social entrepreneurship

5/23/2018 social entrepreneurship

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What Is Social Entrepreneurship?

What is an Entrepreneur?A common misconception is that any businessman, or anyone who starts a business, is an entrepreneur.But starting a business, according to economists Say and Schumpeter, is not the main component of

entrepreneurship. Rather, entrepreneurship is concerned with stimulating economic progress throughinnoation and action.!"#In the early "$th century, the %rench economist &ean Baptiste Say describedentrepreneurs as 'the enturesome indiiduals who stimulated economic progress by f inding new andbetter ways of doing things.(!)#In other words, entrepreneurs optimi*e the allocation and use ofresources to generate ma+imal profits.

In order to achiee his economic obecties, the entrepreneur-s mindset must be innoatie, creatie andgoaloriented. In the words of )/th century economist &oseph Schumpeter,

the function of entrepreneurs is to reform or revolutionize the pattern of productionby exploiting aninvention or, more generally, an untried technological possibility for producing a new commodity or

producing an old one in a new way, by opening up a new source of supply of materials or a new outlet forproducts, by reorganizing an industry and so on.(3

0oreoer, the entrepreneur thries on problems and is motiated by the idea of altering an unpleasantsituation. Rather than waiting for instructions, the entrepreneur initiates direct action. If the entrepreneursees a more effectie method of doing things, he or she will not hesitate to do away with e+isting systemsin faor of a whole new approach to a problem. 1he entrepreneur has the courage to ta2e calculatedris2s, sometimes een doing 'things that others thin2 are unwise, or een undoable.( !3#1he entrepreneuralso carries proects through to completion and is uninhibited by occasional setbac2s or challenges. !4#

What is a !ocialEntrepreneur?1he social entrepreneur harnesses entrepreneurship s2ills to do social good. According to &.5regory6ees, social entrepreneurship 'combines the passion of a social mission with an image of businessli2ediscipline, innoation, and determination commonly associated with, for instance, the hightech pioneersof Silicon 7alley.(!8#1he social entrepreneur-s philanthropic energies are channeled into business

entures, creating alue in business so that consumers are willing to pay for the goods and serices, andby doing so, the social entrepreneur earns a profit which is inested in the social entures.!9#Accordingto 0artin : ;sberg, 'the Social Entrepreneur aims for alue in the form of largescale, transformationalbenefit that accrues either to a significant segment of society or to society at large.(!


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in moving out of poverty fall bac into it)s government, business, and household budgets tighten,costly environmental protection and clean*up efforts are in &eopardy$ecause many social andenvironmental issues are time sensitive, failure to recognize the importance of social entrepreneurshipand provide ade#uate support for such efforts during this downturn would be a serious mistae.(+
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1he 6efining haracteristics of Social EntrepreneursSocial entrepreneurs are!"#>

!ocial -atalysts 1hey are isionaries who create fundamental social changes by reforming

social systems and creating sustainable improements. According to &.5regory 6ees, 'though theymay act locally, their actions hae the potential to stimulate global improements in their chosenarenas, whether that is education, health care, economic deelopment, the enironment, the arts,or any other social field.(!)#

!ocially aware Social improement, as opposed to the creation of profit, should be the ultimategoal of the social entrepreneurs. 1he success of their endeaors is measured by their socialimpact, not by the amount of profits generated.

pportunity*seeing 1hey pursue their goals relentlessly, seeing eery obstacle as an

opportunity to deelop and finetune their business models.

/nnovative 1hey are creatie, willing to thin2 outside the bo+ and ready to apply ideas to newsituations. 1hey understand that not eery innoation will be a success, and they see failures aslearning opportunities een as they strie for success.

0esourceful 1heir isions are not limited by the resources that they hae. Besides optimi*ing

the use of e+isting resources, they actiely e+pand their resource pool through collaboration withothers.

