changes in the legal mode and foreign funding norms of social enterprises have to be made based on this understanding. Such regulatory interventions and an enabling ecosystem (such as incubators) that can foster early-stage mentoring and funding are critical for social enterprises to continue doing good for the society. When implemented, these changes can be expected to provide a boost to the social investment climate for India, enabling the nation to make an indelible mark in the field of social entrepreneurship

Social entrepreneurs mainly deal with the difficult task of improving the welfare of the society and they are always keen to find affordable solutions to various societal problems. But every activity of social business carries a cost, which is mostly borne by the owner out of his own pocket or by taking loans from money lenders. Social entrepreneurs are not necessarily working in a lucrative market; they identify a problem within society and try to find affordable solutions for them. Once they find the way to earn some profit after providing the best low cost solution to the needs of the society, more traditional businesses will enter the market competing with a similar solution and technique, increasing transaction costs and competition for social entrepreneurs and hampering their future growth.

Lack of government support is a major hindrance for social business development in India. Currently, the government is not providing any kind of assistance for promoting these social cause ventures. The government’s policies and regulations for social entrepreneurs are very complex and strict, with no tax incentives or subsidies being provided for a social business, the combination of which acts as major impediment to the growth of social businesses in India.

13. Summary 

In future, Social entrepreneurs will play a crucial role in the progression of social changes. The best thing about Social entrepreneurship is that success is not mentioned by financial gains, but by the number of people these enterprises are able to reach and create a positive impact. In the coming days, Social entrepreneurship and Social businesses will be in the mainstream substantially, which will hopefully impact the society positively.

Web links

• https://www.kti.admin.ch/…/FINAL%20Social%20Entrepreneurship%20Report.pdf.
• www.denovo.in/…/Opportunities_Challanges_Oxford_college_%20Banglore.pdf
• https://www.britishcouncil.org/sites/default/files/bc-report-ch4-india-digital_0.pdf
• www.professionalpanorama.in/wp-content/uploads/2016/05/3._Reena_Mehta.pdf entreprenorskapsforum.se/wp-content/uploads/2013/03/WP_09.pdf
• https://www.demos.co.uk/files/theriseofthesocialentrepreneur.pdf