The idea that a social entrepreneur can help solve major challenges facing our world while at the same time make money like any other business is appealing. It is particularly appealing to donor agencies which otherwise must spend billions of dollars through bilateral, multilateral or NGO-funnelled aid to the developing world. Yet, despite the enthusiasm, social enterprise has not yet proven its capacity to overcome the numerous challenges plaguing our world.
Before focusing on social enterprises, it is useful to situate these entities within the broader sphere of international development. The idea of providing aid to the developing world to overcome challenges like poverty and to align these less-developed countries into a broader global trade system goes back to the end of the Second World War, when many of these countries began gaining independence from colonial rule.
Right after the WW2, we saw the creation of major international organisations of aid, including the IMF and World Bank, alongside the UN system. Alongside bilateral aid agencies within the developed world — such as USAID — these organisations continued to lend directly to the governments of poor countries until the 1970s.
With the rise of neoliberalism, the international aid community began to withdraw support from the government in favour of the private sector and non-governmental organisations. However, the private sector has not been able to deliver vital services to the poor and NGOs have also been unable to create sustainable models of development which can survive beyond donor-supported programmes.
Given the lingering need to meet basic human needs around the world, donor agencies are now trying to explore alternative models of development, which had led to an increasing reliance on social entrepreneurship.
Social entrepreneurs are expected to deliver both social and financial returns — and ‘blended value’. The World Bank’s defines ‘social enterprises’ as social-mission-led organisations that provide sustainable services to the so-called ‘base of the pyramid’ populations.
Despite the enthusiasm, however, there is ambiguity about what social enterprises are and how they differ from NGOs on the one hand, and standard commercial enterprises on the other. Social enterprises often use the proﬁt they generate along with grants they receive, to finance their operations.
There is pressure on donors to rely on social enterprises which are cheaper than NGOs. Even NGOs are now trying to sell branded merchandise, or adopt a fee-for-service approach, in the effort to transition from a nonprofit to a for-profit business model.
However, there are problems which social enterprise can never address using an entirely self-financing model. A profit-making business model cannot be used to provide humanitarian assistance for instance, or to help serve the needs of the poorest of the poor.
Social enterprises claim efﬁciency and ﬂexibility in contrast to slow-moving and bureaucratic public sector. But their critics suspect that the private sector is using social enterprise as a vehicle for the takeover of the public sector. Others question if the private sector business models are not helping the poor, or are even hurting the poor, then how is this organisational structure worthy of emulation?
Nonetheless, social entrepreneurship is getting much attention and support. Many social entrepreneurs are trying to aggressively grow in scale. Scaling up social enterprise is based on the rationale that the greater the proﬁts these ventures make, the more sustainable they can become, and the more societal problems they can help solve.