)ccountable Social entrepreneurs are accountable to their beneficiaries, and they often as2themseles, 'Am I creating alue for the people I am sering? 6o I understand their needs?( 1his isbecause social entrepreneurs want to 2now that they are actually ma2ing an impact. 1hey are alsoaccountable to inestors who want to 2now that their contributions are indeed stimulating social

improements as promised by the social entrepreneurs.
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Social Entrepreneurship> @ot &ust haritySocial Entrepreneurship cannot be confused with charity. While charity reflects the benefactor-scompassion for human2ind and is measured in terms of the generosity of donations to the less fortunate,

social entrepreneurship reflects more than the good intentions of its practitioners, who are not merelydrien by compassion, but are also compelled by a desire for social change. ;ftentimes, charitableorgani*ations surie at the mercy of their donors whose contributions ary with the economic climate. Anonprofit that practices social entrepreneurship, on the other hand, relies less heaily on donor fundsbecause it creates social programs that are meant to be selfsustaining. Social entrepreneurs managedonor contributions in an effectie manner, inesting in social entures which can then generate their ownreenues to sustain themseles.

In other words, while charity uses donor funds to buy food to ease the poor-s hunger, albeit onlytemporarily, social entrepreneurship uses its funds to ma2e a lasting social impact, creating instructionalprograms that teach the poor how to grow their own food so that they can ta2e care of themseles in thelong run. In a world of scarce resources, it is no longer enough to simply donate out of good intentions.Rather, 5reg 6ees emphasi*es the need for people to alue the social impact that their donations areactually haing>

/n society, /1d lie to see more value placed on social impact and success than on good intentions oreffective mareting or the severity of the need you1re claiming to serve. /1d lie to see a fundamentalchange in ethics or culture around that. 2e still have the lingering effect of a culture of charity, whichhonors people for their sacrificehow much they give and the purity of their motives. %he word charitycomes from the word caritas, which is 4atin for love or compassion. 2e1re rewarding people fordemonstrating their love of humanind, but we1re not often looing to see whether it has the intendedimpact. !o /1d love to see an ethics change, so that we honor people for the impact they1ve had directly,or indirectly in choosing to support programs and organizations and individuals that have had impact, not

&ust for how much they give or how generous they are.(+

0oreoer, social entrepreneurs hae to identify opportunities that hae the potential to change the world.In the words of 0artin & %isher : ein Starr, the authors of 0eal 5ood, 6ot "eel 5ood>

'2e can no longer afford to spend scarce funds on things that simply feel good. /nstead we need tosupport initiatives that do real good, and that have the potential to generate large*scale and lastingsolutions to the world1s biggest problems.(
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1he Role of Innoation

Social Entrepreneurs as Engines of Innoation

&ust as business entrepreneurs are willing to ta2e ris2s and play around with ideas until they find one thatwor2s, social entrepreneurs must dare to innoate een if it means treading where no one has enturedbefore. ;f course, not all social innoations are successful. But een socalled failures are usuallyblessings in disguise because they inform the social entrepeneurs what to aoid in a future enterprise.Since social entrepreneuers often wor2 in a ariety of different social conte+ts throughout their career,with each new situation demanding a different approach or een a different solution, they must be fle+iblein the way they thin2 and approach problems.

Innoation A 1ool to Better theWholeSociety1here is no doubt that innoation plays a ital role in any entrepreneurial enterprise. While the ability togenerate innoatie ideas is important, this alone cannot ma2e the social entrepeneur successful. 0anypeople can thin2 creatiely and generate a lot of ideas, but many tend to rest on their laurels once their

own problems are soled. According to William 6rayton, the social entrepreneur effects a paradigm shiftin the whole society7

%here are many creative, altruistic, ethically good people with innovative ideas. 8owever, only one inmany thousands of such good people also has the entrepreneurial #uality necessary to engineer large*scale systemic social change. 9ntrepreneurial #uality also does not mean the ability to lead, toadminister, or to get things done: there are millions of people who can do these things. /nstead, it refersto someone who has a very special trait ** someone who, in the core of her;his personality, absolutelymust change an important pattern across his;her whole society. 9xceedingly few people have this drivingmotivation.


