THE BUSINESS OF DOING GOOD: SUPPORTING PRO-POOR BUSINESS

SOLUTIONS TO POVERTY

The Case for Social Enterprises Natalia Agapitova and Elaine Tinsley

Innovation and Entrepreneurship Unit, T&C

Intro

■  Caribbean Growth Forum Webinar Series

■  Innovations and Entrepreneurship Unit – Trade & Competitiveness GP

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Entrepreneurship Offerings AGRIBUSINESS DIGITAL CLEAN TECH

WOMEN INCLUSIVE INNOVATION

ACCESS 2 FINANCE

Outline

■  Definition and Rationale

■  Social Enterprise Models

■  Public Policies to Support SE

ANNEXES

■  Success Story: The UK Case

■  Resources

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RATIONALE Defining the benefits of the social enterprise sector

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What are Social Enterprises?

Social enterprises create innovative solutions to service marginalized populations, using business methods and leveraging market forces to achieve social objectives that are

cost-effective.

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Market Failures to Meeting Base of Pyramid Needs

Governmentchallenges:•  Lackofresources•  Lowcapacity•  Lackofinfrastructure•  Lackofincen9ves•  LackofunderstandingBoPneeds•  Bureaucracyrigidness•  WeakM&E,limiteddata

Privatefirmsmaynotbeinterested:•  Tooriskyandlowreward•  Uncertaindemand•  Lowprofitmargins•  Unknownmarket•  Unclear/unfriendlyregula9on•  Lackofproveninnova9ons•  Difficul9esadap9ngnewmodel

Social Enterprises

Wheregovernmentsdon’treach,or

tradi9onalprivatefirmsarenotinterested

Benefits of SE ■  Fillsaneed:Fillaccessgaptopublicservices,orwherethere

isservice-improvesquality,affordabilityandequityofservices

■  Pro-poor:Targetedtotheunderservedormarginalizedgroups–eitherascustomers,producers,oremployees,focusedonimpactoverprofit.

■  Innova6ve:EasierforSEtoinnovate,testoutnewideasanditerateontheirmodelstofindthesolu9onthatworks.

■  InclusiveJobs:Morevestedinsuppor9ngandtrainingthelocalemployment,par9cularlyofmarginalizedgroups(women,youth,disabled)

■  Cost-Efficient:needtoprovidevalueformoney–otherwisethereisnomarket

■  Sociallyandenvironmentallyconscious:lookingatthelargerpictureofimpactratherthannarroweconomicreturns.

Ø  CanbeGovernmentalliesinpromo6ngdevelopment:helpingthegovernmentovercomeeconomic(e.g.,budgetpressure),andsocial(e.g.,inclusion)challenges.

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Social Enterprises

Tackle Challenge

Pro-Poor

Innovative

Inclusive Jobs

Cost-Efficient

Social /Enviro

SEs can generate sizable national-level returns

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•  SEs have outperformed profit-driven small-sized enterprises on a number of indicators. •  For example, according to the 2015 Social Enterprise UK Survey, 41% of SEs created jobs in

the past 12 months compared to 22% of small-sized enterprises for the same time period. (SEUK 2015). They also hired more women as leaders.

•  SEs reduce inequalities by providing stable employment to those typically excluded from the labor market, and reduces fiscal transfer benefits. •  In Manitoba, Canada, the SE sector contributed more than USD 200 million each year in

saved costs associated with unemployment (O’Connor et al. 2012). •  Returns on the investment in SEs in the United States include an economic multiplier of 2.23,

and a savings for US taxpayers of USD 1.31 for every dollar invested in SE due to reductions in government transfer benefits (Maxwell 2015).

•  SE sector can become a major contributor to gross domestic product and a driver for sustainable and inclusive economic growth. •  In South Korea, the social economy, which includes newer types of SEs as well as more

established cooperatives, accounts for 3% of gross domestic product (British Council 2015).

