Social enterprise

A social enterprise is an organization that applies commercial strategies to maximize

improvements in human and environmental well-being - this may include maximizing social
impact rather than profits for external shareholders. Social enterprises can be structured as a for-
profit or non-profit, and may take the form (depending in which country the entity exists and the
legal forms available) of a co-operative, mutual organization, a disregarded entity,[1] a social
business, a benefit corporation, a community interest company or a charity organization.[2]

Many commercial enterprises would consider themselves to have social objectives, but
commitment to these objectives is motivated by the perception that such commitment will
ultimately make the enterprise more financially valuable. These are organisations that might be
more properly said to be operating corporate responsibility programs. Social enterprises differ in
that their commitment to impact is central to the mission of the business. Some may not aim to
offer any benefit to their investors, except where they believe that doing so will ultimately
further their capacity to realize their social and environmental goals, although there is a huge
amount of variation in forms and activities.

The term has a mixed and contested heritage due to its philanthropic roots in the United States,
and cooperative roots in the United Kingdom, European Union and Asia.[3] In the US, the term is
associated with 'doing charity by doing trade', rather than 'doing charity while doing trade'. In
other countries, there is a much stronger emphasis on community organising and democratic
control of capital and mutual principles, rather than philanthropy.[4] In recent years, there has
been a rise in the concept of social purpose businesses which pursue social responsibility
directly, or raise funds for charitable projects.[5]

History and philosophy

Social enterprise has a long history around the world, though under different names and with
different characteristics.[6] Whilst many social enterprises will today accept finance and other
forms of support from the state, particularly those with a nonprofit form, they are essentially
enterprises that seek independence from both the state and private capital through strategies that
create a social economy.

Early use of the terms 'social enterprise' and 'social entrepreneurship' can be traced to
Beechwood College near Leeds, England (from 1978) where Freer Spreckley used the term
'social enterprise' to describe worker and community co-operatives that used the 'social
accounting and audit' system developed at Beechwood; and at ASHOKA – a US foundation –
where during the 1980s Bill Drayton established a program to support the development of social
entrepreneurship.[7] Other formative influences were the Italian worker co-operatives that lobbied
to secure legislation for 'social co-operatives' in which members with mental or other health
disabilities could work while fully recovering. The first academic paper to propose worker co-
operatives involved in health and rehabilitation work as a form social enterprise was published in
1993.[8] The scale and integration of co-operative development in the 'red belt' of Italy (some
7,000 worker, and 8,000 social co-operatives) inspired the formation of the EMES network of
social economy researchers who subsequently spread the language to the UK and the rest of
Europe through influential English language publications.[9]

In the US, the work of Ashoka was picked up at Harvard, Stanford and Princeton universities,
and each made contributions to the development of the field of social entrepreneurship through
project initiatives and publications.[10][11][12]

Social enterprises are often regarded – erroneously – as nonprofit organisations, although many
do take on a nonprofit legal form and are treated in academic literature on the subject as a branch
or sub-set of nonprofit activity (especially when contrasted with Social Businesses). Social
enterprise can be characterized by open membership and goals widely considered to be in the
community or public interest, although some social enterprises are more tightly held and can
include proprietary organizations with private membership. A useful, although by no means
universal perspective, created by social enterprise consultants across four continents after a
review by Social Enterprise Europe, highlights three factors which can frame the business
philosophy of a social enterprise:[13]

 The extent to which it engages in ethical review of the goods and services it produces,
and its production processes;
 The extent to which it defines its social purpose(s), and evidences its social impact;
 The extent to which it democratises ownership, management and governance by passing
control of its human, social and financial capital to its primary stakeholders (producers,
employees, customers, service users).

Their international definition states:

"Not for Profit is a misleading criterion. It is good practice for social enterprises to provide
incentives to workers, and social and community investors through dividends. Distribution of
profits or payments to individuals should not compromise the enterprises' value statement or
social objectives".[14] This definition is however reflective of the European conceptualisation of
social enterprise, where the principle of mutuality commonly underpins social enterprise. In
other countries, social enterprise is just as if not more likely to take the form of a 'regular'
business entity (such as sole tradership or proprietary limited company) as it as a nonprofit or co-
operative legal form. In the United Kingdom, it is often considered a spectrum from for-profit to
non-profit, where social enterprise sits closer to non-profit, while social business sits closer to
for-profit models.[15]

The field of social enterprise studies has not yet developed firm philosophical foundations, but
its advocates and academic community are much more engaged with critical pedagogies (e.g.
Paulo Freire) and critical traditions in research (e.g. critical theory / institutional theory /
Marxism) in comparison to private sector business education.[16][17] Teaching related to the social
economy draws explicitly from the works of Robert Owen, Proudhon and Karl Marx with works
by Bourdieu and Putnam informing the debate over social capital and its relationship to the
competitive advantage of mutuals. This intellectual foundation, however, does not extend as
strongly into the field of social entrepreneurship where there is more influence from writings on
liberalism and entrepreneurship by Joseph Schumpeter, in conjunction with the emerging fields
of social innovation, actor–network theory and complexity theory to explain its processes.

Social enterprise (unlike private enterprise) is not taught exclusively in a business school context,
as it is increasingly connected to the health sector and public service delivery. The Oxford
University's Said Business School, does host the Skoll World Forum, however, a global event
focused on social entrepreneurs.

The first international journal was established in 2005 by Social Enterprise London (with support
from the London Development Association). The Social Enterprise Journal has been followed
by the Journal of Social Entrepreneurship, and coverage of the issues pertaining to the social
economy and social enterprise are also covered by the Journal of Co-operative Studies and the
Annals of Co-operative and Public Economics. The European Social Enterprise Research
Network (EMES) and the Co-operative Research Unit (CRU) at the Open University have also
published research into social enterprise. The Skoll World Forum, organised jointly by Oxford
and Duke universities, brings together researchers and practitioners from across the globe.

Salesforce.com trademark dispute

In 2012 Social Enterprise UK ran the 'Not In Our Name' campaign against Salesforce.com, a
global software and CRM company, that had begun using the term 'social enterprise' to describe
its products and had applied for 'social enterprise' trademarks in the EU, US, Australia, and
Jamaica. The campaign was supported by similar organisations in the US (the Social Enterprise
Alliance), Canada, South Africa, and Australia. An open letter was sent to the CEO and
Chairman of Salesforce.com asking Salesforce.com to stop using the term 'social enterprise'. It
was signed by people and organisations around the world, including Muhammad Yunus
(Grameen Bank founder and Nobel Peace Prize laureate), Richard G. Wilkinson and Kate Pickett
(co-authors of The Spirit Level). Salesforce said they would withdraw applications to trademark
the term 'social enterprise', and remove any references to 'social enterprise' in its marketing
materials in the future.[18]

In Australia
The forms social enterprises can take and the industries they operate in are so many and various
that it has always been a challenge to define, find and count social enterprises. In 2009 Social
Traders partnered with the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) at
Queensland University of Technology to define social enterprise and, for the first time in
Australia, to identify and map the social enterprise sector: its scope, its variety of forms, its
reasons for trading, its financial dimensions, and the individuals and communities social
enterprises aim to benefit.

This Finding Australia's Social Enterprise Sector project produced its final report in June 2010.
The project was led by Associate Professor Jo Barraket, Australia's leading social enterprise
academic.

One of the key features of this Australian research is its intention to define social enterprise in a
way that was informed by and made sense to those working in or with social enterprises.

The research design therefore included workshops to explore and test what social enterprise
managers, researchers, and relevant policy makers meant by the term 'social enterprise'. This was
the resulting definition:

Social enterprises are organisations that:

 Are led by an economic, social, cultural, or environmental mission consistent with a

public or community benefit;
 Trade to fulfil their mission;
 Derive a substantial portion of their income from trade; and
 Reinvest the majority of their profit/surplus in the fulfilment of their mission.

This is a movement that has been captured by many throughout all sectors of the Australian
Economy. Social Enterprise activity can be found primarily in small communities and larger
institutions. These institutes work for more than profit alone; they foster social and
environmental innovation and are accountable for their employees, consumers and the
communities. They offer a business model where people can be given direct voice in running the
organisation.

In North America
United States

The Social Enterprise Alliance (SEA) of the United States defines a "social enterprise" as "an
organization or venture that advances its primary social or environmental mission using business
methods."[19]

In the U.S, two distinct characteristics differentiate social enterprises from other types of
businesses, nonprofits, and government agencies:
  Social enterprises directly address social needs through their products and services or
through the numbers of disadvantaged people they employ. This distinguishes them from
"socially responsible businesses", which create positive social change indirectly through
the practice of corporate social responsibility (e.g., creating and implementing a
philanthropic foundation; paying equitable wages to their employees; using
environmentally friendly raw materials; providing volunteers to help with community
projects).
 Social enterprises use earned revenue strategies to pursue a double or triple bottom line,
either alone (as a social sector business, in either the private or the nonprofit sector) or as
a significant part of a nonprofit's mixed revenue stream that also includes charitable
contributions and public sector subsidies. This distinguishes them from traditional
nonprofits, which rely primarily on philanthropic and government support.

In the United States, "social enterprise" is also distinct from "social entrepreneurship", which
broadly encompasses such diverse players as B Corp companies, socially responsible investors,
"for-benefit" ventures, Fourth Sector organizations, CSR efforts by major corporations, "social
innovators" and others. All these types of entities grapple with social needs in a variety of ways,
but unless they directly address social needs through their products or services or the numbers of
disadvantaged people they employ, they do not qualify as social enterprises.

Canada

The Social Enterprise Council of Canada (SECC) of Canada defines a "social enterprise" as
"businesses owned by nonprofit organizations, that is directly involved in the production and/or
selling of goods and services for the blended purpose of generating income and achieving social,
cultural, and/or environmental aims. Social enterprises are one more tool for non-profits to use to
meet their mission to contribute to healthy communities."[20]

Canadian social enterprise characteristics vary by region and province in the ways they
differentiate social enterprises from other types of businesses, not-for-profits, co-operatives and
government agencies:

 Social enterprises may directly address social needs through their products and services,
the number of people they employ or the use of their financial surplus. This can
distinguish them from "socially responsible for-profit businesses", which create positive
social change indirectly through the practice of corporate social responsibility (e.g.,
creating and implementing a charitable foundation; paying fair wages to their employees;
using environmentally friendly raw materials; providing volunteers to help with
community projects).
 Social enterprises may use earned revenue strategies to pursue a double or triple bottom
line, either alone (as a social economy business, in either the private or the not-for-profit
sector) or as a significant part of a not-for-profit corporation's mixed income stream that
may include charitable contributions and public sector assistance. This distinguishes them
from some traditional not-for-profit corporations, which may rely in whole or part on
charitable and government support.

Significant regional differences in legislation, financing, support agencies and corporate

structures can be seen across Canada as a result of different historical development paths in the
social economy. Common regional characteristics can be seen in British Columbia, the Prairies,
Ontario, Quebec and Atlantic Canada.

In Asia
Middle East
There is no separate legal entity for social enterprises in the Middle East. Most social enterprises
register as companies or non-profit organizations. There isn't a proper definition of social
enterprises by the governments of the Middle Eastern countries.

However, social enterprises in the Middle East are active and innovating in a variety of sectors
and industries. A majority of the existing social enterprises are engaged in human capital
development. Many are nurturing a cadre of leaders with the experiences and skills needed to
enhance the region’s global competitiveness while also achieving social goals. Trends in the
region point to an increasingly important role and potential for such activities and for social
entrepreneurship in general. These include the growing interest among youth in achieving social
impact and growth in volunteerism among youth.[21]

According to the Schwab Foundation there are 35 top social entrepreneurs in the Middle East.[22]

South Korea

Legal Supports

In South Korea the Social Enterprise Promotion Act was approved in December 2006 and was
put into effect in July 2007.