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optometrists and ophthalmic nurses, proide training to local specialists. nite %or Sight-s model is able tosignificantly increase the number of surgeries proided by local eye clinics annually. %or moreinformation, isithttp>GGwww.uniteforsight.orgGwhatwedoGsocialentrepreneurship

nite %or Sight wor2s with partner eye clinics to proide local solutions, identifying, and oercomingcommunityspecific barriers to effectie healthcare deliery, such as transportation and communication.Hatients are transported to and from the eye clinic. 0oreoer, local community leaders and members are

inoled in outreach actiities, raising awareness and proiding education regarding eye care to thosewho would otherwise not hae access to eye care. nite %or Sight-s model has been employedsuccessfully in a ariety of different social conte+ts in 5hana, =onduras and India.
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Sustainable Impact : Dearning ;utcomes

1he Social 7enture A Success or a %ailure?

1he primary indicator of success lies in the actual impact of the social initiatie. 1o put it simply, a socialenture is successful if it achiees its intended social impact.

apturing the Impact 1he 0ission Statement1he social entrepreneur should state the intended social impact in a brief and specific missionstatement. %or e+ample, 'poor families will earn more money(!"#or 'fewer people will get, andGor die of,malaria.(!)#Statements li2e 'fighting poerty and inustice( or 'improing lies( are simply too ague to beuseful. !#

0easuring the Impact : Establishing a orrelation1he social entrepreneur can now assess whether the social program actually measures up to the missionstatement. 1o measure impact, one has to gather concrete statistical data. %or instance, if the missionstatement is 'poor families will earn more money,( then the income data of these families before and afterthe interention should be collected and analy*ed. 1he impact can then be Cuantitatiely measured. ;fcourse, owing to the sometimes aried and comple+ nature of the impact, it is often up to the socialentrepreneur to find a suitable metric that can capture results with integrity.

=oweer, it is insufficient to simply measure the impact. 0ore importantly, the social entrepreneur mustproe that the social programs are indeed the interentions responsible for producing the desiredchanges. %or this purpose, scientific randomi*ed trials inoling control groups could be done to study thecorrelation between a particular social initiatie and the perceied social changes. ;therwise, one couldrely on the past studies of similar programs in similar conte+ts conducted by other social entrepreneurs orresearchers. 1he social entrepreneur must proide concrete eidence to ustify the efficacy of the socialendeaors.!3#According to %isher : Starr,

) pro&ect woring to reduce the incidence of malaria by distributing mos#uito bed nets must demonstratethat the incidence of malaria is in fact reduced. /t is not enough to simply report on the number of netsdistributed * the lin to impact may not be there. 6ets can be improperly used, sold by the beneficiariesfor #uic cash, or even used as fishing nets. !imply tracing activities is not enough * you need to tracthe impacts of those activities) pro&ect that aims to reduce poverty by helping poor people to startbusinesses needs to show that the participants earn significantly more net*income after the interventionthan they did before it. $usiness training or access to credit may not in fact get people out of povertymeasuring incomes is the only way to now.!4#

%or more guidelines on how to gauge the impact of global health programs,see http>GGwww.uniteforsight.orgGglobalhealthcourseGmodule3.

ostEffectieness

%unding for philanthropic purposes can be e+tremely limited. !8#As such, it is important to 2eep trac2 ofthe amount of donor funds reCuired to produce a gien impact. %or e+ample, for eery dollar spent in apoerty reduction program, by how much do the incomes of the people rise?!9#1he social entrepreneurmust strie to be costeffectie, optimi*ing eery dollar to produce the greatest benefit for the beneficiary.1he programs should also be ealuated to determine if the programs are going to be cost*effectiveoertime, in the future. %isher and Starr also offer additional adice> 'osteffectieness is relatie, socompare the proect to other proects wor2ing to produce the same impacts in similar areas. If you haenothing to compare it to, then at least ensure that the effectieness can be measured and that it feelsreasonable to you.(!


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Sustainability in the Dong RunA crucial Cuestion is whether the social initiatie would be sustainablein the long run. What would happento the program once the inflow of e+ternal funding stops? In an effectie program, the initial positieimpact should not fade away, but should continue to generate benefits een with scarce, decreasingfunding.!$#%isher and Starr urge social entrepreneurs to continually as2 the following Cuestions>

2ill the people who are given mos#uito nets continue to use them= 2ill the nets continue to beeffective= 2ill they get replacement nets= 2ill new people want, and be able to get, nets=... 2ill thebusinesses that people have started continue to prosper= 2ill new people be able to start new profitablebusinesses= !"/#

According to %isher and Starr, in order to hae sustainable impact, a social program should hae one ormore of the following characteristics>!""#

%he pro&ect can leave in place a business model and supply chain, which will continue to provide

the re#uired goods and services at a profit.