SOCIAL ENTERPRISE SOLUTIONS

Designing solutions to critical development challenges

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Business Models: Development Challenges & Social Enterprise Solutions

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• Decentralized water treatment ATMS (Waterlife)

• Serviced Toilets (Sanergy)

Access to WASH

• Last mile grid connection (Barrio Electrico)

• Solar home systems (Mobisol)

Access to Energy

• Empowering Community Health Workers (Living Goods)

• Mobile Health Clinics (Rides for Lives)

Last Mile Quality Health Access

• Specialized clinics (salaUno)

• Telemedicine (Meradoctor)

• mHealth (Dimagi)

Affordable Health Services

• Low Cost Chain Schools (Bridge)

• Teacher Quality (STIR) • School Ratings and

Management (Gray Matters)

Improving Educational Outcomes

•  Agriculture Productivity (Esoko)

• Media-based farmer education (Digital Green)

Agricultural Productivity

Service Delivery SE Models

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Educa9on

• LowCostSchools

• LearningCenters

• ImprovingTeacherQuality

• SchoolManagementSupport

• RapidITSkilling

Health

• SpecializedClinic

• Telemedicine• mHealth• FoodFor9fica9on

• Microhealthinsurance

• Women’shealth• CommunityHealthWorkers

• FemaleHygiene• AmbulatoryServices

WaterandSanita9on

• DecentralizedwaterTreatment

• Servicedtoilets• Market-ledRuralSanita9on

• WaterBeyondPipes

Energy

• SolarHomeSystems

• Off-gridProduc9veAppliances

• Mini-gridsforVillages

• GridConnec9onforBOPhouseholds

Waste

• WastetoValue• WastetoEnergy• WasteCollec9onServices

• WastewaterTreatment

• IntegratedWasteManagement

• WasteManagementAwareness

Livelihood SE Models

Agriculture

• DirectMarkettoFarmLinkages

• ICTExtensionServices• Non-ICTExtensionServices

• StorageSolu9ons• PostHarvestSolu9ons• Produc9vityEnhancement

• Mul9-stakeholderPla_orm

• End-to-EndSupport• Index-basedAgricultureInsurance

SkillsDevelopment

• RapidITSkilling• Educa9on-orientedOutsourcingServiceProviders

• EmpoweredCommunityHealthWorkers

• EarlyChildcareProviders

• JobsPla_orm

Financing

• ConsumerFinancing• EntrepreneurFinancing

• StudentFinancing• HealthFinancing• AgricultureFinanceProviders

• AgricultureFinanceIntermediaries

• MobileMoney/Banking

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Waste to Value– Building Materials Example: 360 Recycle Jamaica (http://www.360cycleja.com/)

SE: 360 Recycle

Waste Upscaling

Results

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Addressing unemployment

and waste management in

an island country

•  Upcycling of plastic bottle, cardboard, and Styrofoam into building materials

•  Building material is lightweight but sturdy, modular for easy assembly.

•  Also used for the creation of playground equipment and sculptures

•  Employs 35 people with expected expansion to 100 in the next year

Solution Challenge

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Youth Employment– Rapid IT Skilling Example of SE: Daproim, Digital Divide Data, Tunapanda

IT Skilling

Trained Youth

Results

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Rapid IT Skilling provides students a

means to earn money and work experience while staying in school

Addressing youth

unemployment and financing of

higher education

studies

•  Offers disadvantaged youth a work/study program to pursue higher education while earning an income as digital service providers

•  Trainyouthandyoungadultsindigitalskills-abouta2monthperiod.

•  StudentsthenworkonpiecemealITprojectsforthelocalbusinesscommunity.

•  TheprofitsgeneratedfromtheirBPOac9vi9escross-financepre-andin-servicevoca9onaltraining,educa9onscholarshipsorstudentloans

•  Results:Increasesemployabilityofyouth,higherearnings,andabilitytocon9nuestudies

Solution Challenge

Improving Educational Outcomes Example of SE: Bridge Academy provides quality education to low income students

SE: Bridge

Students

Results

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•  Provides standardized content, ensuring quality of material being delivered in a timely manner

•  Centralized administration and other features lowers costs

•  Employs and trains from the local community

•  Families pay $7/month – a cost about the 1/3 of government expenditure per pupil

•  Over 450 primary schools serving over 100,000 students

•  National exams – mean score of 264, with 250 being passing.