The article 2 defines social enterprises as "an organization which is engaged in business activities
of producing and selling goods and services while pursuing a social purpose of enhancing the
quality of local residents' life by means of providing social services and creating jobs for the
disadvantaged, as an enterprise certified according to the requirements prescribed in Article 7,"
the disadvantaged as "people who have difficulty in purchasing social services necessary to
themselves for a market price, the detailed criteria thereof shall be determined by the Presidential
Decree," and social services as "service in education, health, social welfare, environment and
culture and other service proportionate to this, whose area is prescribed by the Presidential
Decree."

The Ministry of Labor is obliged to "establish the Basic Plan for Social Enterprises Support"
every five years (Article 5), and not only enterprises but also cooperatives and non-profits can be
recognised as social enterprises, which are eligible for tax reduction and/or financial supports
from the Korean / provincial governments or city councils. 680 entities have been recognised as
social enterprises as of October 2012. The majority of Korean social enterprises are primarily
concerned with job creation.[23] The Korea Social Enterprise Promotion Agency was established
to promote social enterprises.

Notable Companies

Happynarae[1] Beautiful Store[2] DongChun[3]

Hong Kong

There is no separate legal entity for social enterprises in Hong Kong. They are normally
registered as companies or non-profit organisations. The Hong Kong Government defines social
enterprises as businesses that achieve specific social objectives, and its profits will be principally
reinvested in the business for the social objectives that it pursues, rather than distribution to its
shareholders.[24] In recent years, venture philanthropy organizations, such as Social Ventures
Hong Kong, have been set up to invest in viable social enterprises with a significant social
impact.

India
In India, a social enterprise may be a non-profit Non-governmental organization (NGO), often
registered as a Society under Indian Societies Registration Act, 1860, a Trust registered under
various Indian State Trust Acts or a Section 25 Company registered under Indian Companies
Act, 1956. India has around 1-2 million NGOs, including a number of religious organizations
and religious trusts, like Temples, Mosque and Gurudwara associations etc., who are not deemed
as social enterprises.

NGOs in India raise funds through some services (often fund raising events and community
activities) and occasionally products. Despite this, in India the term "Social Enterprise" is not
widely used, instead terms like NGOs and NPOs (non-profit organizations) are used, where these
kind of organizations are legally allowed to raise fund for non-business activities. Child Rights
and You and Youth United are examples of social enterprise, who raise funds through their
services, fund-raising activities (organizing events, donations, and grants) or sometimes
products, to further their social and environmental goals.

However, there are social businesses with an aim for making profit, although the primary aim is
to alleviate poverty through a sustainable business model. An example is Pipal Tree Ventures
Private Limited, which trains rural youth in various construction and infrastructure-related skills
and has found a way for rural youth to get out of poverty. The company also provides placements
to the trained manpower to various infrastructure industries in India, thereby creating an end-to-
end sustainable business model.

Another example of a social enterprise would be Milaap Social Ventures Pvt Ltd, based out of
Bangalore and headquartered in Singapore. They are a mission driven company changing the
way people fund and impact communities in need. Every day, they connect hundreds of
hardworking borrowers looking to start a small business, pay for education, install better
facilities in their households, and more – with people around the world willing to lend and rally
their friends and family with as little as Rs. 500 ($25).

In the agriculture sector, International Development Enterprises has helped pull millions of small
farmers out of poverty in India.

Another area of social enterprise in India and the developing world are bottom of the pyramid
(BOP) businesses which were identified and analyzed by C. K. Prahalad in "Fortune at the Base
of the Pyramid". This seminal work has been a springboard for a robust area of both innovation
and academic research.

Malaysia

Social Enterprise Alliance Malaysia defines social enterprises as "organizations created to

address social problems that use business models to sustain themselves financially. Social
enterprises seek to create not only financial returns but also social returns to their beneficiaries."
Social Enterprise Alliance Malaysia regards social enterprises as businesses with a social focus,
distinct from non-profit organisations.[25]

Philippines

In December 1999, a group was organized called Social Enterprise Network. Its members, based
in Metro Manila, include entrepreneurs, executives, and academics who believe in social
entrepreneurship (setting up businesses by creating opportunities for the poor). SEN served is a
networking opportunity for like-minded individuals to share their interests and pass on their
experience to others. One of its projects eventually was adopted by the Foundations for People
Development. It is called the Cooperative Marketing Enterprise. CME is devoted solely to
providing the need for cooperatives, micro, small, and medium enterprises for the marketing of
their products.
From the academe, a course "Social Entrepreneurship and Management" was first offered at the
University of Asia and the Pacific School of Management in 2000. This course was developed
and taught by Dr. Jose Rene C. Gayo, then Dean of the School of Management. It was offered as
an elective for the senior students of the Bachelor of Science in Entrepreneurial Management. In
March 2001, a seminar on "Social Enterprises: Creating Wealth for the Poor" was held at the
University of Asia and the Pacific.

A social enterprise in the Philippines is GKonomics International, Inc., a non-stock, non-profit

organization, incorporated in 2009. They are a Gawad Kalinga partner in social enterprise
development. Their mission is building a new generation of producers.

Thailand

In Thailand social entrepreneurship is small but growing. Thammasat University in Bangkok is

the Southeast Asia partner of the Global Social Venture Competition (GSVC-SEA).[26] Every
year new emerging social enterprises present their business model showcasing variety of
business models ranging from agriculture, to technology, tourism and education. In 2013 the
winners of GSVC-SEA were Wedu (female leadership development and education) and CSA
Munching box (agriculture).

A major player in the social entrepreneurship space in Thailand is ChangeFusion, led by the
Ashoka Fellow Sunit Shrestha. A major figure in the space is Mechai Viravaidya,[27] founder of
the Population and Community Development Association (PDA).

Members of the Royal Family of Thailand have been involved in social entrepreneurship like
with the creation of the brand Doi Tung by the Mae Fah Luang Foundation.

The government of Thailand supports the creation of new social enterprises via the Thai Social
Entrepreneurship office (TSEO).[28]

In Europe
EMES

The best established European research network in the field, EMES, works with a more
articulated definition - a Weberian 'ideal type' rather than a prescriptive definition - which relies
on nine criteria:

Economic criteria:

 Continuous activity of the production and/or sale of goods and services (rather than
predominantly advisory or grant-giving functions).
 A high level of autonomy: social enterprises are created voluntarily by groups of citizens
and are managed by them, and not directly or indirectly by public authorities or private
companies, even if they may benefit from grants and donations. Their members have the
right to participate ('voice') and to leave the organisation ('exit').
 A significant economic risk: the financial viability of social enterprises depends on the
efforts of their members, who have the responsibility of ensuring adequate financial
resources, unlike most public institutions.
 Social enterprises' activities require a minimum number of paid workers, although, like
traditional non-profit organisations, social enterprises may combine financial and non-
financial resources, voluntary and paid work.

Social criteria:
  An explicit aim of community benefit: one of the principal aims of social enterprises is
to serve the community or a specific group of people. To the same end, they also promote
a sense of social responsibility at local level.
 Citizen initiative: social enterprises are the result of collective dynamics involving
people belonging to a community or to a group that shares a certain need or aim. They
must maintain this dimension in one form or another.
 Decision making not based on capital ownership: this generally means the principle of
'one member, one vote', or at least a voting power not based on capital shares. Although
capital owners in social enterprises play an important role, decision-making rights are
shared with other stakeholders.
 Participatory character, involving those affected by the activity: the users of social
enterprises' services are represented and participate in their structures. In many cases one
of the objectives is to strengthen democracy at local level through economic activity.
 Limited distribution of profit: social enterprises include organisations that totally
prohibit profit distribution as well as organisations such as co-operatives, which may
distribute their profit only to a limited degree, thus avoiding profit maximising behaviour.

Ongoing research work characterises social enterprises as often having multiple objectives,
multiple stakeholders and multiple sources of funding. However their objectives tend to fall into
three categories:

 integration of disadvantaged people through work (work integration social enterprises or

WISEs)
 provision of social, community and environmental services
 ethical trading such as fair trade

Despite, and sometimes in contradiction to, such academic work, the term social enterprise is
being picked up and used in different ways in various European countries.

European Commission

As part of its Social Business Initiative,[29] which ran from 2011 until 2014, the European
Commission developed the following definition based on three key criteria: social objective,
limited profit distribution and participatory governance:[30]

A social enterprise is an operator in the social economy whose main objective is to have a
social impact rather than make a profit for their owners or shareholders. It operates by
providing goods and services for the market in an entrepreneurial and innovative fashion
and uses its profits primarily to achieve social objectives. It is managed in an open and
responsible manner and, in particular, involve employees, consumers and stakeholders
affected by its commercial activities.
The Commission uses the term 'social enterprise' to cover the following types of business:

 those for which the social or societal objective of the common good is the reason for the
commercial activity, often in the form of a high level of social innovation,
 those where profits are mainly reinvested with a view to achieving this social objective,
 and where the method of organisation or ownership system reflects their mission, using
democratic or participatory principles or focusing on social justice (for example, with a
reduced range of pay).

Thus:

 businesses providing social services and/or goods and services to vulnerable persons
(access to housing, health care, assistance for elderly or disabled persons, inclusion of
vulnerable groups, child care, access to employment and training, dependency
management, etc.); and/or
  businesses with a method of production of goods or services with a social objective
(social and professional integration via access to employment for people disadvantaged in
particular by insufficient qualifications or social or professional problems leading to
exclusion and marginalisation) but whose activity may be outside the realm of the
provision of social goods or services.

Czech Republic

In the Czech Republic a working party stemming from the development partnerships in the
EQUAL programme agreed on the following distinctions (April 2008):

Social economy

It is a complex of autonomous private activities realized by different types of

organizations that have the aim to serve their members or local community first of all by
doing business. The social economy is oriented on solving issues of unemployment,
social coherence and local development. It is created and developed on the base of
concept of triple bottom line – economic, social and environmental benefits. Social
economy enables citizens to get involved actively in the regional development. Making
profit/surplus is desirable, however is not a primary goal. Contingent profit is used in
preference for development of activities of organization and for the needs of local
community. Internal relations in the social enterprises are headed to the maximum
involvement of members/employees in decision-making and self-management while
external relations strengthen social capital. Legal form of social economy entities is not
decisive – what is crucial is observing public benefit aims as listed in the articles.
Subjects of the social economy are social enterprises and organizations supporting their
work in the areas of education, consulting and financing.

Social entrepreneurship

Social entrepreneurship develops independent business activities and is active on the

market in order to solve issues of employment, social coherence and local development.
Its activities support solidarity, social inclusion and growth of social capital mainly on
local level with the maximum respect of sustainable development.

Social enterprise

Social enterprise means "a subject of social entrepreneurship", i.e. legal entity or its part
or a natural person which fulfils principles of the social enterprise; social enterprise must
have appropriate trade license.
The above mentioned definitions stem from the four basic principles that should be
followed by social enterprises. Standards with a commentary were settled for each
principle. These standards were settled as the minimum so that they should be observed
by all legal entities and all types of social enterprises. Specific types of enterprises, that
are undergoing pilot verification within CIP EQUAL projects and that are already
functioning in the Czech Republic, are social firms employing seriously disadvantaged
target groups, and municipal social cooperatives as a suitable form of entrepreneurship
with the view of development of local communities and microregions.
The legal form a social enterprise takes may not always be seen as important - however,
they must be subject of private law. According to the existing legal system, they can
function in a form of cooperatives, civic associations, public benefit associations, church
legal entities, Ltd., stock companies and sole traders. Budgetary organizations and
municipalities should not be social enterprises as they are not autonomous - they are parts
of public administration.
Social entrepreneurship is defined very broadly. Beside employment of the people
disadvantaged at the labour market it also includes organizations providing public benefit
services in the area of social inclusion and local development including environmental
 activities, individuals from the disadvantaged groups active in business and also
complementary activities of NGOs destined to reinvest profit into the main public benefit
activity of an organization. Social entrepreneurship defined in such a wide way should
not be directly bound to legal benefits and financial support because the concept of social
entrepreneurship might be then threatened by misuse and disintegration. Conditions of
eventual legal and financial support should be discussed by experts.