%he pro&ect can hand*over the provision of goods or services to the local government > which

will fund the continued interventions by collecting taxes. 1hough this is a iable option, it isunfortunately not always sustainable to rely on the goernment.

%he pro&ect can leave in place a self*sustaining community process to provide a solution to a

local problem with no external source of funding.

?"inally, a pro&ect can wor to permanently eliminate the problem it is trying to solve. 9ither it can

get rid of the problem itself, or it can permanently change a no*cost social behavior...

A Case in Point: The Grameen Bank, A Mode of S!stainabiity

0uhammad Junus, the founder of the 5rameen Ban2 and winner of the )//8 @obel Heace Hri*e, found asolution to the plight of poor Bangladeshis who are unable to acCuire funds to start their own business microcredit. =e lent K)9 of his personal funds to a group of poor women, who Cuic2ly started a sewingbusiness that was able to generate enough income to help them pay bac2 the loan, and more importantly,

to rise aboe poerty. 1hus the idea of the 5rameen Ban2 was born. According to 0artin : ;sberg,'5rameen Ban2 sustained itself by charging interest on its loans and then recycling the capital to helpother women.(!")#=aing thus proen microcredit to be a sustainable method of combating globalpoerty, Junus continues to inspire organi*ations worldwide to adopt the 5rameen model to combatpoerty in their own communities.

Dearning ;utcomes> Sharing nowledge With ;ther SocialEntrepreneurs

After assessing the impact of a social enture, the social entrepreneur will 2now whether it is successfulor not. Successes and failures are eCually important because the social entrepreneur draws aluablelessons from both. 0ore importantly, the social entrepreneur also shares 2nowledge of what wor2s andwhat doesn-t with other social entrepreneurs to help them achiee progress in their respectie social

proects.!"#

Dearning ;utcomes> Scaling : Replicating 1he Impact ElsewhereAccording to %isher : Starr, 'deeloping successful models for social change is e+pensie and we can-tafford to reinent the wheel eery time.(!"3#1he best proects are normally those that, with a few minormodifications, can be rescaled and replicated in a ariety of different social conte+ts to address a similarproblem. 1he 5rameen model of poerty reduction is successful not only because it is sustainable andcosteffectie, but also because it can readily be adapted to sere the needs of different communities with
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different sets of cultural and social needs. In fact, so successful is microfinance that it is now een beingimplemented in deeloped countries li2e the nited States to reduce poerty.!"4#
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LHatient- apital In Social Entrepreneurship

An Emerging 1rend> Social 7enture Inestors

While enture capital was predominantly inested in such industries as semiconductors, biotechnology,and the internet in the past, enture inestors today are increasingly attracted to small business modelsthat, in addition to their potential to earn attractie financial returns, could yield social benefits. 0anyenture inestors increasingly recogni*e that there is no need for a tradeoff between earning profits anddeliering a social mission. Already many industries, such as clean energy and organic foods, are gettinginestors- attention, and their Lpatient- capital.!"#

?%here1s more attention in this space, and with attention, more investors want to participate it becomesless a fringe and more acceptable. /n a few years it1ll be closer to mainstream.(* 6eb Harsons,business deelopment director at Inestors- ircle

What is LHatient- apital?'atient capital is another name for long*term capital. 2ith patient capital, the investor or bacer is willingto mae some type of investment in a business with no expectation of turning a #uic profit. /nstead, theinvestor is willing to defer any return for an extended period of time.(3

Hatient capital is reolutioni*ing the concept of philanthropy. Social entrepreneurs are no longer contentwith traditional philanthropy which is normally the giing of direct, temporary aid to reliee poerty asthe best way to alleiate poerty. Hatient capital allows social entrepreneurs to bring their businessacumen to bear on social issues. By combining patient capital with their talent and 2nowledge, socialentrepreneurs strie to perfect the correct models for deliering basic goods and serices, such ashousing, healthcare, energy and clean water, to the undersered mar2et of the poor in the most effectieand efficient ways.!3#

Hatient capital is based on the philosophy that eeryone should hae access to basic goods and serices.!4#It targets the poor consumers.