•  Bridge’s pioneer students had a 40% higher chance of passing the national primary exit exams than their counterparts

Challenges: Poor quality education in low income areas impedes educational attainment and limits income potential

Affordable Healthcare – Specialized Clinics Example of SE: Aravind Eyecare

Specialized Clinics

Results

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Standardized high volume patient care – model also used for dental, treating diabetes (Mexico’s

sugar clinics), dialysis treatments, cardiac and other chronic diseases

•  High cost of specialized surgery

•  Traveling costs to get screened, diagnosed and treated

•  High cost of lens

High rates of blindness due

to treatable cataracts

•  Specialize only in cataract surgery, •  Streamline of surgical process to

allow for high volume – 6 patients/hr

•  Cross-subsidization of patients, with tiered services so poor are treated for free

•  Rural outreach with mobile clinics for screening, and transport to hospital for surgery

•  Over 32 million treated, many free •  Cost is about $20/ surgery

including 2-night stay and medication

Impact from India

Solution Challenge

Service related business model •  Accessibility •  Affordability

Improving Agricultural Productivity Example of SE: Esoko Extension Service Model Empowers Farmers

SE: Esoko

Farmers

Results

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•  Esoko provides SMS messages on weather, market prices, farming tips

•  Call centers to answer questions •  Connects them to traders •  Mobilizes local community leaders

•  Subscribers pay a small fee to receive SMS with price information

•  Over 350,000 farmers served in 10 countries

•  Esoko clients experience 11% increase in income, solely based on access to price information

•  Esoko has reduced cost of transacting business and searching for market information

•  Due to greater price transparency, farmer have gained greater negotiating power

Challenges: Poor flow of real-time market information within agriculture sector among farmers and traders that affects supply and demand

Why Social enterprises? Targeting the Poor

Awareness: Raising awareness to the problem

Acceptability: Designing an appropriate solution

Availability: Making it easily available or accessible

Affordability: Providing value for money, spreading costs

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POLICIES Public policies to seed and support social enterprises

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Ecosystem

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Policies

Seeding Social Enterprises ■  Compe66on–Surfacingandsuppor9ng

exis9ngenterprises.■  Incubators/Accelerators–Crea9ngthespace

andsupportservicesforSEtodeveloptheirbusinessmodels.

■  TrainingandCapacityBuilding■  Replica6on–Invi9ngorcopyingexis9ng

enterprisestoreplicate.■  Financing:–  ImpactInves,ng–Providingcapitalfundstoseed

grassrootsinnova4onorexpansion–  FiscalIncen,ves–taxreliefforthoseinves4nginSE–  Grants/FundingWindows

■  Externalsupport

Scaling Social Enterprises ■  Regula6ons-Lowerbarrierstoentry,addresssector

constraints■  Public-privatecollabora6on:

–  Subsidized(e.g.capitalcostsonWaterATM)–  Divisionofresponsibili4es–e.g.government

takesonawarenesscampaign–  Adop4onofprivateinnova4onintothepublic

system(Liberia-Bridge)■  SocialProcurement–Governmentprocurementthat

takesalsosocialexternali9esintoconsidera9on■  SocialImpactBonds–FinancinginstrumenttouseSEto

achievedevelopmentresults.Sociallymindedinvestorsprovideupfrontcapital,andgetreturnsoninvestmentswhenoutcomesareachieved.

■  Na6onalframeworkstosupportSE

Legal Definition vs Working Definition vs Legal Forms ■  Adoption of a legal definition can play a positive signaling effect for the private

sector and impact investors, by providing a predictable framework for public and private investments and support to social enterprises. However, a legal definition alone appears insufficient to boost the social enterprise sector. (Korea, Italy)

■  Offering a working definition provides a number of the same advantages as offering a legal definition. It signals that government is focused on social enterprise. It helps entities determine whether or not they should be viewed as social enterprise, which in turn will help them attract public recognition and relevant financing sources. However the lack of a certification process can create abuse. (UK)

■  Where no legal or working definition exists, the creation of legal forms for social enterprise can reduce confusion on what constitutes social enterprise without locking in the parameters. By offering new legal forms, social enterprise status can be protected, making them attractive investments for socially minded investors. (US- Social Purpose Corporations, Benefit Corporations)

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SUCCESS STORY: THE UK CASE

4.