Finland

In Finland a law was passed in 2004 that defines a social enterprise (sosiaalinen yritys) as being
any sort of enterprise that is entered on the relevant register and at least 30% of whose
employees are disabled or long-term unemployed. As of March 2007, 91 such enterprises had
been registered, the largest with 50 employees. In the UK the more specific term "social firm" is
used to distinguish such "integration enterprises". This legal definition of a social enterprise
(sosiaalinen yritys) made it hard for actual social entrepreneurship to enter the Finnish
consciousness and public debate so a new term Yhteiskunnallinen Yrittäjyys (societal
entrepreneurship) was dubbed and promoted by the early players in the field. Nowadays the term
is recognised, accepted and even promoted by entrepreneurial NGOs, entrepreneurs themselves,
co-operatives and government organisations. Finnish Social Enterprise Research Network
FinSERN collects and exchanges national and international research data, maintains connections
with social enterprise researchers and research networks around the world, and finds financing
opportunities for research. There is also a growing interest in impact investment in Finland.

Italy

Italy passed a law in 2005 on imprese sociali, to which the government has given form and
definition by Legislative Decree, 24 March 2006, no. 155. Under Italian law a social enterprise is
a private entity that provides social utility goods and services, acting for the common interest and
not for profit.

In an effort to develop social enterprises and measure social impact, the Italian governmental
work placement agency - Italia Lavoro - has developed a method to calculate the social
efficiency of their project, from an economic point of view. For example, they measure the
economic value to the society of providing a job to a disabled person. Since 1997, Italia Lavoro
provides work placements to people with mental, social, physical or health disadvantages. To
this aim, they help people who have fallen out of the general work system to reintegrate society
through the creation of small and medium non-profit enterprises.[31]

Also intended to generate more social enterprises is the non-profit cooperative Make a Change.
Make a Change provides financial, operational and management support to social start-ups. In
2010 they organized the first edition of a contest to elect the "Social entrepreneur of the year", as
well as another contest entitled "The World's Most Beautiful Job". This year winner of the
former was the social cooperative "Cauto", which manages the whole trash life-cycle in the
Province of Brescia. Cauto's workforce has 1/3 disabled and disadvantaged individuals.

Winner of the "World's Most Beautiful Job" prize was the project "Tavern of the Good and Bad"
by the group Domus de luna from Cagliari. The tavern employs mums and children recently
graduated from rehabilitation programs. The prize consisted of a grant of 30.000 euro and 12
months of professional consulting and support. The prize-giving ceremony was included in the
program of the Global Entrepreneurship Week.[32]

United Kingdom

Definition
In the UK the accepted Government-backed definition of social enterprise used by the UK social
enterprise sector bodies such as Social Enterprise UK comes from the 2002 Department of Trade
and Industry report 'Social Enterprise: a strategy for success' report as:[33]

A business with primarily social objectives whose surpluses are principally reinvested for that
purpose.

The original use of the term social enterprise was first developed by Freer Spreckley in 1978,
and later included in a publication called Social Audit – A Management Tool for Co-operative
Working published in 1981 by Beechwood College. In the original publication the term social
enterprise was developed to describe an organisation that uses Social Audit. Freer went on to
describe a social enterprise as:[34]

An enterprise that is owned by those who work in it and/or reside in a given locality, is governed
by registered social as well as commercial aims and objectives and run co-operatively may be
termed a social enterprise. Traditionally, 'capital hires labour' with the overriding emphasis on
making a 'profit' over and above any benefit either to the business itself or the workforce.
Contrasted to this is the social enterprise where 'labour hires capital' with the emphasis on social,
environmental and financial benefit.

Later on the three areas of social, environmental and financial benefits used for measuring social
enterprise became known as the Triple Bottom Line.

Twenty years later Freer Spreckley and Cliff Southcombe established the first[35] specialist
support organisation in the UK Social Enterprise Partnership Ltd. in March 1997.

In the British context, social enterprises include community enterprises, credit unions, trading
arms of charities, employee-owned businesses, co-operatives, development trusts, housing
associations, social firms, and leisure trusts.[36]

Whereas conventional businesses distribute their profit among shareholders, in social enterprises
the surplus tends to go towards one or more social aims which the business has – for example
education for the poor, vocational training for disabled people, environmental issues or for
animal rights, although this may not always be the case.[37]

Social enterprises are often seen as distinct from charities (although charities are also
increasingly looking at ways of maximising income from trading)[38] and from private sector
companies with policies on corporate social responsibility. An emerging view, however, is that
social enterprise is a particular type of trading activity that sometimes gives rise to distinct
organisation forms reflecting a commitment to social cause working with stakeholders from
more than one sector of the economy.

Three common characteristics of social enterprises as defined by Social Enterprise London are:

 Enterprise orientation: They are directly involved in producing goods or providing

services to a market. They seek to be viable trading organisations, with an operating
surplus.
 Social Aims: They have explicit social aims such as job creation, training or the provision
of local services. They have ethical values including a commitment to local capacity
building, and they are accountable to their members and the wider community for their
social environmental and economic impact.
 Social ownership: They are autonomous organisations with governance and ownership
structures based on participation by stakeholder groups (users or clients, local community
groups etc.) or by trustees. Profits are distributed as profit sharing to stakeholders or used
for the benefit of the community.

Examples
  The Big Issue
 Cafédirect
 Camara
 The Co-operative Group
 Technology Trust
 Divine Chocolate (Kuapa Kokoo)
 The Eden Project
 HCT Group
 John Lewis Partnership
 London Symphony Orchestra
 Welsh Water
 Skoll Centre for Social Entrepreneurship
 Two_Fingers_Brewing_Co.

Scale

A survey conducted for the SEnU in 2004 found that there were 15,000 social enterprises in the
UK (counting only those that are incorporated as companies limited by guarantee or industrial
and provident societies). This is 1.2% of all enterprises in the UK. They employ 450,000 people,
of whom two-thirds are full-time, plus a further 300,000 volunteers. Their combined annual
turnover is £18 billion, and the median turnover is £285,000. Of this, 84% is from trading. In
2006, the government revised this estimate upwards to 55,000, based on a survey of a sample of
owners of businesses with employees, which found that 5% of them define themselves as social
enterprises.[39] The most up to date estimates suggest that there are approximately 68,000 social
enterprises in the UK, contributing £24 billion to the UK economy.[40]

These estimates, however, are questioned by Dr Rory Ridley-Duff and Mike Bull, who draw
attention to work by the EU Commission to define and study the European social economy.[41]
Using the EU definition of social economy, the annual contribution of social enterprises to the
UK economy is four times larger at £98 billion[42] because it includes the contribution of all co-
operatives, mutuals and associations that produce goods or services to improve human well-
being.

Every two years, Social Enterprise UK carries out and publishes the findings of the state of
social enterprise survey, the largest piece of research looking at the UK's social enterprise sector.
The most recent report, The People's Business, details the findings of the 2013 survey.

Bodies

The first agency in the UK – Social Enterprise London (SEL) – was established in 1998
following collaboration between bodies supporting co-operative enterprise. SEL did more than
provide support to emerging businesses: it created a community of interest by working with the
London Development Agency (LDA) to establish both an undergraduate degree in social
enterprise at the University of East London and a Social Enterprise Journal (now managed by
Liverpool John Moores University). SEL built a network of over 2,000 social enterprises and
social entrepreneurs, directly brokered over 500 social enterprise jobs under the DWP's Future
Jobs Fund and delivers consultancy and business support across the world in countries including
Vietnam, Korea and Croatia.

The national membership and campaigning body for the social enterprise movement in Britain is
Social Enterprise UK (SEUK) (previously the Social Enterprise Coalition),[43] and this liaises
with similar groups in each region of England, as well as in Northern Ireland, Scotland and
Wales. SEUK's chief executive, Peter Holbrook, joined in January 2010 from the award-winning
social enterprise, Sunlight Development Trust, based in Gillingham, Kent. Claire Dove is the
Chair of SEUK and runs the social enterprise Blackburne House in Liverpool.
In 2002, the National Council for Voluntary Organisations (NCVO) established the Sustainable
Funding Project. Using funds from Futurebuilders England, Centrica and Charity Bank, this
project promoted the concept of sustainability through trading to voluntary groups and
charities.[44] From 2005 onwards, NCVO began using the term social enterprise to refer to
voluntary sector trading activities.

In 2002, the British government launched a unified Social Enterprise Strategy,[45] and established
a Social Enterprise Unit (SEnU) to co-ordinate its implementation in England and Wales,
primarily to consult on a new type of company to support social enterprise development. After a
consultation (see CIC below), policy development was increasingly influenced by organisations
in the conventional "non-profit" sector rather than those with their origins in employee-
ownership and co-operative sectors. The 2003 DTI report on the consultation shows the
disproportionate influence of charitable trusts and umbrella organisations in the voluntary sector,
and evidence now exists that the voices of progressive employee-owned organisations were
marginalised in the course of producing the report.[46][47]

The Social Enterprise Unit was initially established within the Department of Trade and Industry
(DTI), and in 2006 became part of the newly created Office of the Third Sector, under the wing
of the Cabinet Office.

Following broad consultation, SEnU adopted a broader definition which is independent of any
legal model. This latitudinarian definition could include not only companies limited by guarantee
and industrial and provident societies but also companies limited by shares, unincorporated
associations, partnerships and sole traders.

In April 2012, Prime Minister David Cameron launched Big Society Capital, the world's first
social investment wholesaler. Capitalised with a total of £600 million, it will distribute funds to
intermediaries that will lend money to social enterprises, charities and community groups.

Scotland

In Scotland, social enterprise is a devolved function and is part of the remit of the Scottish
Government.[48] Activities are co-ordinated by the Scottish Social Enterprise Coalition, and
intellectual leadership is provided by the Social Enterprise Institute at Heriot-Watt University
(Edinburgh), established under the directorship of Declan Jones. Senscot, based in Edinburgh,
supports social entrepreneurs through a variety of activities, including a weekly email bulletin by
co-founder Lawrence Demarco.[49] The Social Enterprise Academy "deliver leadership,
enterprise, and social impact programmes" throughout Scotland,[50] and further support is
provided by Development Trusts Association Scotland and Co-operative Development
Scotland.[51][52]

Community Interest Companies

Main article: Community Interest Company

The UK has also developed a new legal form called the community interest company (CIC).
CICs are a new type of limited company designed specifically for those wishing to operate for
the benefit of the community rather than for the benefit of the owners of the company. This
means that a CIC cannot be formed or used solely for the personal gain of a particular person, or
group of people. Legislation caps the level of dividends payable at 35% of profits and returns to
individuals are capped at 4% above the bank base rate.

CICs can be limited by shares, or by guarantee, and will have a statutory "asset lock" to prevent
the assets and profits being distributed, except as permitted by legislation. This ensures the assets
and profits are retained within the CIC for community purposes, or transferred to another asset-
locked organisation, such as another CIC or charity.[53]
A CIC cannot be formed to support political activities and a company that is a charity cannot be
a CIC, unless it gives up its charitable status. However, a charity may apply to register a CIC as a
subsidiary company.

Social firms

Another type of social enterprise category in the UK is a social firm, a business set up
specifically to create employment for people otherwise severely disadvantaged in the labour
market.[54]

In Africa
Ghana

The registered non-profit Trashy Bags was launched in 2007 in order to increase public
awareness of Ghana's solid plastic waste problem and clean up sachets from the streets of Accra.
This company buys waste from collectors. After washing and drying the sachets, it sews them
into fashionable bags and other products which are then sold in Accra and exported to eight other
countries around the world. The Trashy Bags Company has collected 20 million plastic sachets
since its founding, and employs 60 machinists.

