July 2017 – Page 2 – SOCIAL BUSINESS

Social Business : the challenge of scaling up

12 July 2017/in Challenge and Definition /by quai13

Entrepreneurship can meet the needs of “base-of-the-pyramid” populations, provided the business in question has reached the critical size needed for profitability and sustainability. Examples of “inclusive businesses” which have successfully “scaled up”, however, are few and far between. Rectifying this situation means removing a number of practical, psychological and financial barriers. There are many ways in which development finance institutions can help this sector to grow.

What role can businesses play in combating socio-economic inequalities and environmental depletion? This key issue in the current debate over development straddles three relatively independent phenomena. First, with financial ressources now limited or reduced, authorities and private foundations are looking for leverage that will boost the impact of their actions. Their watchwords now are social-business support, public-private partnerships and impact investing. The second phenomenon is the 2008 financial crisis which triggered a moral conflict in many business leaders seeking to reconcile their responsibilities towards their shareholders with their personal convictions. Here the watchwords are inclusive business, shared value and base- of-the-pyramid. The third phenomenon applies to NGOs, non-profits and social entrepreneurs who wish to sustain their initiatives and reduce their dependence on ad hoc resources such as grants and donations. Their watchwords are social business, sustainability and “turning beneficiaries into customers”.

While the outlook, ideologies and vocabulary differ, the key question is the same, i.e., can businesses – long considered the source of social and environmental problems – become part of the solution? Are there any concrete examples which prove that inclusive business1 approaches can solve social problems in an economically profitable way and on a large scale? While inclusive businesses may have sprung up in developing countries, we need to ask ourselves why they are not more wides- pread? What obstacles do they encounter when changing scale and what can development finance institutions do to help them grow?

Success of scaling up: examples of your inclusive businesses

The following examples of inclusive businesses prove that scaling up is indeed possible. The businesses in question have reached a critical size that ensures both profitability and sustainability. They also directly impact a huge number of customers and have inspired the creation of similar businesses.

See the full article on the blog Private Sector & Development, animated by Proparco.

The ambitious and challenges of social busine ...

12 July 2017/in Challenge and Definition /by quai13

Social business is a demanding business model: social enterprises pursue social or environmental goals while also seeking long-term profitability and they face many challenges. In the wide- ranging ‘impact investing’ sector, it is vital that the social businesses are able to structure and differentiate themselves, both to attract investment and to boost their impact.

Despite the involvement of the international community and extensive multi-actor engagement, guaranteed access to essential goods and services is still a long way off for the world’s poorest populations. 1.5 billion people do not have reliable access to clean, affordable electricity; more than a billion lack drinking water or adequate health facilities; access to existing treatments for infectious diseases such as HIV/AIDS, tuberculosis and malaria is still very limited; and 70% of all children around the world not attending school live in Southern Asia and sub-Saharan Africa (Acumen, Hystra, WHO, 2014). Public funding alone cannot tackle all these challenges and while the private sector is already a significant funding source of development,[1] there is a need for new sources to be harnessed so that wider approaches can be developed, ‘workable’ solutions disseminated, and innovative responses devised that will benefit the very poorest. Working alongside the public sector, which plays a vital role in all these areas, investors and social enterprises face the challenge of developing capacity to meet this global demand for goods and services at affordable prices.

The emergence of ‘social business’: the culmination of a long story

The business world has many different terms for enterprise with a social or environmental focus, including “the social and solidarity economy”, “social entrepreneurship”, “bottom-of-the-pyramid initiatives”, “the inclusive economy”, “impact investing” and “social business”. However, while these terms appear to refer to the same concepts, they need to be differentiated. “The social economy” is an established term that represents a global attempt to combine economic activity and social benefits. This movement has produced different kinds of business, including cooperatives and mutual societies. Since the late 1990s, traditional private sector businesses have increasingly been embracing environmental and social issues, initially by focusing on controlling their environmental and social risks, and subsequently by incorporating notions of sustainable development and corporate social responsibility (CSR) into their organisation. At the same time, the financial sector has been creating “socially responsible investing” (SRI) tools – new investment vehicles that enable investors to monitor how their assets perform in social and environmental terms.

See the full article on the blog Private Sector & Development, animated by Proparco.

Low-cost private schools scalable solution to ...

12 July 2017/in Education /by quai13

To provide low-cost nursery and primary school education in poor neighbourhoods, Bridge International Academies has developed a vertically-integrated system. It includes operational tools and systems, curriculum materials, teacher recruitment, training processes. Its business model gives priority to academic quality using new technologies to support classroom teaching while keeping overheads and costs down in order to remain affordable.

Are social businesses able to provide efficient, sustainable, scalable solutions to problems that have traditionally been the preserve of the public sector? While few will argue that commercial businesses are the key to creating and sustaining jobs, many consider that a line has been crossed when for-profits enter sectors traditionally seen as public goods like nursery and primary education.1 Indeed, the UN special rapporteur on education, Kishore Singh declared that “For-profit education should not be allowed in order to safeguard the noble cause of education”.2 Yet there is a significant gap that needs to be addressed. Unicef estimates that there are still 58 million primary-age students globally who are out of school (UIS/EFA GMR, 2015). A recent article by Bookings Fellow Leisbet Steer reports that USD 26 billion in donor funding is needed every year to address this global education gap (Rose et al., 2013).