Social enterprises have gained increased recognition for their ability to bring about fair and equitable social transformation. The unique model provides an additional mode of engagement for individuals and institutions interested in addressing social issues. However, very little has been published about their development in Asia, the conditions needed to ensure their success, and the roles that philanthropists can play. At Kordant Philanthropy Advisors, we were thrilled to have Vivian Gee, a leading expert on social enterprises in Asia, help us develop a report that addresses these issues.
Social Enterprises in Asia: An Introductory Guide is part of Kordant’s work to provide high-quality, independent research into trends and issues in the philanthropic sector. Below are some highlights of the report.
Definition of Social Enterprise
Social enterprises (SEs) can take the form of a non-profit or for-profit and vary in size and structure but what unites all SEs is their business approach to social change. Instead of maximizing profits, SEs apply market practices to maximizing impact and strive to optimize finances in support of their social or environmental missions. SEs form an integral role in a larger social innovation sector – they act as on-the-ground implementers of social solutions.
Overview of Social Enterprises in Asia
Early social entrepreneurs in Asia tended to be foreigners or returning patriates, but homegrown Asian social entrepreneurs are now more common. Some of the world’s largest and most well known SEs, like Grameen Bank and BRAC Enterprises, got their start in Asia.
It is difficult to state the number of SEs there are in Asia since SEs are so diverse in their nature and scope of activities. Because of the relatively recent introduction of the term, many organizations may not even self-identify as a social enterprise even though they function as one.
SE development at the country level is driven by the number of interrelated factors, but there are two that stand out in particular:
1. Vitality of a country’s civil society – the strength of its nonprofit sector, the freedom of its people to act, the availability of resources that support citizen engagement, etc.
2. The country’s business environment – encompassing its ease of doing business, the sophistication of its business culture, and the state of its infrastructure, etc.
For example, the innovation sector in Mainland China has expanded rapidly but Chinese SEs still face a number of regulatory hurdles. In comparison, SE ecosystems in Singapore and Hong Kong benefit from greater regulatory and multi-sector support.
The types of issues that SEs address also depends on the needs and phase of each country’s unique development. For instance, Japan may have an advanced economy, but it faces a rapidly aging population and needs to develop a more inclusive labor market if it is to retain its economic clout. Many Japanese SEs, therefore, focus on enabling more women to participate in the country’s workforce. Resource rich countries, like Indonesia and the Philippines, incubate many SEs that focus on environmental stewardship and management of a more inclusive value chain.
The Challenges Ahead
As Asia continues to undergo drastic social, demographic, and economic changes, SEs can play a role to ensure that future Asian growth is inclusive and sustainable. SEs reach underserved communities, linking them to products and services that enhance their quality of life and income generation ability. However, a number of issues must be addressed before SEs can become a part of mainstream Asian economies and societies. These challenges include:
1. Funding. Many Asian SEs continue to rely on personal funds or grants from Western foundations as major sources of their funding. While interest from Asian philanthropists is increasing, more education around how SEs work must be done. In addition, many Asian governments have yet to set up incentive structures that encourage local investment in SEs.
2. Lack of Awareness and Collaboration. SEs must do a better job of engaging philanthropists, investors, and the general public in their work. Social entrepreneurs can also increase dialogue among one another in order to improve understanding and build upon each other’s efforts.
3. Regulatory Environments. Most Asian countries have yet to develop regulations that keep up with the pace of SE growth. However, India and the Philippines are moving towards stronger policy support for SEs.
4. Sector Metrics. While many success stories have emerged from the fields, the overall impact of SEs has yet to be quantified. With Asia being so diverse and with so much variance among SEs, it has been difficult developing a standard metrics system. However, benchmarking systems like IRIS and GIIRS are gaining wider adoption.
5. Capacity Building. Many professionals are attracted to social entrepreneurship but increasing salary and organizational capacity will be critical for retaining talent in the sector.
Opportunities and Recommendations
Philanthropists have an opportunity to nurture the social innovation sector in Asia. We recommend that philanthropists must study not just the SEs they are supporting, but also the issues that SEs seek to address. Below are some other ideas:
1. Technical Training & Staff Support. As SEs move beyond proof of concept, they will need more resources to grow. Philanthropists can provide unrestricted funding and provide organizational effectiveness or capacity building grants.
2. Mentoring & Networking. Philanthropists can bring their knowledge, experience, and connections to help the social entrepreneur and enterprise succeed. For example, in Vietnam, the Centre for Social Initiatives Promotion has a program providing intensive mentoring, resource sharing, and networking opportunities.
3. Funding Instruments & Support for Intermediaries. Philanthropists can work with SEs to select funding vehicles that is appropriate for their situation. Depending on a SE’s stage of business maturity, a guaranteed or interest-free loan may be better than a grant. Philanthropists can also support intermediaries that promote participation in the social innovation sector – such as university programs, incubators, and others that seek to inspire and enable more young people to become part of social ventures.
We encourage you to download the report to learn about several social enterprises and funders working in Asia.
What other social enterprises are you familiar with? What else can philanthropists do to support the growth of SEs in Asia?
About the Author
Dien S. Yuen is Founder and Managing Director of Kordant Philanthropy Advisors, a social venture firm dedicated to more effective, impactful and joyful philanthropy. As an advocate of donor education and the strengthening of the philanthropic sector in the U.S. and Asia, she speaks at many events and her insights are often quoted in leading publications, including Forbes Asia, New York Times, Family Office Review, San Francisco Business Times and Economist Intelligence Unit reports.