MIG Live is a for profit Social Enterprise that designs, develops and markets products, services
and solutions that provide global socio economic value. The enterprise focuses on education,
health and youth unemployment issues. They are forming strategic partnerships with
entrepreneurs, leaders, local and global organizations to understand and collaborate on
developing their various offerings. The business is only 2 years old but is on a mission to
leverage creativity, media and technology to provide socio economic value to the world.

Kenya

In Kenya, many NGOs use business models to improve the lives of people, mainly in rural
Kenya. An example of this is KOMAZA, a social enterprise that plants trees with smallholder
farmers and uses economies of scale to enable them to access high value markets for processed
trees. Another example of this is RISE Kenya that runs projects to mitigate climate change in the
semiarid Eastern Province of Kenya. They also run weaving projects whereby women who
would traditionally engage in weaving make products that are marketed in the capital city
Nairobi and in overseas markets of Europe and America. Social business Ruby Cup also utilises
international sales to fund projects. They provide menstrual solutions for women and girls in
Kenya, and menstrual cup sales to an overseas market allows them to donate cups to Kenyan
schools.

Other development-oriented social enterprises in Kenya include the One Acre Fund, Nuru
International and Alive & Kicking, which has produced over 200,000 sports balls from its
stitching centre in Nairobi.[55] Kenya's social enterprises include M-Pesa, which facilitated
economic transactions via mobile phone.

Social enterprise in Kenya has grown to include spaces with IT infrastructure such as internet
connectivity and computer hardware. Two of these, the iHub and NaiLab, are centers for
technological enterprise, with ventures such as Tandaa in cooperation with the ICT Board of
Kenya and Akirachix.[56]

Zambia

As in much of Africa, social enterprises in Zambia are often focused on the creation of
sustainable employment. Alive & Kicking established a stitching centre in Lusaka in 2007,
which employs 50 stitchers and produces 2,000 sports balls a month.[57] Zambikes produces a
range of bicycles from their Lusaka factory, including 'Zambulances' and ones made from
bamboo, and provide three levels of mechanic training.[58]

Advantages of social enterprise

Rodney Schwartz of ClearlySo listed a number of advantages of the social enterprise as a
business:[59]

 ability to raise capital at below market rates due to the ethical investment industry
 easier access to publicity
 labour costs below average, "as staff seems willing to work for below market rates in
support of the values of social enterprises."

Schwartz described social entrepreneurs as "extraordinarily innovative, deploying models that

seem to derive results out of thin air."[59]

Awards
There are several awards that recognize and reward social enterprises.

The Skoll Foundation presents the Skoll Awards for Social Entrepreneurship each year at the to a
select group of social entrepreneurs whose proven innovations are disrupting an unjust and
unsustainable status quo and have demonstrated impact on solving some of the world’s most
pressing problems.

The Social Enterprise Awards is the UK's national award for social enterprise, recognising both
individuals and organisations in the social enterprise movement. These are run by Social
Enterprise UK (SEUK) in partnership with social enterprise organisations in Wales, Scotland and
Northern Ireland. The Social Enterprise Awards evolved out of the Enterprising Solutions
Awards, which were run by SEUK in collaboration with the Office of the Third Sector in the
Cabinet Office and the Community Banking branch of the RBS Group.

The Edge Upstarts Awards are run annually by the New Statesman in the UK.

The Asia Social Innovation Award is the first Asia-wide annual competition that asks for simple
ideas that can solve social issues common in Asian cities, such as an aging population, poverty
and environmental sustainability.

The Hong Kong Social Enterprise Challenge is the first and the only inter-collegiate social
ventures business competition in Hong Kong.

Fast Company has a yearly ranking of the top 15 to 25 noteworthy social enterprises called the
Social Capitalist Awards which highlights noteworthy organizations in social innovation (2004
to 2010).

In addition, several organizations offer fellowships like Ashoka, Acumen Fund, and Echoing
Green, all three of which are quite competitive. Still other organizations offer accelerator and
mentorship programs like the Unreasonable Institute.

See also
 Benefit corporation (or "B corporation")
 Citizen enterprise
 Corporate social entrepreneurship
 Corporate social responsibility
  Impact investing
 List of social enterprises
 MicroConsignment
 Micro-enterprise
 Mutualism (economic theory)
 Public/social/private partnership
 Social venture capital

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Routledge.
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Further reading
 Fightback Britain: A report on the state of social enterprise survey, published by Social
Enterprise UK (2011)
 SEUK: The People's Business A report on the state of social enterprise survey, published
by Social Enterprise UK (2013)
 Muhammad Yunus, Bertrand Moingeon, Laurence Lehmann-Ortega, "Building Social
Business Models: Lessons from the Grameen Experience", April–June, vol 43, n° 2-3,
Long Range Planning, 2010, p. 308-325
 A Developed World: An online social publication featuring the stories of social
entrepreneurs from around the world.
 "Can the World Change? Perspectives on Social Entrepreneurship and Social Innovation"
 "Fostering Social Enterprise": An examination of the development of social enterprise in
the US and Europe
 How to Change the World: Social Entrepreneurs and the Power of New Ideas: David
Bornstein profiles nine leading social entrepreneurs.
  Social Enterprise: A Financial Perspective: An alternative view on social enterprise
which incorporates the agency theory and other analysis.
 The Meaning of Social Entrepreneurship This 1998 article by J. Gregory Dees, Professor
of the Practice of Social Entrepreneurship and Nonprofit Management at Duke
University's Fuqua School of Business, attempts to define what makes a social
entrepreneur.
 The Power of Unreasonable People: How Social Entrepreneurs Create Markets that
Change the World: John Elkington and Pamela Hartigan describe how innovations by
social entrepreneurs are addressing a variety of social, economic and environmental
problems.
 The Social Audit Toolkit This is the latest in a series of publications on social enterprise
and social audit by Freer Spreckley who pioneered social enterprise in the late 1970s.
 Gergen, Christopher, Gregg Vanourek, (2008), Life Entrepreneurs: Ordinary People
Creating Extraordinary Lives [4]
 Kevin Lynch, Julius Walls, (2009) Mission, Inc.: The Practitioners Guide to Social
Enterprise [5]
 Prahalad, CK (2009) Fortune at the Base of the Pyramid: Eradicating Poverty Through
Profits [6]
 Ted London and Stuart Hart (2010) Next Generation Business Strategies for the Base of
the Pyramid: New Approaches for Building Mutual Value [7]
 Urs P. Jäger (2010) Managing Social Businesses. Mission, Governance, Strategy and
Accountability. Palgrave McMillan.
 Social Enterprise Planning Toolkit 2011 Freer Spreckley provides a well-rounded
definition and history of social enterprise and introduces the processes required for
establishing social enterprises.
 Value Creation, Value Capture, and Value Devolution: Where Do Social Enterprises
Stand?: By Alejandro Agafonow, Administration & Society DOI:
10.1177/0095399714555756, 24 November 2014.
 ClearlySo: What is a social enterprise anyway? Definition of Social Enterprise according
to ClearlySo, in the UK
 [8] Financial Times article on growth in the UK due to social enterprise, Andrew Bounds
(2013)

List of social enterprises

From Wikipedia, the free encyclopedia

This is an annotated list of social enterprises sufficiently notable to have a Wikipedia article, in
alphabetical order. For quick navigation, click on one of the letters:

Contents :

Social enterprises:

A
 Aarong
 Acumen Fund
 Appropriate Infrastructure Development Group
 Aravind Eye Hospital
 Ashoka: Innovators for the Public

B
 Barefoot College
  Benetech
 Better The World
 Better World Books
 BioLite
 BRAC

C
 CAP Markets
 Casa Mesita
 Charity Checkout
 CharityVillage.com
 Change.org
 Chavez for charity
 Chemonics
 Cherie Amie
 Comic Relief

D
 Drishtee
 Deep Springs International, sponsor of Gadyen Dlo
 Defy Ventures

E
 Elephant Magazine
 Enercoop
 Envirofit
 Elephant Parade

F
 Fair Trade USA
 Five Talents

G
 Give Something Back Business Products
 GlobeIn
 Grassroots Business Fund
 Greyston Bakery
 Grameen Bank
 Grama Vidiyal

H
 Housing Works
 The Hub
 Husk Power Systems
 Happynarae

J
  Jaipur rugs

K
 Kiva (organization)

L
 Ladakhi Women's Travel Company
 Lifestraw

M
 Masarang Foundation
 Me to We
 Medic Mobile
 MicroConsignment
 Milaap

N
 Newman's Own
 Nuru International

O
 One Acre Fund
 OneWorld Health
 Orangi Pilot Project
 OFoundation

P
 Partners in Health
 Pratham
 Proximity Designs

R
 RepaNet
 Ruby Cup

S
 Schwab Foundation for Social Entrepreneurship
 SEKEM
 SIRUM
 Shristi
 SKS Microfinance
 Samasource

T
  The George Foundation
 TeachAIDS
 Teach for America
 Terracycle
 Toms Shoes
 Top Third Ventures
 Trew Era Cafe

W
 Wakawaka light

Y
 Yunus Social Business - Global Initiatives

Public/social/private partnership
Public/social/private partnerships are methods of co-operation between private and
government bodies.

Background
Models of cooperation between the market and the state: examples from Austria

The name “public social private partnership” (PSPP) is a development of Public Private
Partnership (PPP).

PPP is one expression of a strong trend towards (re)privatisation, which in some European
countries has arisen as a result of more difficult economic conditions in recent years and the
associated structural crisis in the public sector (see Eschenbach, Müller, Gabriel: 1993).

The growth in public-private partnerships as a way of fulfilling public tasks in partnership

between the state administration and private enterprises must be seen in this context.

In political discussions, lack of public funds is often put forward as a limit on state activities.
Instead of financing infrastructure projects alone, the government increasingly looks to
cooperations with private investors. Also, the EU policy on competitive tendering of public
works and services has forced changes towards a more market-oriented approach to delivering
tasks for which the state is responsible. Another relevant factor are the arguments in debates on
privatisation that state bodies are inefficient and that management concepts typical in the
commercial sector should be used to achieve more cost-effective provision of public services. All
these factors taken together result in a shift away from a role of the state as “producer” towards
one as “quality assurer” and a trend away from collective, tax-based financing of infrastructure
to financing models in which these are paid for by their users (see Budäus 2006).

The term PPP has gained currency for this increased cooperation of government with private
partners in the German-speaking countries since about the middle of the 1990s.

Public private partnership contrasted with conventional provision of public services PPPs
can be said to differ from other forms of provision of public services in the following 3 points:
  In PPPs, the ownership of the project is shared. The heart of a PPP is thus the sharing of
risks and profits.
 Compared to providing the service directly, in a PPP the state can concentrate on its core
competences. The state does not need to allocate experts of its own for the
implementation of the project and is thus less intimately involved.
 Additionally, PPPs exhibit a trend away from conventional, tax-based financing
approaches towards financing through contributions of individual users (e.g. tolls for
motorways).

From PPP to PSPP

In the social services sector, PPPs have been implemented mainly in the health services and
overseas development until now. As current discussions about PPPs in the social services sector
show (see e.g. the EQUAL development partnership “Public Social Private Partnership” [1];
workshop at the University of Cologne, Germany “PPP in social and educational services”,
March 2006; Conference: “Partnerships in Work Integration: Added Value for Enterprises?”,
Zürich, Switzerland, October 2005), this sector has special requirements and will need special
conditions and criteria for possible PPPs. The definition of goals is a particularly central and
sensitive issue in finding a suitable form and modalities of implementation of PPPs in this area.
Existing types of PPP will likely need to be modified to include extra mechanisms and criteria in
order to function adequately in social services.

