For years, the majority of first-world academics, politicians, and practitioners have viewed economic development as a two-stage process. When a country or region is too poor to help itself, offer aid: start schools, open clinics, build infrastructure to facilitate basic trade and communication, and do it all for free. After the place has been spoon-fed on first-world donations for a few years, see if it can walk. Stop aid, cut NGO services, and treat it like an adult — a fully capable (and competitive) member of the global economy.
Unfortunately, places — like people — don’t grow from babies directly into adults. Few, if any, countries have ever leapt from aid to independence, and some, as author Dambisa Moyo claims in “Dead Aid,” are economically stunted by too many free goods and services. Social enterprise could be an intermediate step, a driver of development that could bridge the gulf between aid and industry.
Social Venture Partners Rhode Island (SVPRI), the small non-profit where I currently work, defines social enterprises as “mission driven initiatives that apply market-based strategies to maximize social impact.”
This definition is one of many. Like the term “green,” “social enterprise” has been applied to or appropriated by groups of incredible diversity. Usually, it refers to organizations that mix money-making and social impact, two poles on a wide scale that encompasses everything from Girl Scouts selling cookies to the Goldman Sachs Charitable Gift Fund. An important faction maintains that the term can apply to any innovative solution to a social problem.
The spectrum of social enterprise … according to some definitions.
Social enterprise can be glamorous. Some of the most prominent players in the field are boutique consulting and venture capital firms that focus exclusively on non-profits, whose employees enjoy the comfort of air-conditioned, well-connected offices in New York or London as well as the self-satisfaction of serving the greater good. These firms, like Social Finance,New Profit, or the IGNIA fund, focus on improving the “social return on investment” — making every last dollar of donor money count. These firms are making an impact, directly on their clients and indirectly on the non-profit sector, by contributing to new standards of accountability and efficiency.
However, the greatest potential benefit of social enterprise may lie on the less glamorous side of the spectrum. There are thousands of small businesses that may never attract the attention of big-shot funders or employ more than five people, but that nonetheless marry social mindfulness with real income, employment, and economic development. Most of these micro-enterprises can’t make it without some donations, but unlike charities, their earned-income strategies grow or maintain the donor dollar while creating what every economy needs: new business.
In the developed world, micro social enterprises have some established streams of funding and support. For example, SVPRI runs an eight-week incubator program to launch and grow micro social enterprises. When they start, most enterprises are just a lone entrepreneur with an idea: a bike shop involved in the community (Recycle-a-Bike), a distributor for maternal health kits (Maternova), a catering business run out of a local soup kitchen (Amos House). The entrepreneurs are often unemployed individuals seeking to give back to their communities and also support themselves and their families.