LHatient- apital as a HoertyReduction 1ool'eople grow out of poverty when they create small businesses that employ their neighbors. 6othing elselasts.(@ 1homas D. %riedman

0oreoer, according to %riedman, many people do not aspire to become entrepreneurs because theywould rather be followers of certain ris2ta2ing leaders and innoators.!9#As such, patient capital must bemade aailable to these wouldbe capitalists to initiate their own businesses which could in turn benefitothers.

Hatient capital can also be used to increase the incomes of the poor sustainably. A case in pointdescribed by %riedman is the enyan companyAdanced BioE+tracts !ABE#, a pharmaceutical companywhich produces an affordable, efficacious malaria treatment in a region where malaria still 2ills nearly amillion Africans annually. ABE also designs contracts with small local farmers to grow the botanical

ingredient for the drug, which helps them earn more income than ust growing corn. 1his business modelis funded using Lpatient- capital from inestors li2e @oartisand theAcumen %und. !


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'eople don1t want handouts%hey want to mae their own decisions, to solve their ownproblems.(+A> Bac#ueline 6ovogratz

A former graduate of Stanford Business School and subseCuently an international ban2er, &acCueline@oograt* is now a social entrepreneur who is redefining the practice of philanthropy by tapping into herbusiness foresight and s2ills to fight poerty in deeloping countries. She beliees that traditional charity,which merely gies aid, is no longer an adeCuate solution to the problem of poerty. %ounding 1he

Acumen %undin )//", @oograt* uses mar2etoriented approaches to tac2le issues of poerty byproiding promising entrepreneurs, who bring the necessary good and serices to communities who needthem, with patient capital. Rather than distributing handouts li2e a traditional charity, 1he Acumen %undinests in sociallyconscientious companies whose target customers are the world-s poor.!""#

"rom drip*irrigation systems in /ndia to malaria*preventing bed nets in %anzania to a low*cost mortgageprogram in 'aistan, )cumen1s portfolio offers important case studies for entrepreneurial efforts aimed atthe vastly underserved maret of those maing less than CD;day.(+
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Social Inesting and Social Return on Inestment

'hat is So%ia (n)estment*

According to !ocial 9conomy !cotland, social inestment is a form of inestment that is 'focused on thesocial return rather than the financial return. It is a relatiely new term but is gaining common currencydescribing the type of inestment organi*ations are loo2ing for as they moe away from grant aid.(!"#

The Chaenge: Pro%!ring So%ia (n)estment

Because a social inestor has to sacrifice financial return in faor of social return, the social inestorarguably ta2es on more financial ris2 compared to the traditional inestor. According to Brian 1relstad of

Acumen %und, a social inestor is 'someone who ta2es a double !or in some cases triple# bottom lineapproach to their capital, and attributes real alue to the social or enironmental return in their inestmentdecisionma2ing. 1hey will often, but not always, be willing to e+change a lower economic return forpotential social or enironmental impact.(!)#So a fundamental challenge facing social entrepreneurs is topersuade inestors, who normally inest in profitoriented businesses, to inest in social entures that notonly do not promise significant returns, but are normally also highly susceptible to failure.

At the moment, there are no ready answers to this problem. In fact, there are many more challenges tocome in terms of attracting inestment into the social sector. 1hough the number of social inestorscontinue to grow, it is unli2ely to achiee a si*e large enough to meet all future social inestment needs.!#0oreoer, continued dependence on donor funding only leads to increased competition with othertraditional nonprofits. Some hae also suggested improing the profitability of social entures bye+panding their clientele to include the middle and upper classes,!3#but this would arguably detract fromthe integrity of social entrepreneurship, which is supposed to sere the disadantaged. Jet, withoutsufficient inestment, a social enture-s impact is limited because it cannot achiee significant scale.!4#