In other words, public social private partnership (PSPP) is not merely an extension of the PPP
idea, but a precondition for ensuring that a PPP with a social goal:

 assures and implements the public aims, agendas and tasks in the sense of community
benefit, welfare, etc.;
 adheres to and sustains the agendas and aims of cooperations in the mid- and long-term;
 plans and suitably applies the necessary conditions and resources (e.g. financing) for
sustainable results.

For the state side of the partnership the redefinition from PPP to PSPP means that mid- to long-
term solutions are found for functions that the state needs to fulfil for reasons of the common
good or welfare provision. By addressing state functions in the form of partnerships, the state
partner gains options for action: firstly through a cooperative form of outsourcing (including
financing) and secondly by involving additional partners from private enterprise and social
enterprise in doing things which the state has responsibility for. Both of these aspects allow the
state to do its job in a more rounded, professional and sustainable way by bringing in additional
finance, expertise and practical resources.

For private enterprises, PSPP opens up possibilities for new kinds of business activity through
the cooperation with the state and social enterprise.

PSPPs offer social enterprises an opportunity to act in their ideal role of intermediaries between
the state and private sectors, helping to make sure that each partner’s contribution to the project
is in an area where they have special competence. This reduces the risks for all partners. The
social enterprise partners stand to gain from a PSPP in terms of planning, development and
quality due to the mid- and long-term nature of the projects.

Finally, for target groups of disadvantaged people, PSPPs can mean the assurance of services
that they need, and that the welfare state has led them to expect; and also, mid- and long-term
PSPPs have the chance to anticipate future needs and develop innovative solutions and services.

To summarize, application of a PPP model to fulfilling social aims for people in disadvantaged
situations naturally leads to expansion of the PPP to a PSPP. PSPP rather than PPP criteria
become applicable when public aims such as the common good and welfare are being pursued.
In this area, all the mid- and long-term indicators of success belonging to the agendas and goals
of the cooperation depend on the correct adherence to PSPP specifications.

PSPP: public social private partnership – description of the

model
Description

Observing the discussions among representatives of social enterprise on the issue of “public
social private partnership”, it becomes apparent that it is necessary to distinguish between a
broad and a narrow definition. The definition can be regarded as a basis on which a specification
is to be constructed. PSPP in the broad definition covers, like PPP, cooperation models between
the participants. In the case of public social private partnership these are not only agencies of the
state and private enterprises (as in PPP) but also social enterprises and social economic
organizations. The focus is on the partnership formed between the participating organizations
and enterprises with the aim of working out and implementing social aims. The two main
characteristics of a PSPP in the broad definition are therefore:

1. The social purpose: Carrying out activities for the protection, support and improvement
of opportunities for disadvantaged people or groups of disadvantaged people.
2. Implementation in partnership: The concept of partnership between firstly public,
secondly purely commercial and thirdly social economic organizations and enterprises.

The specification of the PSPP model makes sense because of the needs of disadvantaged people
and of the social economy and also those of the state and private enterprise mentioned above. In
order to ensure that disadvantaged people are not excluded completely or partially from social
participation, their needs must be supplied long-term and uninterruptedly. To do this, the relevant
social services must be provided. This can only be guaranteed through longer-term financing.
For that reason, the narrow definition of “public social private partnership” picks up on the
financing aspect of the functional description of PPP and attempts to see how this can be
harnessed for social interests. Also in this case the partnership aspect is important (see below),
and only through it can the long-term nature and opening up of new fields of action be achieved.

A PSP partnership is thus related to a specific field of activity and has the explicit purpose of
assuring long-term financing and generation of resources for products and services in order to
fulfil purposes of social protection, support and improvement of opportunities for disadvantaged
people or groups of disadvantaged people: PPP as a financing and resource-generating
instrument becomes PSPP in this case.

The following three main characteristics make up a public social private partnership:

1. The “S” of the name indicates exactly the goal and purpose of the financing tool: the
servicing of social protection and support interests and activities for the improvement of
opportunities for disadvantaged people or groups of disadvantaged people.

While PPPs as described in the literature as being used to execute public tasks in general, in
PSPP the scope is narrowed to specifically social topics.

1. A PSPP has the character of a financing or resource-generating instrument.

In order to act in the interest of social protection and support, i.e. to provide social services or
introduce social products, in many cases it is necessary to set up and operate infrastructure. PSPP
projects therefore aim at financing infrastructure that is used to realize social services and
products. In this respect PSPPs do the same thing as PPP projects, which are also usually set up
to finance infrastructure. To provide social services it may not always be necessary to set up
infrastructure on a large scale, but it is always necessary to carry out a phase of developing,
planning and organizing the prerequisites for providing the social services. PSPP as a financing
instrument can thus also be used to finance the development and preparation of social products
and services that do not require any large infrastructure investments. Different financing
instruments are used depending on whether infrastructure needs to be financed or not.

1. “Partnership” means that to operate the tool at least two partners are required that will
generate the finance and other resources needed to achieve the shared goal “s”.

The PSPP characteristic “partnershaft” is also similar to a PPP. Three characteristics of PPPs
identified by Budäus (2006:19) will be integrated at this point:

 Partnership principle in the sense that the aims and expectations of benefit of the
participating partner enterprises and organizations are compatible with each other.
 Partnership principle in the sense of creation of synergies.
 Identity of the partner enterprises and organizations remains intact.

Also in this point PSPP differs from the conventional methods of delivering state services. In
contrast to PPP projects, which can be formed with only two partners, “partnership” in the case
of PSPP ideally involves a minimum of three partners, since there are three essential but different
roles to be filled: The financing of the project, the project leadership and the demand for the
social services.

In a PSPP three functions must therefore be exercised: At least one of the partners ensures the
financing (financing level), at least one of the partners takes on the overall responsibility for the
project and thus leads the coordination of the project from planning through setting-up and
realization of the social product or service (project leadership) and at least one of the partners
ensures the flow of funds into the project by buying the product or service (so also contributing
to the financing). These three functions are – as described under roles and functions – ideally
taken on by three partner enterprises and/or organizations that have the relevant competences and
responsibilities. As a minimum, the synergies can also be created between two partner
enterprises or organizations, so long as the three functions are present. In this way, a PSPP
partnership is a partnership between two levels: the financing and the practical level.

Purposes

According to their historically conditioned self-understanding, contemporary European states

have highly diverse tasks. A centrally important role is the social interest in various protective
functions and activities. Besides the basic function of the state and community to stabilize or if
possible to improve socially precarious or unstable conditions, the state has the duty to protect
the weak and endangered at all levels of state activity, i.e. by law, in the justice system and in the
administration.

Typical areas in which the state intervenes to protect people in weaker positions are consumer
law, residential property rental and of course social law. The way the state(s) go about
implementing these measures has to be seen against the background of the whole legal
framework; the legal principles and practical methods involved are subject to continual
theoretical (e.g. in terms of sociology, political science or philosophy) and practical (e.g. in the
popular media or political interest groups) discussion. Connected to the issue of “protection” are
terms such as “common good”, “human dignity”, “equality”, “welfare”, “clientele politics”, etc.

If the duty of the Hobbesian “Leviathan” to guarantee and provide protection is primarily related
to individuals or subgroups of the state’s population, then the interests of social maintenance
directed towards the state will focus mainly on the assurance of whole-society pluralities and
minimum standards. The interest in social maintenance stands alongside the interest in protection
and complements it. For example, the laws that regulate the entitlement to unemployment money
belong to the “protection” sphere, whereas the laws on the activities of political parties belong to
the “maintenance” sphere; the overlapping of the two spheres of interests becomes evident when
various parties, according to their political programmes, (can) take influence on the laws that
govern the situation of unemployed people, by changing laws through the mechanisms provided
by law for creating legislation.

Such social “protection” and “maintenance” interest being addressed to the state place a duty
upon it to serve these interests through legislation and in the exercise of executive power; both in
the inner sphere of lawgiving, justice and administration and in the outer sphere of cooperation
with non-state actors in the form of “social partnerships”.

The legal phrase “Gesellschaftliche Schutz- und Erhaltungsinteressen", i.e. social protection and
maintenance interests, only partly defines the goals of a PSPP. This needs to be expanded for the
purpose of the present discussion to “activities to improve the living situation and opportunities
of people and groups of people in disadvantaged circumstances”. This expansion is more specific
because it refers to people. However, the question as to when people or groups of people are or
become socially disadvantaged remains open.

As a point of reference for PSPP the principles of action of a democratic state should be chosen.
The democratically legitimated state follows principles of the common good as a way of
“guaranteeing [its citizens] optimal overall opportunities for living and expression/development”
(Reinhold 2000:204). The state’s conception of what the common good is, is expressed in laws.
This makes constitutions and city statutes the most suitable indicators of the smallest-common -
denominator consensus as to what can be considered to be the common good in a democratically
organised society. Beyond this, at any particular point in time the current government is an
expression of the society’s current vision of the common good. If we follow the chain of the
“common good” orientation down from the national to the local level, we arrive at other
structures e.g. in Austria the provinces and the local communities/municipalities, each of which
has to some extent its own definition of the common good. If certain people or groups of people
do not have full access to the elements of what, as legitimated by the democratic legal system, is
regarded as an acceptable minimum level of income, welfare, general living conditions and
social participation, then we can say that they are socially disadvantaged.

The state has the task of preventing social disadvantage and therefore has a duty to intervene
wherever these basic needs cannot be filled by the market alone. The reactions of the so-called
civil society to disadvantageous circumstances may make disadvantage visible. This is most
obvious when non-governmental alternative organizations and projects are started by citizens in
order to relieve the disadvantages. These could be individual citizens, social economic
organizations, self-help groups, and social projects in general.

We emphasize at this point that this does not imply a normative or prescriptive definition of what
should be classified as social disadvantage. A descriptive approach, which takes account of the
overall social system and its mechanisms of legitimation, was chosen.

Also, on the descriptive level – based on this definition – diverse characteristics of people or
groups of people can be described, as a consequence of which these people may be
disadvantaged:

The results of empirical social research show that there are three main factors that have a
stronger and more predictable effect on social standing and opportunities, and therefore potential
disadvantage, than others: These factors are:

 Social class
 Gender
 Ethnicity and/or nationality

Besides these, many other factors can also be important. The most often mentioned are physical
and intellectual abilities, sexual orientation, age, religion and educational level (in strong
correlation with social class). The list of potential factors that could contribute to social
disadvantage can, however – since it depends on the dimension mentioned above, the society’s
consensus on what represents the common good – never be complete, because factors that can
cause disadvantage are always dependent on specific situations and issues.

The definition of aims is the heart of a PSPP. Because of this, all components of a PSPP (the
interactions between the participating partner enterprises and organizations, the roles and
functions in the partnership and the setting-up and practical implementation of the project) must
be compatible with the specific set of aims defined by the partnership and must serve to realize
these aims. On the other hand, the route to realization of a specific, agreed goal and the structures
that are set up to allow the project to be realized, should conform to the general definition of
aims described here. This means that the structures and agreements of the partnership and the
project process itself must be designed so that these also serve to improve the living situation of
disadvantaged people as defined above.

Roles and functions

In a PSPP three main roles are exercised:

1. Financing of the infrastructure for implementation of social products and services, i.e.
Financing of development of social products and services
2. Project Leadership i.e. research / analysis of needs, ideas, coordination from planning
through set-up and operation
3. Demand: Assurance of cash flow by agreeing to buy the products and services

All three roles can be done by different partners. But in the different sectors involved (state,
social economy, private enterprise) each has its own interests and areas of competence, so that
they will naturally have different interests and priorities as to the roles they wish to play in the
partnership.

