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9 February 2004updated 24 Sep 2015 12:01pm

Social enterprise – Hearts before pockets

Big business is starting to realise that if it is to adapt to a new world, it needs the help of soci

By David Puttnam

I’ve come to believe that a quiet, almost imperceptible change is under way among global corporate and political leaders. It was evident in the unlikely setting of the annual meeting of the World Economic Forum in Davos, Switzerland. There, leaders listened to the ambitions of the Schwab Foundation for Social Entrepreneurship, a tiny but increasingly influential non-profit-making body based in Geneva.

Broadly speaking, social entrepreneurs are what you get when you cross Richard Branson with Mother Teresa. They do their most effective work at the fringe of the market place, where both the public sector and the market itself have failed to deliver important goods and services, particularly to those who can pay little. They realise that “development” is too complex to be left to business, the public sector or philanthropy alone. The organisations they create defy the boundaries that traditionally separate welfare and business. They may or may not operate for profit, but their bottom line is social transformation, enabling all to take part in building sustainable livelihoods and just societies.

The world’s best-known social entrepreneur is probably Muhammad Yunus, “the father of microcredit”. Going against all prevailing opinion in the formal banking sector, Yunus created the Grameen Bank, which extended tiny loans to poor people who had previously been seen as uncreditworthy. Beginning in Bangla-desh, his home country, Yunus proved that the poor are perfectly creditworthy; it’s just that there are not enough profits for banks in making small loans to poor people. Today, microfinance is a billion-dollar industry that has served millions, at rates of repayment that would make any conventional bank proud.

Another example is Rory Stear’s Freeplay Group, which sells wind-up technology (radios, torches and water purifiers) to outdoor enthusiasts. High-volume sales to affluent markets have allowed Freeplay to offer its products at a reduced cost for humanitarian efforts: more than 150,000 battery-free radios have been distributed in sub-Saharan Africa. The increased access to information in isolated and impoverished communities has helped health, education and income-generation programmes and significantly improved the quality of life.

Then there is the Novica enterprise started by Roberto Milk and Armenia Nercessian de Oliveira. It acts both as a customer purchasing agent and a sales department for developing world artists and artisan groups. By cutting out the middlemen, it enables artisans to earn up to 50 per cent more for their products and customers to make savings of as much as 100 per cent.

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Social entrepreneurs face many constraints, including gender. Suraiya Haque, founder of Phulki in Bangladesh, went against the wishes of her husband and sons to open up, initially in her garage, a daycare centre for the children of garment factory owners. Now Phulki is established in textile factories right across the country. Gisele Yitamben founded Asafe in her native Cameroon in the belief that African women could become successful entrepreneurs if only they could get training and development support, alternative financing and access to e-commerce. Today Asafe supports thousands of female entrepreneurs in Cameroon, Guinea, Benin, Chad and the Democratic Republic of Congo.

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Yitamben found a familiar problem. There are hundreds of foundations around the world that support start-ups, many of them needlessly reinventing the wheel. But there are all too few sources of significant capital for established social entrepreneurs who could replicate and expand their success.

This is where the Schwab Foundation comes in. Acceptance into this network of outstanding practitioners furthers the legitimacy of the enterprise in their home countries, where they need it most. But the foundation also connects social entrepreneurs to an entirely different network of high-ranking individuals in the corporate and public sectors, giving their work more exposure and the possibility of support for expansion.

Why should big business be interested? Increasingly, corporate leaders acknowledge that the successful company of the future will be one that has created a market niche among previously untapped groups of customers. But they also realise that they have to offer products and services which are not only attractive in themselves but also appeal, through their social value, to people’s hearts and minds.

Global companies command vast managerial and technological resources, they can access a global knowledge base, and they have the clout to influence political leaders in emerging markets. But they lack credibility and local knowledge. These are areas where social entrepreneurs have the advantage. They command credibility among the local people they work with precisely because they are not solely focused on the bottom line and have demonstrated their commitment to transforming the conditions of the economically excluded. Everyone working within the Schwab network has spent decades designing, implementing and refining innovative approaches to complex social problems. They work through trial and error. They know the signals to watch for, the pitfalls to avoid.

Multinationals that are ahead of the curve realise that social entrepreneurs are their indispensable allies in creating a different economic model – an economics of the heart as much as of the pocket.

David Puttnam is a board member of the Schwab Foundation