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Hong Kong social enterprises on an upward trajectory

Social enterprises (SEs) are seen as an innovative way of tackling various issues which concern the community by setting up new businesses which usually operate on a not-for-profit basis. For nearly a decade, various stakeholders have been actively developing this concept in Hong Kong and to date the city probably has the highest number of social enterprises per capita in Asia.

 

Social enterprises (SEs) are seen as an innovative way of tackling various issues which concern the community by setting up new businesses which usually operate on a not-for-profit basis. For nearly a decade, various stakeholders have been actively developing this concept in Hong Kong and to date the city probably has the highest number of social enterprises per capita in Asia. But what remains unclear is how many of the entrepreneurs behind these initiatives are able to maintain the early enthusiasm and momentum and how many of these enterprises have been turned into a self-supporting venture.

“Hong Kong’s social entrepreneurship is quite advanced in terms of numbers and marketing, compared with neighbouring economies in Asia,” says Kee Chi-hing, adjunct associate professor at Hong Kong Baptist University and a member of the Home Affairs Bureau’s Social Enterprise Advisory Committee.

To back this up, Kee notes that, with around 450 SEs and a population of just over 7 million, Hong Kong is ostensibly doing better than Singapore which has roughly 170 SEs for a population of 5.4 million.

However, according to a survey by the DBS Social Enterprise Advancement Grant 2014, only 35 per cent of such businesses are making a profit, while 32.5 per cent achieve breakeven and the remaining 32.5 per cent operate at a loss. These findings are in line with other research done last year by the Centre for Entrepreneurship at the Chinese University of Hong Kong (CUHK). It showed that 62 per cent of the 174 local SEs surveyed were profitable or at breakeven in 2012.

Diamond Cab, a Hong Kong start-up providing point-to-point transportation for wheelchair users, is one of those social enterprises that was able to break even within a year of starting operations in 2011.

Initial costs were high in having to buy five wheelchair-adapted vehicles from Japan, pay taxi licence fees, and incur other administrative costs. The plan, though, was to target customers who could afford fares starting at HK$115 and the company has since expanded its revenue stream with income from taxi advertising and organising events. For instance, the annual Diamond Sedan Competition now attracts corporate sponsorship and registration fees range from HK$5,000-35,000.

In offering round-the-clock services, a particular challenge is finding customers during the late shift.

“Current usage is mainly driven by demand for commuting to clinics and hospitals,” says chief executive Doris Leung. “To add an aspect of entertainment to the life of wheelchair users, we organise events to encourage them to go out for leisure activities and offer a means of transportation too.”

Also an executive director of Social Ventures Hong Kong, Leung has noticed that the private sector is increasingly interested and proactive in supporting local SEs. For example, DBS Bank has allocated HK$2 million in each of the last two years to support SE expansion through training, job creation, branding and other relevant activities.

“Investors in SEs value the projects’ social impact more than the monetary return,” Leung says.

Another successful enterprise, Dialogue Experience, formerly known as Dialogue in the Dark Hong Kong, achieved revenue of HK$16 million in 2012. It hires individuals with visual impairment to provide experiential training and entertainment for corporate and individual clients. Among other events, the company has organised concerts and dinners in the dark and now plans to offer a “silence experience” by diversifying its pool of employees to include individuals with impaired hearing.

Dialogue Experience chief executive Antony Pang sees no need to prioritise profitability over social impact or vice versa.

“It is important for SEs to develop value for money business offerings which the market is willing to pay for,” he says. “Customers will not come back if they choose your brand simply based on empathy.”

Even so, Diamond Cab and Dialogue Experience are in a minority among local SEs. They are neither registered charitable organisations nor supported by government funding. And according to the CUHK research, only 37 per cent of Hong Kong’s SEs are registered as companies.

As early as 2005, the Commission on Poverty promoted SEs as a way to enhance the eventual self-reliance of the able-bodied unemployed and create other positive outcomes. In line with this, the government currently offers a range of funding support including the 3E’s Project, otherwise know as the Enhancing Employment of People with Disabilities through Small Enterprise Project. Other funds exist to support community investment and inclusion, partnerships for the disadvantaged, enhancing self-reliance, and social innovation and entrepreneurship.

Baptist University’s Kee has also conducted research on the social return on investment of SEs and other poverty alleviation measures in Hong Kong. His view is that such enterprises should prioritise social return on investment over profitability, since cost-effectiveness of a well run social enterprise is seven times higher than comprehensive social security assistance as a means of poverty alleviation and nearly twice as good as employee retraining schemes.

Table 1: Density of Social Enterprises in the United Kingdom, Hong Kong, Singapore and South Korea

Table 2: Overview on Hong Kong’s Poverty Alleviation Policy

*  The average duration of employment of those who can land a job is 10 months. As such the total income is $7,600 per month times 10 months.

** The average monthly salary of a job created by the 3E project is HK$ 6,246 per month. As the median life span of the SEs under the 3E’s Project is 9.3 years, the total income should be 9.3 years time 12 month per year = 111.6 months, rounded up to 112 months.

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