Preconditions for a PSPP

Building on the previous remarks on the PPP concept and the related quality model PSPP, we
can posit as a precondition for the step from a PPP to a PSPP the willingness of all parties
involved to define / accept only solutions, aims and agendas that will have mid- to long-term
character. (By this we do not mean that the products of the partnership could only be generated
in the mid- to long-term; this is not the same thing). This applies both to the goals themselves
and also in the sense that conditions should be created that make it possible for the products of
the partnership to have a lasting effect. This condition, arises, in contrast to a PPP, from the fact
that the agendas of a PSPP are tasks and aims of the state (common good / welfare) that do not
obey the laws of supply and demand. These goals and contents lie instead in the delivery of an
agreed level of common good to civil society. Such fundamental social agreements are central
and necessary building blocks for a social peace based on security and justice, where citizens can
rely on pre-agreed levels of state functions and can set up their lives accordingly. This is a
precondition for preventing people from being disadvantaged or finding themselves in living
situations that tend towards them becoming disadvantaged. In this way, “mid-term” PSPPs can
be defined as those that have a similar lifetime to the electoral cycles of municipalities and states;
any that take place on a longer time base can be called long-term (quantitatively), and can be
seen as (qualitatively) supporting the long-term assurance of state supports promised in
constitutions and municipal statutes.

Order of events

The starting point of a PSPP is a recognition by a social enterprise of a social problem (e.g. an
organization working with disabled people realizes that many people with disabilities in rural
areas are faced with a problem of distance between their homes and workplaces). An idea is
formed about how this problem could be solved, and the social enterprise develops a concept –
drawing on their long experience and expertise in the area – for a social service, for which some
infrastructure needs to be set up (e.g. sheltered accommodation close to the workplace, in which
various needs, depending on gender, age or cultural background, can be catered for). In order to
be able to realize the project, the social enterprise approaches a partner enterprise that could
supply the necessary finance (e.g. a local bank) and brings in a state agency that has an interest in
the project being done (e.g. the local social service responsible for people with disabilities, or the
regional social department). This ensures the cash flow by buying the social service and makes
possible a more economical financing by the commercial partner. The social enterprise then
plans the execution of the project, sets up if necessary a legal vehicle for the project, sets up the
necessary infrastructure (builds the sheltered housing project) and realizes & runs the social
service (the support of the inhabitants). In this example, the order of events and some division of
roles is already evident. The phases of a PSPP can be summarized again as follows:

1. Needs analysis

In the needs analysis, factors that cause and/or reinforce disadvantage are researched and
analysed.

1. Idea
2. Development of social products and services
3. Setting-up of the financing partnership with state and commercial organizations
4. Planning of the practical implementation
5. Setting-up of the infrastructure or other preparations for realizing the products / services
6. Implementation: Operation of the infrastructure and provision of the social services /
supply of the social products

Financing

The classification of the models is based on PPP models, since forms of cooperation between
two partners can be taken as a starting point for forms involving three partners. The description
above thus includes the models to be found in PPP practice, with the exception of the company
management (Betriebsführung) and company transfer (Betriebsüberlassung) models, since in
these no positive effects are to be expected if a third partner were brought in, and these forms
exhibit the lowest efficiency gains of all PPPs.

Financing instruments as additional elements of PSPP:

 Factoring

The starting point of (true) factoring is a long-term contractual arrangement between the
municipality and a private person, on the basis of which the private person provides a public
service. Due to the assured flow of payments (payment according to time) this model could in
principle be considered for all PSPPs. The factoring consists in the further stage in which the
private operator / owner sells a part of the future income from the contract with the state at cash
value (minus a commission) to a factoring institute and uses the price to finance the project, so
that only a low level of owner’s equity is needed. (see Kirchhoff 1995). This is especially useful
for medium-sized enterprises, in order to compete with the strongly capitalized large
corporations.

 Municipality Guarantee

In addition to the factoring by the private partner, it is not uncommon to further optimise the
financing costs in PSPP by adding a guarantee given by the municipality / state authority to the
other forms of security provided for loans.

 Silent partnership
Silent partnerships involve a limited-term raising of capital by bringing in a silent partner, who
normally comes in simply for the dividend. (see Kirchhoff 1995).

 Public financing aids

In certain models for communal social economic purposes, public financing aids in the form of
reduced-interest loans or investment grants can be availed of in addition to private-sector capital
and equity. The EU, the federal republic and the provinces offer grants for research, planning and
implementation of communal social investments.

 Sponsoring

Sponsoring is essentially an exchange transaction (see Arnold, Maelicke 2003). The sponsor
pays the sponsored organization in the form of money, in kind, or services. In return the sponsor
acquires certain rights to advertise its involvement. It therefore uses the sponsored organization
as an element of its advertising strategy. Both sides ought to derive benefit from the exchange. A
further constitutive feature of sponsoring is the contractual definition of the quid pro quo. Both
parties must clearly understand their contractual obligations. A written contract is not mandatory,
but is much to be recommended.

 Social Bonds

Another possible financing method is the issuing of bonds. Investors can take out a bond with a
reduced interest rate and in this way make an indirect donation to PSPP projects. Compared with
typical bond schemes, whose interest levels are coupled to the credit rating of the company, and
have minimum volume limits of approximately € 50 million (or € 5 million in the case of the
new mid cap bonds), social bonds, with the waiver of a part of the interest by the investors, have
definite advantages for social enterprises. A successful example is the “ELAG SOCIAL bond“
(ELAG=Elisabeth Liegenschafts-Entwicklungs-Aktiengesellschaft, Elisabeth Real Estate
Development Stock Corporation). This stock company formed by the Caritas of the diocese of
Linz and the KOOP Lebensraum Beteiligungs-AG has used the bond issue to ensure compliance
with its investment rules, which specify low-risk investment, charitable-social purpose and
investment in properties that should yield dividends not less than the rate of inflation.

Sample List of Corporations and Investors active in the financing, ownership and development of
Public-Private Partnerships around the world.

 Balfour Beatty
 Cintra
 SNC Lavalin
 Carlyle Group
 Alinda Capital Partners
 National Standard Finance
 Meridiam Infrastructure/AECOM
 Siemens
 Barclays
 CH2M Hill
 Acciona

Description of various PSPP models

Service models

 Complex contracting-out

Contracting-out generally means hiving off organizational units as private entities and/or
purchase of services from private providers under the state contracting/tendering rules. This is
the state equivalent of the already well-established trend in commercial business of outsourcing
in order to concentrate on one’s core competence (see Müller, Prankebenberg 1997).

Special financing forms

 Leasing and fund leasing

The minimal specifications of PPP as regards communal leasing mean that not all leasing
activities of municipalities qualify for the title of PPPs. Especially, much product leasing, such as
simple leasing of equipment without services, does not fall under the definition of PPP. The
leasing variants that qualify as a form of PPP are those in which an investor chosen by
competitive bidding supplies more than the mere provision of financing, e.g. by providing
complementary services and taking on additional practical tasks. The private partner in such
cases is responsible for major pieces of implementation of a project. (see Höftmann 2001).

 Concession model

Concession models are similar to leasing models conceptually and in terms of the applicable
accounting rules, but all the restrictions of leasing, particularly problems of tax and property law,
are avoided. At the centre of the model is the waiver of preferential tax treatment both on the part
of the project leader and the finance provider, so that in the concession model no savings can be
made on the basis of taxation technicalities. The less stringent conditions for setting up such a
vehicle thus have their price and are reflected in higher annual rates of rent compared to leasing
(see Scheele 1993).

Provider model

 Provider Model

The basic idea of a provider model is that the municipality hands over the fulfilment of its
statutory tasks to a private provider in such a way that the complete task is temporarily
outsourced. The municipality private capital and expertise is brought into a project during the
setting-up and operational phases, without the private partner acquiring shares in the operating
company – effectively a form of limited-term privatisation (see Rudolph, Büscher 1995).

 BOT Model (Build-Operate-Transfer)

Since the operator models with a lifetime of 20–30 years are long-term arrangements and a
premature transfer back to the municipality is not possible, BOT (build, operate, transfer) models
with a lifetime of three to ten years have been developed as a shorter-term variant. (see Kirchoff
1997). These are basically transitional solutions with private-sector planning and setting-up as
well as temporary private-sector operation in the relatively risk-intensive early years, so that
BOT models could be called short-term operator models (see Höftmann 2001).

 Cooperation model

The basic idea of a cooperation model is the setting-up of a private legal entity, in which both the
municipality and at least one private enterprise hold shares either directly or indirectly (through
an intermediate holding company). This type of mixed municipal/private, or semi-state
ownership has been in common use for about 100 years, especially in utilities with a local
monopoly on provision (see Hering, Matschke 1997).

Limits and risks

PSPPs offer not only opportunities but also bring risks, especially for the state partner (and their
budget). Entry into a PSPP on the part of the state is based on the expectation that additional
resources can be generated or mobilized in order to increase the scope of public social services.
Due to the responsibilities of the state, the state partner must carefully evaluate what is made the
subject of a PSPP – with whom, for how long and under what conditions. Long-term effects must
be anticipated. The evaluation process needs comprehensive, long-term and operational criteria,
quality assurance, a political decision and a critical analysis of the PSPP as to its suitability as an
instrument for the intended purpose. For public institutions, a PSPP can increase the room for
manoeuvre, but this process must not take place at the expense of erosion or abdication of
responsibility by the state authority. The state must be careful not to surrender control of
activities over which it is democratically mandated to exercise adequate control. This issue is the
subject of extensive discussions as it applies to PPPs: the growing influence of private actors and
the correspondingly retreating influence of the state (see e.g. B. Pölzl/Preisch 2003: 41). This
makes it all the more important to emphasize that PSPP models should only be supported by the
state in cases where they serve the long-term social needs of disadvantaged members of society.
This responsibility belongs to the state and the state only.

To reap the full benefits of a PSPP for all involved parties, it must be ensured that the clear
definition of social aims and partnership process on the one hand is not outweighed by the
impetus to generate and mobilize resources and finance on the other hand. It is essential for the
implementation of a PSPP to preserve the partnership throughout. This means that the autonomy
of the social economic partners must be protected and they must not be brought into a position of
such dependency by entering a PSPP that their autonomy is sacrificed or weakened.

Since public goals and agendas can be matched to mid- and long-term solutions by using PSPPs,
a qualitative approach can be used.

Some concern about the quality of the services that are provided in the course of PPPs exists
both in public opinion and among some representatives of the state sector. The specification of a
PSPP in terms of the social aims (in contrast to PPPs) is a positive quality factor. Due to the
orientation of the model according to these aims and the resulting processes and conditions
(needs analysis and product development by experts working in the social sector, partnership
principles, etc.), the model places great emphasis on the quality of implementation of the PSPP.
Nonetheless, it must be said that the quality of the social products and services produced will
always be the responsibility of

 the people and organizations who have the decision-making competence in development
and implementation of the social products and services;
 the internal project controlling;
 and the enterprises and organizations that control all the relevant aspects of the
environment in which the project takes place (financing, regulation of activities, etc.)
through the partnership negotiation process; this requires responsible and serious
behaviour not only on the part of the private and social-economic actors but also crucially
on the part of the state representatives.

Prospects: opportunities and potential

If the conditions for when a PSPP should be used, and the quality criteria, are respected, a PSPP
can be of great benefit for the social target group it aims to help as well as for the participating
organizations and enterprises.

In a PSPP, needs of disadvantaged people or groups of people that have been previously
neglected can be met, or the spectrum of services available to them can be expanded. Private
enterprises are usually strongly oriented towards meeting customer (consumer) demands. In a
PSPP this also applies to the social enterprises, which in contrast to non-social economic
enterprises and organizations exhibit a stronger responsiveness towards the needs of their clients.