So%ia +et!rn on (n)estment "S+($ & (ts (m-ortan%e

According to !ocial 9conomy !cotland, SR;I measures an organisation-s added alue by calculating thesocial, enironmental and economic benefits it creates and by attributing a financial alue to them. It is

based on standard accounting principles and inestment appraisal techniCues.(!8#It is a way ofCuantifying alue creation. Di2e other inestors, social inestors, too, want to 2now if their inestments areactually generating social returns. After all, ust as economic profits ustify the e+istence of businesses, sosocial returns ustify the e+istence of nonprofits and social entrepreneurs.!9#

But unli2e other inestors, social inestors often hae difficulty coming up with a precise, numerical aluethat can accurately represent the amount of social return produced. According to Sean StannardStoc2ton, the director of a wealth management firm,

$ut what about the !ocial 0eturn on /nvestment= /f a donor maes a gift to a nonprofit, what is thereturn on that gift= 8ow much good was achieved= %he dollar amount given is easy, but calculatingthe good done is tough. "irst because nowing what good means is hard, secondly because relatinggood to dollars is lie translating a symphony into organic chemistry, and third because identifyingcause and effect is tough (did your grant create more &obs, or did the economy &ust happen to get better=

/ don1t thin we1ll ever be able to honestly mae statements lie


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?9xamines a social service activity over a given time frame (usually five to +A years: calculates theamount of ?investment? re#uired to support that activity and analyzes the capital structure of the non*profitthat is in place to support that activity: identifies the various cost savings, reductions in spending andrelated benefits that accrue as a result of that social service activity: monetizes those cost savings andrelated benefits (that is to say, calculates the economic value of those costs in real dollarterms:discounts those savings bac to the beginning of the investment timeframe (referred to as ?%ime

Hero? using a net present value and;or discounted cash flow analysis: and then presents the !ocio*9conomic Ialue created during the investment time frame, expressing that value in terms of net presentvalue and !ocial 0eturn on /nvestment rates and ratios.(E

In presenting the aboe methodology, the authors also gie a disclaimer> '1he core SR;I analysis, aspresented by RE6%, does not attempt to definitiely Cuantify and capture all aspects of the benefits andalue that accrue as a result of a successful program, but rather to identify direct, demonstrable costsaings or reenue contributions that result from that interention.(!"/#In other words, this is ust one ofmany possible ways to calculate social return on inestment, one based on cost saings and reenuecontributions.

1he alert %oundation has designed its ownSocial Return on Inestment alculator, based on thenumber of obs created by the social enture. 1he diersity of methods of alue appraisal attest to thedifficulty of proiding a standard, consistent way of Social Return on Inestment analysis.
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Social Entrepreneurship By 1hose In 6eelopingountries

1he LInisible- EntrepreneursSocial entrepreneurs from deeloping countries are seldom 2nown.!"#1his is hardly because deelopingcountries lac2 entrepreneurial talentM it is because many, especially those who hae initiatedentrepreneurial proects to lift themseles out of poerty, simply go unrecogni*ed. 1he field of socialentrepreneurship conentionally gies recognition only to 0BAs and inestment ban2ers, the elite groupwho hae acCuired speciali*ed training in an institutional setting, but not to the poor and disenfranchised.!)#It is time that they are recogni*ed as legitimate practitioners of social entrepreneurship, and be gienthe necessary support and resources. @o longer satisfied with ust being the clientele of social entures,the poor, too, want to participate actiely in improing their own lies.

Social Entrepreneurship> A Surial 1actic for the Hoor

?%he true social entrepreneurs are ghosts that never claim the glory for themselves, that wor for theirgoal lie their lives depend on it, because actually, their lives do depend on it. %hey don1t wor to becounted. Jou don1t find them in congresses, seminars and forums. %hey don1t read literature about socialentrepreneurship: they don1t study it. %hey &ust are social entrepreneurs because they need to be. %heylive for it and by it.(3 &ohn Ale+is 5uerra 5ome*

