201 SPEAR STREET, SUITE 1100, SAN FRANCISCO, CA 94105 WWW.KORDANT.COM +1 415 470-9197 [email protected] Kordant Report Series Social Enterprises in Asia An Introductory Guide Over the decades, social enterprises practices to maximizing impact and strive (SEs) have gained increased recognition for to optimize finances in support of their their ability to bring about fair and social or environmental missions. equitable social transformations. Their This report serves as an introductory unique models provide an additional mode guide to social enterprise development in of engagement for individuals and Asia. It looks at the role of SEs in social institutions interested in addressing social innovation, examines the conditions driving issues. SEs can take the form of a nonprofit social entrepreneurship, and provides or for-profit and vary in size and structure, recommendations for philanthropists but what unites all SEs is their business interested in supporting SEs in Asia. approach to social change. Instead of ! maximizing profits, SEs apply market "1 THE SOCIAL INNOVATION SECTOR SEs play an integral role in a larger social investors financing SEs; universities cultivating a ! innovation sector. Put simply, social innovations are pipeline of talent for the sector; consultancies creative solutions to society’s most pressing engaging in capacity building and promoting problems, designed to be just, affordable, and impact measurement frameworks; policymakers sustainable (Phills, Deiglmeier and Miller 2008). creating an enabling regulatory environment; and Given this multifaceted definition, the actors and corporations interested in exploring new, Kordant Report Series organizations that make up the social innovation underserved markets for their products and sector can also cut across a wide spectrum of services, among others. Each actor and business and society. Aside from SEs, which act as organization has a critical role to play, with the on-the-ground implementers of social solutions, overall success of the sector dependent on their they include: venture philanthropists and impact mutual collaboration. OVERVIEW OF SOCIAL ENTERPRISES IN ASIA Although early models of SEs have existed in respondents considered social entrepreneurship Asia for centuries, the term “social enterprise” was the single-most important emerging trend in Asian not used to identify such organizations until the philanthropy (Mahmood and Santos 2011). 1980s. Around this time, Bill Drayton, founder of Across the continent, Asia is proving to be a the nonprofit organization Ashoka, explicitly highly fragmented but fertile space for SE linked social innovation to entrepreneurship. Once development. On the one hand, two-thirds of the the term started to gain traction, the individuals world’s poor live in Asia; the support mechanisms initially celebrated as social entrepreneurs in Asia for Asian SEs are still underdeveloped; and its tended to be foreigners or returning expatriates, entrepreneurial space lacks cohesion between but homegrown Asian social entrepreneurs are countries. Asia has over 40 sovereign states and now more common. special territories—each with its own Some of the world’s largest and most well idiosyncrasies in culture, governance, and known SEs, like the Grameen Bank and BRAC development. Everything from the legal Enterprises, got their start in Asia. However, it is classifications to the stages of social difficult to state exactly how many SEs there are in entrepreneurship maturity can differ by country. Asia since SEs are so diverse in their nature and On the other hand, Asia is also home to a scope of activities. Moreover, because of the third of the world’s wealth; its talent pool runs relatively recent introduction of the term, many deep; and there is a diverse array of actors organizations may not even self-identify as a social pushing for greater Asian innovation. The enterprise even though they function as one. opportunities for innovation in Asia are just as Nevertheless, as an indicator of social plentiful as there are needs, and the people of Asia entrepreneurship’s growing momentum in Asia, a are taking greater ownership in solving the social recent UBS-INSEAD survey of philanthropists, and environmental issues the region currently foundations, and family businesses from ten Asian faces. countries found that over a third of survey "2 LOCAL ECOSYSTEMS SE development at the country level is driven are compelled to either register their organization ! by a number of interrelated factors, but there are as a commercial business and compete directly two that stand out in particular. The first is the with well-financed mainstream businesses, or take vitality of a country’s civil society (which includes a more traditional nonprofit approach and face the strength of its nonprofit sector, the freedom of restrictive government oversight and limited its people to act, the availability of resources that funding opportunities. Kordant Report Series support citizen engagement, etc). The second is In comparison, SE ecosystems in other parts the country’s business environment (encompassing of Asia, like Singapore and Hong Kong, benefit its ease of doing business, the sophistication of its from greater regulatory and multi-sector support business culture, and the state of its infrastructure, for social innovation. Singapore and Hong Kong among other things). An imbalance in either are both known for their hospitable business factor can have far-reaching implications for the environments and world-class infrastructure, and local SE ecosystem. impact investing is also gaining traction in both For example, the innovation sector in these city-states. Additionally, Singapore and Mainland China has expanded rapidly over the Hong Kong both have active spaces of civil past two decades thanks to a combination of society and governments that commit a number heightened social awareness and ongoing of resources to furthering SE development. economic reform. But Chinese SEs still face a Singapore’s Ministry of Social and Family number of regulatory hurdles that could stall Development currently has at least three funds set future growth. Regulations in China are complex aside for SEs: the ComCare Enterprise Fund, the and demanding, but no specific legal framework Youth Social Entrepreneurship Programme for exists for SEs, making it difficult for Chinese social Start-Ups, and the Central Co-operative Fund. entrepreneurs to ascertain how much operational Hong Kong officially launched the half billion leeway they have. For the sake of a clear working HKD Social Innovation and Entrepreneurship environment, many Chinese social entrepreneurs Development Fund in September 2013. ISSUES & INDUSTRIES The types of issues that SEs address also million lack access to clean water, 650 million depends on the needs and phase of each lack access to basic financial services, and 70% country's unique development. For instance, live in rural areas (World Bank 2010 - 2012). Japan may have an advanced economy, but it India’s population is also very young — more faces a rapidly aging population and needs to than half are under 25 years old (Rajendram develop a more inclusive labor market if it is to 2013). But India’s education system has not yet retain its economic clout. Many Japanese SEs, met the needs of the country’s young population, therefore, focus on enabling more women to and job growth in recent years has stagnated. participate in the country’s workforce. Viewed all together, these conditions describe a Meanwhile, resource rich countries like country that still struggles with basic Indonesia and the Philippines incubate many infrastructure and education services. Not SEs that focus on environmental stewardship and surprisingly, the SEs that have emerged in India management of a more inclusive value chain. have gravitated towards activities in its food- India is perhaps the clearest example of how energy-water nexus, with a great number of SEs emerge as solutions to a country’s unique microfinance, education-focused, and healthcare development situation. In India, some 300 organizations emerging as well. million people lack access to electricity, 98 "3 ! Common Types of Social Enterprises Social enterprises are an evolving concept. As such, the different organizational structures and business models SEs can adopt continue to grow in number. Below is a brief summary of some of the common SE types found in Asia. Please note, however, that this list is far from comprehensive, and many SEs have overlapping models that can be grouped under multiple categories. 1.Social Firms are also known as “Work 4. Community Enterprises are SEs with a Integration Social Enterprises.” Their primary localized angle. They leverage a local function is to create or find quality jobs for community’s existing assets (e.g. its cultural capital disadvantaged and marginalized communities. or natural resources) and build viable business Ex. Rags2Riches, a Filipino SE, trains impoverished models based off of those assets. women in skills development, business management, and Ex. Impulse Empower Brand works with weavers in the financial literacy and helps them supplement their income Assamese and Mishing tribes of Northeast India to produce through its fashion business. artisan products unique to the region that are then sold at ! various retailers throughout the world. 2. Cooperatives are SEs managed by “member- ! owners” — individuals who come together with a 5. Social Business Ventures are SEs legally common business