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Results 70,000 social enterprises

ü Contribu9ng£24 bn totheeconomy

ü  31% work in 20% most deprived communities

ü Genera9ng1mjobs

ü Sustainable(50%profitableand26%breakeven)

Source: Social Enterprise UK. The State of Social Enterprise Survey 2015. 2015.

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Social Enterprises outperform SMEs in the UK

Source: Social Enterprise UK. The State of Social Enterprise Survey 2015. 2015.

31% work in the 20% most deprived communities

40% female leadership

59% employ disadvantaged people

35% of start-ups

52% grew turnover

41% created additional jobs

59% introduced new product or service

SMEs Social Enterprises

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UK: Legal and Policy Regulation

SocialEnterpriseUnitcreatedwithinDepartmentofTrade&Industry

AlegalformforCommunityInterest

Companiesintroduced

-ARegulatoryAgencytoregisterandmonitor

compliance-Communitybenefit

Test

SocialEnterprise:AstrategyforSuccess

published-Webpage-Regionalassistancecenters-Impactmetrics-£10minvestmentfunds

TonyBlair,LabourParty(1997-2007)

Socialenterpriseac4onplan:Scalingnew

heightspublished

2001 2002 2005 2006

Tony Blair commitment

1997

SocialEnterpriseCoali9on(nowSocial

EnterpriseUK)established

Red-Awareness Blue–Regula9onsGreen – Financing

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Launch of Big Society Capital with £600m

of investment for social enterprises

and charities

PublicServices(SocialValue)Act2012

“demandingpublicorg.tohaveregardto

economic,socialandenvironmentalwell-

being”

Socialinvestmenttaxrelief

DavidCameron,Conserva9veParty

2009 2012 2013

Prime Minister David Cameron launches the G8 Social Investment

Taskforce

First ever Social Impact Bond

launched

2011

All main parties manifesto’s

commitments to SEs

Social Enterprise

£100M Investment

Fund: health and social care

services

UK: Legal and Policy Regulation 2010

SEs features in Queen’s speech

Red-Awareness Blue–Regula9onsGreen – Financing

Social investment market

Source: Doeringer, Matthew F. "Fostering social enterprise: A historical and international analysis." Duke Journal of Comparative & International Law 20.2 (2010): 315.

Connects general public with impact

investments

SIB

Financial Instruments, i.e. Micro Genius

allows people to buy shares in community-based

projects

Crowd funding platform for social

investment

Infrastructure Intermediaries

ü Social banks ü  Impact investors ü Venture

philanthropy funds ü Community

Development Finance Institutions

UK Social Enterprise Ecosystem

Legal,economicandpoli9calrecogni6onofsocialenterprise

sector

SocialEnterpriseSectorakracts

skilledprofessionals

Dynamicandfastgrowing

socialinvestmentmarketand

Intermediaries

SocialEnterpriseUKadvocatesfortheSEsectorandprovidesinforma6on

Expansivesupport

networksandintermediaryorganiza9ons

RESOURCES 4.

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Additional Info SocialEnterpriseModels

■  hSps://www.innova6onpolicyplaUorm.org/content/social-enterprise-business-models

WBBlogs

■  hkp://blogs.worldbank.org/dmblog/business-doing-good

■  hkp://blogs.worldbank.org/dmblog/10-policy-tools-governments-are-implemen9ng-spur-social-enterprise

■  hkp://blogs.worldbank.org/dmblog/procuring-social-impact

■  hkp://blogs.worldbank.org/dmblog/reaching-last-mile-social-enterprise-strategies

■  hkp://blogs.worldbank.org/dmblog/innova9ve-business-models-beker-impact-why-elearning-social-entrepreneurs

Courses

■  Self-pacedonlinee-learningforsocialenterprises:https://olc.worldbank.org/content/innovative-business-models-better-impact-self-paced

■  CourseforPolicyMakersonEngagingtheSocialEnterpriseSector(byrequest)

Formoreinforma9on:

ElaineTinsley–e9nsley@worldbank.orgorNataliaAgapitova–nagapitova@worldbank.org

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