%or many of the poor, social entrepreneurship is a ocation of necessity, not of choice. In an effort to e2eout a liing, many rural poor!3#hae un2nowingly become what Western academics term socialentrepreneurs. 1hese entrepreneurs hae low or maybe een *ero isibility in the field of socialentrepreneurship because they do not actiely engage in public relations, or they do not hae resourcesli2e Internet access or een the necessary language s2ills to discuss their ideas. Jet, they are contributingin significant ways to the betterment of their communities. 1heir social entures may not achiee a scalesignificant enough to trigger a paradigm shift, as is conentionally the desired outcome of socialentrepreneurship, but they neertheless still hae a huge impact on their immediate surroundings,

especially on the poor people around them.

ontrary to popular belief, most poor people do not want to get by on charityM they want a sustainable wayof ma2ing a liing. 5ien the tools and resources, they too can become successful social entrepreneurs.;nly when they can generate a consistent income to guarantee their own financial security, and their ownfamilies- economic stability, are they then willing to use their s2ills and resources to sere others in thecommunity through their social entures. 'Indiidual ownership is the 2ey to sustainable economicdeelopment,( says ic2start, a nonprofit that fights poerty.!4#

ommunity 0embers as Social EntrepreneursIt is common perception that most social entures are initiated by foreigners who see a social problemand decide that something should be done. =oweer, local people cannot and do not rely on the initiatieof foreigners. Instead, local people themseles ta2e the initiatie to deelop their own entrepreneurial

plans of action in response to social problems. 0oreoer, they possess unsurpassed e+perience and2nowledge of their immediate surroundings and needs, and therefore are in a good position to ta2eaction.

A powerful synergy can be created by harnessing the entrepreneurial talent of local people to deelopsocial entures in collaboration with social entrepreneurs from deeloped countries who can proide thefunding and other resources. nite %or Sight, for instance, depends on such a synergy for its successM itcultiates and inests in the talent of local eye care leaders who hae the determination and s2ill to createsocial enterprises that sere their communityFs poorest people. nite %or SightFs partners include5hanaian ophthalmologist 6r. 1homas Baah,who founded Sae 1he @ationFs Sight linic to bring eye
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care to the doorsteps of the rural poor. nite %or Sight is also a partner of alinga Eye =ospital in6hen2anal, ;rissa, India, which was founded by Sarang Samalto proide low cost, high Cuality eye careto some of IndiaFs most difficult to reach patients.

arrus =ayes, a Diberian refugee and the founder of'7ision Awa2e( Africa %or 6eelopment, is anothere+ample of a 'local( social entrepreneur. 1he "$


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Business at the Base of the Hyramid !BoH#

An Introduction".$

1he Base of the Hyramid !BoH# refers to the 3 billion people who earn annual per capita incomes belowK"4//, the minimum considered necessary to maintain a decent life.

BoP/s Latent Market Potentia

1he strength of the BoH mar2et comes from its numbers>

/n fact, given its vast size, %ier D Lthe $ase of the 'yramidM represents a multi trillion*dollar maret.)ccording to 2orld $an pro&ections, the population at the bottom of the pyramid could swell to morethan @ billion people over the next DA years, because the bul of the world1s population growth occursthere.!)#

ompanies that want to tap into this latent mar2et potential must stri2e a balance between profitcreationfor themseles and aluecreation for their consumers at the BoH.

(s (t 0ot 1nethi%a to Se to the Poor*

In order to appeal to the BoH demographic, oer a billion of who lie on a per capita income of less thanKl a day,!#companies must design products and serices that are !sef!!e.g. lifesaing technologiesli2e water filters, mosCuito nets etc.# and affordabe!appropriate cost structure#.!3# It is ethical to sell tothe poor proided that basic reCuirements of usefulness and affordability are met. At the end of theday, )a!e %reationfor the BoH consumers is paramount.