The solutions developed in a PSPP can also be offered on a mid- to long-term basis and thus
contribute to a sustainable establishment of new activities and structural change.
For private or social economic enterprises / organizations, the participation in a PSPP offers an
expansion of their fields of business and the opportunity to become active in already established
and newly developed fields as competent partners. Social economic organizations or enterprises
gain an opportunity to make necessary longer-term investments which would not be possible in a
conventional working relationship with the state (i.e. by simple buying of services by the state).

On the other hand, the state can make use of the specialist expertise of the social economic and
private companies. This should allow all the participants to concentrate on their core
competences. The state can gain an opportunity to do the tasks it is responsible for efficiently,
cost-effectively and without delays due to budgetary bottlenecks.

In addition to the special benefits for disadvantaged people, the positive effects of “classical”
PPPs apply (Pölzl/Preisch 2003):

 Exploitation of synergy effects through mutual sharing of information and capabilities

 Opening up of new ways of financing investments
 Goal-oriented division of tasks and functions results in increased efficiency
 The previous two points, taken together, result in time savings
 Smaller risks for individual participants through sharing of risks

The opportunities offered by PSPPs can be exploited best when the participating organizations
can avail of the necessary know-how in the form of accompanying consulting and support by
appropriate professionals. In Austria, even PPP is still a relatively new phenomenon – in contrast
to Germany, neither a national “PPP Facilitation Act” nor PPP Task Forces to ensure
professional setting up of PPPs. The expansion of the PPP concept by adding the qualitative
aspect of the explicit social aims is even more dependent on competent support to implement the
relatively complex projects with good quality and successfully. Not only purely
private/commercial approaches on the one hand need and public administration principles, rules
and procedures on the other hand need to be dealt with, but also the competences needed for the
social service elements need to be fitted together suitably.

From the point of view of social policy, PSPPs, if the procedure described is followed and needs
analysis is done by social economic organizations and enterprises working in the field, can open
up new fields of activity, not only for the social and private enterprises but also for the state.
PSPPs are a chance for development of social services not as a purely top-down process (in
which the state formulates the needs and contracts the corresponding works) but that needs can
be recognized and formulated by agents and organizations of civil society and these can be met
in cooperation with the state. To make use of this chance, the state must be flexible and open to
innovation and the political and legal environment must be compatible with this bottom-up
approach. Many established social phenomena, e.g. the Red Cross movement or the women’s
emancipation movement, began in the private or civil-society spheres and were later picked up
and supported by the state; and through state support, their development was importantly
influenced.

See also
 Global public-private partnership

Literature
 Brooks, Stephen: "The Mixed Ownership Corporation as an Instrument of Public Policy".
In: Comparative Politics, Vol. 19 (1987), No. 2, S. 173-191
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Grundlagen und praktische Ausprägungen von Public Private Partnership", Schriftenreie
der Gesellschaft für öffentliche Wirtschaft, Heft 54, Baden-Baden 2006.
 European Commission: Green Paper on Public Private Partnership, Brussels 2004; [2]
  Kukovetz, Brigitte; Leonhardt, Manfred; Loidl-Keil, Rainer: Public Social Private
Partnership zur Realisierung sozialer Dienstleistungen, In: kontraste, 02/07.
 Mitchell-Weaver, Clyde; Manning, Brenda: Public-Private Partnerships in Third World
Development: A Conceptual Overview. In: Studies in Comparative International
Development, Vol. 26 (1991–92), No. 4, S. 45-67.
 Modigliani, Franko; Miller Merton: "The Cost of Capital, Corporation Finance and the
Theory of Investment". In: American Economic Review (June 1958).
 Parkin, Frank: "Strategies of social closure in class formation", In Parkin, Frank (Hg.):
The social analysis of class structure, London 1978, S.1-18.

Social venture capital

From Wikipedia, the free encyclopedia

Social venture capital is a form of investment funding that is usually funded by a group of
social venture capitalists[1] or an impact investor[2] to provide seed-funding investment, usually in
a for-profit social enterprise, in return to achieve a reasonable gain in financial return while
delivering social impact to the world.[3] It deviates from the traditional venture capital model,
which focuses on simple risk and reward. However, there are various organizations, such as
venture philanthropy companies and nonprofit organizations, that deploy a simple venture capital
strategy model to fund nonprofit events, social enterprises, or activities that deliver a high social
impact or a strong social causes for their existence. There are also regionally focused
organizations (both for-profit and nonprofit) that target a specific region of the world, to help
build and support the local community in a social cause.[4]

Investment Criteria
Apart from the traditional venture capitalists focusing on just the financial profit, social venture
capitalists believe in achieving financial success through social impact to the world.[5] Beside,
those Venture philanthropy funds such as Venture Philanthropy Partners initiate investment in a
high-performing nonprofit organization,[6] the following criteria that social venture capitalists
generally assess on social venture companies for funding:[7]

 Strong Social Impact

 Financial capacity
 Scalability
 Best-Practice
 Criteria of exclusion

Types of Funding & Growth Support

For-Profit Funding & Growth Support

Social Venture Accelerators

Social Venture Accelerators is a form of Seed accelerators that fixed termed, cohort-based
entrepreneurial development programs designed to transform validated idea of the social startups
companies to seed funding. Hence, increase the outcomes for sustainability and growth of startup
companies that have potential to scale(usually tech-based companies). Such programs allows
startup companies to gain exclusive visibility to early stage investors and other resources such as
providing initial investment, technical facilities/development, to office accommodation and
under the guidance of experienced mentors, all of which in return of a minor share in the
invested startups companies,[8] or under grant funding to support participating companies.[9] Seed
Accelerator companies will assess based on startup companies' business model and ensure
market/customer sector validated, to develop a commercial validity of the social startup
companies to investment ready and prepare to scale their impact.[10]

Social Incubators

Business Incubator usually provides business with facilities and funding with the help of external
management team to manage an idea that was developed internally. Given the intense efforts
involved, the incubator period usually lasted longer the Seed Accelerator, and takes up a much
larger amount of equity than Seed Accelerator as well.[11]

Social Incubator Fund

As part of effort of UK Government to support social ventures from a grassroots level to deliver
positive social and environment impact, a £10 million Social Incubator Fund, which was
launched on 24 July by Minister for Civil Society, Nick Hurd. The fund run by Big Lottery Fund
will increase the amount of money available at the early stages of projects where the financial
return is too low [12] while Big Society Capital invests social investment intermediaries that
carries higher financial risk.[13] However, such funds doesn't indicate free funding, as incubators
such as Social Incubators North, a social business incubator[14] provided a repayment interest free
loan of £25k to successful applicant. On the other hand, newly launched Non-For-Profit
incubator Halcyon Incubator targeting on the social impact that the social ventures deliver, does
not require equity in the fellow’s venture, but only a commitment to growing ideas to achieve
social change.[15][16]

Non-Profit Oriented Funding and Support

Venture Philanthropy deploy simple venture capital strategy model to fund non-profits
events/social enterprises/activities that deliver high social impact or a strong social causes for its
existence. Organization such as Amanter Social Venture providing such services focusing on
social principles as main assessment criteria and running programs to help existing social
organization/enterprise through capacity building and executive training. Hence, to deliver a
multiplier effect to next beneficiary organizations.[17] The classic example of Benetech, a non-
profit organization,show that the proceeds gain was being used to create a handful of new social
enterprise patterned.[18]

Regionally-focused organizations such as Venture Philanthropy Partners (VPP), the European

Venture Philanthropy Association (EVPA) and the Asian Venture Philanthropy Network
(AVPN), are associations that covers venture philanthropy funds targeting certain regions such
as the National Capital Region in the US, Europe and Asia that finance charities, revenue
generating social enterprises and socially driven business.[19]

Forms of Social Ventures Funding

Social Ventures unusually faces ranges of funding options not limited to the common ones such
as debt capital with participation rights, mezzanine financing (quasi equity) or license fees.[20]

Debt Capital + Mezzanine Capital

Common forms of funding such as Debt Capital + Capital. Such funds supports the social
ventures with invested capital that must be repaid either in short or long period of time, in
additional with an agreement amount of interests. These raised capitals are usually secured with
the assets of the company, by the lenders from banks and venture capital companies.[21] In other
words, if the company failed to repay their debt capitals, would results their ownership and
equity interest to be liquidized. Noted, that mezzanine financing usually blinded with a high
returns of 20% to 30%.[22]
Equity investments

Social venture capital companies will usually make equity investment and co-investments, when
an anticipated exit strategy of the company is foreseeable.[23] Such investment are made through
preferred shares which commonly entitled the lenders a fixed dividend that takes priority over
that of ordinary share dividends, usually without voting rights.[24]

Investment Approach
To effectively maximize the fund’s capital to deliver social impact, Social Venture Companies
attracted to successful financing social enterprises that shows growth and financial sustainability,
usually when anticipated exit strategy of the company is foreseeable,[25] especially for young
venture capital firms to minimize their exit from the invested companies, to maximize the
opportunity of future fund raising, especially, when prospect of exits beyond the 7 year periods
decreases for companies going for Initial public offering (IPO) and merger and acquisition.[26]

Investor Tax Relief Scheme

Venture Capital Scheme

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme is a tax advantaged scheme designed to help companies that
at their early growth stage to raise equity finance from investors. Through this scheme,
qualifying investors are able to claim income tax relief of 30%, plus exemption from capital
gains tax when enterprise investment scheme shares are disposed of.[27]

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme is a tax advantaged scheme designed to encourage
investment from investor in higher-risk small companies that are in their early growth stage to
raise equity finance. With contrast the existing Enterprise Investment Scheme (EIS), the SEIS
allows qualifying investors can claim income tax relief of 50%, plus capital gains tax relief.[28]

Venture Capital Trust (VCT)

The Venture Capital Trust Scheme is a tax advantaged scheme designed for a HMRC-Approved
VCT company to chip in for shares in, lends money to small unquoted companies. Under
scheme, the VCT companies itself exempt from CT on chargeable gains and their investors can
claim income tax relief on subscriptions of up to £200,000.[29]

Social investment Tax Relief

Social investment tax relief scheme is designed to encourage more social investments from
investors to support social enterprise by introducing a range of tax relief schemes such as Income
Tax relief, capital gains hold-over relief and capital gains disposal relief. SITR covers
investments made on or after 6 April 2014.[30] It means that debt investments into asset-locked
bodies (like community interest companies) can now be made on the same tax relief terms as the
Enterprise Investment Scheme for equity investments.[31]

Income Tax Relief

Investors(need not to be UK resident) who subscribed to qualifying shares or make qualifying

debt investments in the social enterprise that meet SITR requirement, are able to calm at 30% of
the amount they invested, to a maximum investment of £1,000,000 up to 5 years after the 31
January following the tax year in which the investment was made.[32]

Capital Gains Hold-Over Relief

Investors are able to defer the payment of tax on a capital gain of any kind of disposed asset,
when the capital gains are reinvested in the share or debt investment which qualify for SITR
Income Tax Relief. However, it must arise in the period from 6 April 2014 to 5 April 2019. The
SITR qualifying investment must be made in the period one year before or three years after the
gain arose.[33]

Capital Gains Disposal Relief

Any gain on the investment that is disposed after it has been held for at least three years, are free
from Capital Gain Tax, in additional to the Income Tax Relief coverage on the cost of the
investment. .[34]

Alternatives Funding

Business Angels/Angel Finance

Business angels are usually a group/single individual investors with a high-net-worth pool of
investments looking for opportunities to invest in an enterprise, to achieve a reasonable amount
on return of investment. As business angel funding involves investors injecting funds into a
startup/private company in return for a share in its ownership, businesses that operate as sole
traders or partnerships are usually not eligible for such financing.[35]

Crowdsourcing

Crowdsourcing is a practice of funding a project or venture by raising monetary contributions

from a large number of people, typically via the internet.For-profit fundraising companies using
strategies such to charge a premium on "keep what you raise” model or a minor charges on an
"all-or-nothing funding approach" [36] However, particularly for Social Crowdsourcing, non-
profit organization such as razoo to help social enterprise or non-profit, student organization to
raise fund for event or charitable causes.[37]

