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The ‘what’ and the ‘why’ of social enterprise

The ‘what’ and the ‘why’ of social enterprise

Pakistan is in dire need of channeling talent towards social enterprise development.

Unfortunately, few people understand what the sector entails. This is not surprising since we do not even recognize the space between a ‘for-profit’ and a ‘not-for-profit’ organization.

It is in this space that a social enterprise exists; where societal gain provides a healthy and necessary counterweight to financial gain and where businesses spawn to accrue and prioritize public goodwill over wealth.

To illustrate further, a social enterprise will meet the need for potable water, or energy, through a sustainable revenue generation model that does not fixate on profit maximization. It is a concept that was born many years ago but has only managed to gain currency in recent years, especially after the 2007-2008 financial crisis that forced the world to rethink business.

One notable pioneer of social enterprise development is Nobel Laureate, Professor Muhammad Yunus, the founder of Grameen Bank. Working in rural Bangladesh, Yunus understood that the only obstacle between an enterprising but poor talent and a bank loan was the absence of collateral.

So Yunus replaced that collateral with a ‘peer-group-pre-requisite’, which essentially meant that any single borrower would get clubbed with four other borrowers who would collectively act as a support network and enhance the sense of accountability amongst the borrowers. Also, if any member of the peer group defaulted, Grameen Bank would not take the borrower to court nor would it hold the group liable for default.

The loan would simply be written off.

You are probably wondering like many others before you: How can such a forgiving loan policy even work? What’s the catch? Did we miss something in the fine print? Sadly, the only thing we missed, or perhaps underestimated, was the power of human behavior and the role it can play in the success of a social enterprise.

The Grameen microfinance model thrives on the relationships borrowers develop in their peer groups. Nobody wants to be seen or known as a failure in his or her community. Furthermore, when people assume collective responsibility of a certain debt, they have a stake in the performance of other peer members; and that is when competition turns to collaboration.

Suddenly, the need for collateral evaporates into thin air. A leap of faith Yunus was able to take because of his ‘faith’ in human behavior.

To date, Grameen Bank has catered to more than 7 million borrowers and 97pc of the borrowers are women. Since its inception, Grameen has disbursed loans worth USD 6.25 billion across 78,101 villages, out of which USD 5.58 billion have been recovered, with a loan recovery rate of 98.28pc.

The numbers say everything.

So where do social entrepreneurs like Muhammad Yunus come from? Do they fall from the sky when you and I are asleep at night? Or do they blossom only once in a blue moon? I like to think there is a social entrepreneur in each one of us.

A social entrepreneur is deeply affected by the inadequacies of the state and chooses to bridge the gap with the resources that are available to him or her. A social entrepreneur can identify and harness the potential of an untapped social asset, just like Muhammad Yunus harnessed the potential of human behavior. Above all, a social entrepreneur invests profit back into the enterprise, and is not motivated by the accumulation of personal wealth. Again, Grameen Bank, 94pc of which is owned by its borrowers, works as a prime example of this.

Like Bangladesh, we face a plethora of unaddressed social needs and luckily an equally large number of social assets we can use to meet those needs. Indeed, we have not been able to produce a social entrepreneur like Muhammad Yunus but that does not mean we lack the potential to do so. Half of Pakistan’s population is still under the age of 25, and the bulk of their opportunities lie in the days ahead of them. Our youth and its potential is probably our greatest social asset – if we choose to channel it in the right direction – and our greatest liability if we fail to do so.

The other reason why social entrepreneurship can flourish in Pakistan is because the next best alternative of joining the civil service is now a dead option. There was a time when the civil service absorbed Pakistan’s brightest talent. Young men and women who wanted to help with the affairs of the state competed for a select few, highly coveted positions in government each year.

But over the years, the growing strength of the executive threatened the prowess of the legislature and thus the role of the executive gradually languished against the hostility of successive regimes.

Today, our bright talent is lining up outside the corporate sector, competing for a position to sell detergent, biscuits, chewing gum, fizzy drinks, mobile phones, LCD screens, cars, motorbikes, credit cards and water to a sea of hapless consumers. Either that or they are carefully considering the possibility of expatriation – the life of a second-class citizen in another nation.

Very few, if any, are seriously considering entrepreneurship, let alone social entrepreneurship.

A reality that shines a dim light on our collective mindset, which follows: one, we see more people as more liabilities and not more assets; two, we are averse to the uncertainty of entrepreneurial life and perhaps ill-equipped to balance its highs and lows with an unsupportive government, spouse, family and community at large; three, we feel abundant natural resources like wind, water and sunlight are best left to large businesses and the government to harness; four, we do not have enough faith in our own ability to help ourselves; and five, we lack the courage to fail, the courage to gather ourselves from the wreckage of our failure, and to start all over again.

Muhammad Yunus has shown us how one minor social innovation can influence millions of lives. He has convinced us that social entrepreneurs can solve problems where unwieldy bureaucracies fail. Now it is our job to recognize and reward the right talent from amongst our own lot – no one can do this better because no one understands us like we understand ourselves.

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