8ealth!tore was running a malaria promotion, including a discount on bed nets. %hey thought they1dhave enough nets to last months, but they sold out in a wee. /t showed us that low*income peoplehave the ability and will ingness to pay for healthcare, something development experts tend to discount.6ot only did customers turn out in droves, but promotions were effective at driving traffic to thefranchises. )t one 8ealth!tore, pre*promotion traffic was about AA customers per month. )fter a series

of promotions, they recorded +,AAA customers per month in steady traffic. $asic business practices worin developing country contexts > all you need is good training and dedicated entrepreneurs.!4#

The B!siness Strategy

2hile commendable as an initial step, most first generation corporate $o' strategies have, in ourview, failed to hit the mar. "rom 6ie1s 2orld !hoe misstep to create an athletic shoe for low*incomemarets to 8industan 4ever1s sachet*pacaged soaps, shampoos, and creams, these strategiesrepresent arm1s length attempts to #uicly tap into a new maret. 'ushing the company1s reformulatedand repacaged products onto shantytown dwellers and rural villagers may indeed produce incrementalsales in the near term. $ut in the long run, this strategy will almost certainly fail because the businessremains alien to the communities it intends to serve.!8#

ompanies cannot ust 'sell to the poor,( or simply transfer firstworld business strategies to a deelopingworld conte+t. Rather, their business strategy must be geared towards the deelopment of products andserices that address the fundamental problems of poerty and sustainable deelopment. BoHcommunities must be regarded as business partners, not ust passie consumers.So instead ofmaintaining an arm-s length relationship, companies must routinely engage in close dialoguewith BoHcommunities to be in tune with local wants and needs.!9#ompanies must create alue for BoHconsumers een as they generate profits for themseles.

@5;s : Hriate ompanies> A Symbiotic Relationship in BoHBusiness"2$
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While @5;s pursue social eCuity, priate companies aim for scale and profits. In fact, both parties canform a powerful alliance to promote these dual aims. @5;s or nonprofits can harness the entrepreneuriale+pertise of forprofit e+ecuties to help BoH clients deelop effectie business enterprises. Hriatecompanies, on the other hand, can hire e+pertise from @5;s to reach BoH consumers.

"or example, Nanone has set up a &oint venture with $angladeshOs 5rameen $an to manufacture andsell bottom*of*the*pyramid dairy products.


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healers, chemical sellers, and local community members who sell glasses because these indiiduals arefamiliar to those in the community. In contrast, many hae neer before met a medical doctor or seenmedical techniCues or surgeries, thereby leading to discomfort and fear about see2ing medical care froma doctor. 1he nite %or Sight outreach teams freCuently encounter patients who hae permanent eyedamage from couching and traditional medicines, while they meet others who hae purchased incorrectglasses prescriptions from nonmedical professionals. nite %or Sight and its partner eye clinics wor2 to

dispel myths about these nonmedical serices while raising awareness regarding the importance ofsee2ing eye care, medication, and eyeglasses only by eye doctors.

Hatients similarly often choose other traditional methods of cure oer medical care proided by doctorsand nurses. %or instance, in Accra, 5hana, where 48/ women die for eery "//, /// births according tothe World =ealth ;rgani*ation, women often turn to prayer camps, where church healers perform healingrituals for a fee of K"/K)/, instead of professional medical care, which is proided at hospitals free ofcharge. According to the 5hana =ealth Serice, only 4N of all delieries are professionally superised,while the remaining 84N use traditional assistance.!"#

So%ia 4ntre-rene!rs Benefit the BoP

By deliering innoatie, technologybased solutions to the BoH, social entrepreneurs enhance the Cualityof life at the BoH. ;ften, this means bringing lowcost, lifesaing technologies to the deeloping world. A

healthcare technologies company,7estergaard %randsendeeloped a mosCuito netthat releasesinsecticide into the enironment !een after multiple washes#, a technology that has been used with greatsuccessat arious African sites to combat malaria. 1he same company also designed aportable waterfilterthat proides safe drin2ing water to millions in the deeloping world, as well as a pipe filtertechnology that remoes guinea worm larae from drin2ing water.

1he company does not proide these useful technologies free of charge to the BoH consumers. Rather,they strie to ma2e them aailable at affordable prices. A portable water filter that can proide safedrin2ing water for a year, for e+ample, costs as little as K4. 0oreoer, arious financing programs ensurethat these technologies reach those who need them the most. Social entrepreneurship thus reolutioni*esthe concept of philanthropy, regarding people at the BoH not as mere recipients of charity but as businesspartners.
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