Social enterprises are needed more than ever amid Covid-19, and Asia is the perfect place for their growth
- Social enterprises, which try to meet social needs through a for-profit business model, are often at the forefront of social innovation
- The region, with its vast wealth and extreme poverty, must tap its considerable resources in philanthropy and investment funds to support innovative business ideas for wider benefit
The study, conducted in late February, revealed that the average turnover of most of the 214 companies surveyed more than halved in January and February compared with the same period last year. Nearly 20 per cent of those surveyed had no revenue at all. Education and training enterprises were the worst affected.
The chamber is calling on the government to give certified social enterprises here, numbering about 500, a handout of HK$80,000 each to help mitigate the impact from the fall in revenues brought on by the coronavirus crisis. But what are social enterprises and why do they matter?
The study is the largest data-driven analysis of early-stage social enterprises and their ecosystems in Asia. It covers six economies – Hong Kong, Indonesia, Japan, Korea, Pakistan and Thailand – with 1.2 million social enterprises between them, and spotlights China and India, which adds an estimated 3.5 million to the total.
We define a social enterprise as an organisation that follows business principles to meet a social or environmental need through a product, service, process or distribution of profit. Take Festyle, a Hong Kong social enterprise promoting healthy eating and women’s employment by recruiting female home-based cooks to prepare healthy, ready-to-cook meals for busy city dwellers.
Or Sehat Kahani, a health provider network connecting underserved Pakistani communities to female doctors using telemedicine. Or Wise Steps, an environmentally conscious, socially oriented travel agency in Indonesia promoting responsible tourism.
Social enterprises endeavour to tackle social needs efficiently and sustainably through market-based models and are often at the forefront of social innovation. They contribute to the growth of local economies, serve the underserved, employ the disadvantaged, and fill gaps in public services.
Today, Asia is at a crossroads. It has one-third of the world’s wealth, and two-thirds of the world’s poor. It may be the fastest-growing continent on Earth, but it is particularly vulnerable to the threat of climate change: 80 per cent of those dislocated by weather disasters in the past decade were Asian.
More than 350 million Asians lack access to electricity and 81 million remain unemployed. Governments alone are not meeting the urgent needs of all citizens, even in affluent cities such as Hong Kong.
The confluence of unprecedented wealth and unmet needs gives Asia both the mandate and ability to leverage the power of social enterprises. There is an increasing recognition of this by governments and individuals in the region.
Governments in the six economies we studied spend US$1 billion annually in direct support for social enterprises (US$100 million), or indirectly by supporting start-ups, and small and medium-sized enterprises more broadly (US$900 million).
Our conversations with government officials yielded different reasons for their interest. South Korea and Pakistan focus on youth unemployment. Hong Kong seeks to engender social inclusion and address poverty. Japan targets regional revitalisation, the elderly and childcare.
Enablers, such as incubators, accelerators, venture philanthropists and networks, can also play an important role in helping social start-ups find their footing, receive general business support and industry mentorship, access funding, and connect with fellow entrepreneurs who understand the long, lonely entrepreneurship journey.
The exemplary Rakuten Social Accelerator in Japan, which leverages Rakuten employees’ skills to support social enterprises, was conceived by Rakuten’s female chief innovation officer.
Financing start-ups can be risky, and this holds true for social start-ups. There is one particular kind of funding that steps in to provide scaffolding at the early stage: philanthropy. Grant funding makes sense when the potential of exponential returns are not part of the value proposition.
There is room for philanthropists and corporations to help plug the gap and add more social enterprises to their grant and corporate social responsibility portfolios.
Impact investment can step in next – but demand far outstrips supply. This is set to change over time as Asian investors step up. Most ultra-high-net-worth individuals we polled were keen to engage in impact investing, but are not fully decided on their risk-return-impact appetite.
By taking a broader portfolio approach to impact investment, investors can include a wider array of social enterprises using a broader spectrum of debt and equity instruments.
As Asia stands at an unprecedented confluence of wealth, opportunity and need, social enterprises, driven by the duality of seeking social impact alongside financial return, are an important part of the way forward.
In Hong Kong, social enterprises address needs and provide services in education, training, health care, biotech, pharmaceuticals and information technology. The time for removing barriers and investing in their success is now.
Mehvesh Mumtaz Ahmed is director of research at the Centre for Asian Philanthropy and Society