A List of Social Venture Capital Firms

 Renewal2

Renewal is an investment funds that primarily focus in the region of British Columbia. They
have built up a strong base in the region that enable them to leverage from their resources and
extend their influences to carry their mission to foster social change[38]

 Acumen Fund

Acumen Fund is non-profit that raises charitable donations to invest in companies, leaders, and
ideas in one of their investment sectors of Agriculture, Education, Energy, Health, Housing, or
Water, that are changing the way the world tackles poverty.[39]

 AgDevCo

AgDevCo is a project developer in agribusiness; incorporated as non-for-profit distribution,

limited company in the UK. They invest in patient capital into early stage agribusiness in Africa
and connect them to market.[40]
  Unitus Seed Fund

Unitus Seed Fund is a seed-stage investment fund based in Bangalore and Seattle. They support
the startups with funds, connections to external opportunities, mentoring and poised them in
securing future growth capital.[41]

 Grassroots Business Fund

Grassroots Business Fund is an investment company that use private investment funds to support
non-profit organization in the low income communities.[42]

 Triodos Bank

Triodos Bank is a world-leading sustainable bank that fund that promote sustainable
development to positive social, environmental and cultural change through their innovative
financial products and high quality service.[43]

 Aavishkaar

Aavishkaar aims to create economic development by supporting entrepreneurial spirit at the base
of the economic spectrum, that often overlooked by financiers due to their small economic of
scale and high level of risk incurred.[44]

 Omidyar Network

Omidyar Network is an investment funds that believe that, with given opportunity to the capable
people, they create positive return to the world. Omidyar focused on 5 keys areas for their
investment: Consumer Internet and Mobile, Education, Financial Inclusion, Government
Transparency, and Property Rights.[45]

 Shell Foundation

Shell Foundation is an independent charity established by the Shell Group in 2000. They helps to
tackle some of the social and environmental issue that related to the energy sector through
application of the business foundation. Leverage on the existing skills and network of Shell
Group to deliver greater development impact.[46]

 City Light Capital

City Light Capital is a venture capital fund specialising in early stage startups working in the
education, environmental and security sectors who are dedicated to making an impact as well as
a profit. [47]

See also
 Venture capital
 Socially responsible investing
 Microfinance
 Angel capital
 Corporate venture capital

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Micro-enterprise
In general, a microenterprise is considered a small business employing 10 people or less, and
have a capital asset of less than PhP 3,000,000. Internationally, most microenterprises are family
businesses employing one or two persons. These microentrepreneurs operate microenterprises by
choice. Most microenterprise owners are primarily interested in earning a living to support
themselves and their families. They only grow the business when something in their lives
changes and they need to generate a larger income. According to information found on the
Census.gov website,[1] microenterprises make up 95% of the 28 million US companies tracked
by the census. Microenterprise is a common aspect in business communities everywhere.

The terms microenterprise and microbusiness have the same meaning, though traditionally when
referring to a small business financed by microcredit the term microenterprise is used. Similarly,
when referring to a small, usually legal business that is not financed by microcredit, the term
microbusiness is used.

History of the concept

The concept of microenterprise and microfinance was pioneered in 1976 by Nobel Prize
recipient Muhammad Yunus, founder of the Grameen Bank (Bank of the Poor), in Bangladesh.
The bank was established for the purpose of making small loans to the poor − predominantly
women – to help them obtain economic self-sufficiency. The fundamental principle behind the
Grameen Bank is that credit is a human right. This strategy was highly effective as the bank grew
exponentially; from fewer than 15,000 borrowers in 1980, Grameen bank had 2.34 million
members by 1998, 7.67 million at the end of 2008, 97% of whom are women, and 9.4 million
today. [2]

Global definitions
The term microenterprise refers to different entities and sectors depending on the country. In
Australia, it refers to a business with a single owner-operator, having up to 20 employees. The
European Union EU defines "micro-enterprises" as those that meet two of the following three
criteria and do not fail to do so for at least 10 years:

 fewer than 10 employees

 balance sheet total below EUR 2 million
 turnover below EUR 2 million .[3]

In the United States, a different model is used, but the stated goals and core values are similar.
Here, a microenterprise is defined as a business with five or fewer employees. Many of these
businesses have no employees other than the self-employed owners. Additionally, such
microenterprises generally need less than $35,000 in loan capital and do not have access to the
conventional commercial banking sector. The basis of microenterprise in the U.S. is
entrepreneurship, recognizing a fundamental right of people to apply their individual talents,
creativity and hard work to better their lives.

Microenterprise programs, therefore, are built around the philosophy that the unique ideas and
skills of entrepreneurs and would-be entrepreneurs should be provided business assistance and
small amounts of credit to support the development or start-up of a small business, primarily
through the U.S. Small Business Administration. Most organizations in the field also focus their
services on those microentrepreneurs who, as defined by federal government standards, are low-
to-moderate income. By definition, most of these entrepreneurs are minorities, recent
immigrants, women, disabled or for other reasons have special challenges that reduce their
ability to access traditional credit and other services.

Contributions to the larger economy

Microenterprises are said to add value to a country's economy by creating jobs, enhancing
income, strengthening purchasing power, lowering costs and adding business convenience.[4]

Financing
Because microenterprises typically have little to no access to the commercial banking sector,
they often rely on "micro-loans" or microcredit in order to be financed. Microfinance institutions
often finance these small loans, particularly in the Third World. Those who startup
microenterprises are usually referred to as entrepreneurs. Micro-loans are a way for
organizations and entrepreneurs to make small loans to those in poverty often in third world
countries. The term "micro-loans" is more commonly referred to as Microcredit.

Government programs
Government support for microenterprises varies from country to country. Plan for Achieving
Self Support is a program offered by the United States Social Security Administration (or SSA)
to encourage persons that are Supplemental Security Income (or SSI) eligible who are disabled to
set aside moneys for various reasons: training, schooling and funding microenterprise as a Work
Goal.

The NEIS (New Enterprise Initiative Scheme) is a government program in Australia, which
assists unemployed people to start their own businesses. Although it is not specifically for micro-
businesses, many if not most businesses started in this program are micro-businesses (in the
senses of having limited capital, and only one person involved in the business).

Recent development in the United States

The microenterprise field has a twenty-year history in the United States. While the term
“microenterprise” was in common use internationally by the late 1970s, it came into domestic
use within the United States about a decade later. Traditionally, the business sector had been
categorized into three groups: large, medium, and small. The U.S. Small Business
Administration (SBA) defines a small business as having up to 500 employees. In 1991, the SBA
recognized microenterprise as a separate or distinct category of business.

Microloans may be used for general business expenses [1] such as, working capital and tangible
assets, such as inventory, furniture, and equipment. They cannot be used to pay the
microbusiness owner, to purchase real-estate, pay existing debt, or for non-qualifying not-for-
profit entities.

During the 1990s, the microenterprise field grew rapidly in the United States. Starting with a
small number of non-profit organizations testing developing country models, the field now has
service providers in every state, a national trade association (AEO), a growing number of state-
level associations and financing intermediaries, and several research and policy organizations.
The Aspen Institute and FIELD (Microenterprise Fund for Innovation, Effectiveness, Learning
and Dissemination) has collected data on the organizations in the field since 1992. The first
directory, in 1992, listed 108 organizations that identified themselves as working in the field. By
2010 this number had grown to over 800 organizations that provide direct services to
entrepreneurs—either microfinancing or business development services.[5]

Community Development Financial Institutions (CDFI's), particularly Community Development

Loan Funds frequently offer loan capital for microenterprises in the United States.

Anthony Hilb, author of 'Make Money with a Microbusiness' and founder of

microbusinessowners.com states, "Microbusinesses have existed since people first exchanged
goods and services in their communities. Today, microbusinesses can have a much larger impact;
products and services can be exchanged at previously unimagined volumes, distances, and
speeds. Credit here is due to advancements in technology. With the internet, apps, and other
technologies available (often for free), microbusinesses will continue to explode in popularity."

In developing countries
A young Syrian refugee holds a basket that she decorated for sale. Making and selling small
crafts or clothes is a common form of micro-business for women.

In developing countries, microenterprises constitute the vast majority of the small business
sector—a result of the relative lack of formal sector jobs available for the poor. Microenterprises
in developing countries, then, tend to be the most frequent form/size of business. As explained
by Aneel Karnani:

Most microcredit clients are not microentrepreneurs by choice. They would gladly take a factory
job at reasonable wages if it were available. We should not romanticize the idea of the "poor as
entrepreneurs." The International Labour Organization (ILO) uses a more appropriate term for
these people: "own-account workers."[6]

Paper to Pearls is another example of a micro-enterprise program, which is based in the United
States, but works with women in northern Uganda.

The International Fund for Agricultural Development (IFAD) Vietnam country programme
supports operations in 11 poor provinces. Between 2002 and 2010 around 1,000 saving and
credit groups (SCGs) were formed, with over 17,000 members; these SCGs increased their
access to microcredit for taking up small-scale farm activities.[7]

In Poland, in 2012, there were 1.7 million micro-enterprises, employing 3.5 million persons.[8]

Women in the Dominican Republic

In the Dominican Republic, a nationwide survey conducted in 1992 revealed that 330,000 micro
and small enterprises created employment for 26 percent of the economically active
population.[9] Furthermore, a significant portion of this is represented by women (38 percent).[10]

It is argued that the households of women are targeted more directly by microenterprise support
services because women tend to devote more of their income to their households, than do
men.[11] Therefore, it is recommended that microenterprise training programs be less gender-
neutral and should be diversified to address the central challenges of women's businesses.[12]

References
 1.

 Census.gov
  http://www.grameenfoundation.org/our-impact/numbers
  Official Journal of the EU, Recommendation by the European Commission 2003/361/EC
dating from 060503, Annex Article 2. http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:124:0036:0041:EN:PDF
  Munoz,J.M.2010.Contemporary Microenterprise:Concepts and Cases. Cheltenham: Edward
Elgar Publishing. http://www.e-elgar.com/Bookentry_Main.lasso?id=13820
  "Welcome to MicroTracker". microTracker. Retrieved 10 January 2013.
  "Microfinance Misses Its Mark," Stanford Social Innovation Review (summer 2007).
  RIDP, PCR and Validation, 2010.
  D. Walczak, G. Voss, New Possibilities of Supporting Polish SMEs within the Jeremie
Initiative Managed by BGK, Mediterranean Journal of Social Sciences, Vol 4, No 9, p. 760-761.
  Cabal,Miguel. 1992. Microempresasy pequenas empresase n la Repdblica Dominicana:
Resultadados de una encuesta nacional. Santo Domingo: Fondomicro.
  Cabal,Miguel. 1992. Microempresasy pequenas empresase n la Repdblica Dominicana:
Resultadados de una encuesta nacional. Santo Domingo: Fondomicro.
  Grasmuck, Sherri, and Rosario Espinal. 2000. Market Success or Female Autonomy?
Income, Ideology, and Empowerment among Microentrepreneurs in the Dominican Republic.
Gender and Society 14 (2):231-255.

12.  Grasmuck, Sherri, and Rosario Espinal. 2000. Market Success or Female Autonomy?
Income, Ideology, and Empowerment among Microentrepreneurs in the Dominican
Republic. Gender and Society, 14(2):231-255.

External links
 Grameen Foundation
 PASS Plan.org
 ssa.gov
 entrepreneur.com
 score.org
 Small Business Administration.gov
 Association for Enterprise Opportunity (AEO)
 Micro-enterprise Acceleration Program
 Five Talents Microenterprise Development Library
 Shared Lives Plus and micro-enterprise
 Community Catalysts CIC
 Fiver hive Official Website
 USAID Microenterprise Results Reporting (MRR) Portal