The business of positive change
“Profit-seeking is consistent with social
entrepreneurship,” says Pamela Hartigan, the co-founder of the Schwab
Foundation for Social Entrepreneurship and author of ‘The Power of Unreasonable
People: How Entrepreneurs Create Markets that Change the World.’ Hartigan says
social entrepreneurs see the profit motive as a means to the goal of improving
society and not as an end in itself.
“Social entrepreneurs identify
opportunities for social profit where others see only problems,” she explains.
“They are able to develop innovative business models that engage stakeholders
and bring about social change.”
Sharing
journeys
Sharing his experiences at the
event, Jean-Daniel Muller, co-founder of SIEL Bleu, a Strasbourg-based
organisation encouraging tens of thousands of elderly people to stay healthy
through physical activity, says it could have been sold to a for-profit
organisation for a large sum of money. However, the offer was turned down. “We
want to retain our not-for-profit status and reinvest all surplus funds in
growing SIEL Bleu to create greater social impact,” he says.
Another alumnus of the INSEAD Social
Entrepreneurship Programme (ISEP), Majid El Jarroudi, co-founder of Jeunes
Entrepreneurs de France (Young Entrepreneurs of France), says that through a
growing set of partnerships, his organisation can provide training and support
to hundreds of young entrepreneurs living in the suburbs or banlieues of Paris
to help them set up their own businesses. “Young Entrepreneurs is not about
charity; it is about giving a chance to young people to prove themselves.”
Anonymous
Developing
new business models
Filipe Santos, INSEAD’s Academic
Director for Social Entrepreneurship, says the key challenge for social
entrepreneurs is to develop new business models to address social problems and
then grow the ventures beyond their local context to achieve a broader impact
in society.
One new business model linked to
microfinancing is peer-to-peer lending, where individuals in developed
countries lend funds to finance projects in emerging countries.
According to Mads Kjaer, founder of
MyC4, this innovative business model allows individuals to invest in
entrepreneurial projects of their choice and get good interest rates while
facilitating economic development in the target regions. Kjaer, who shares the
millennium goal of eradicating extreme poverty and hunger in Africa by 2015,
says MyC4 today lends close to two million euros to more than 1,250
entrepreneurs in Africa. The organisation was only set up last year. Although
there have been no defaults on loans so far, MyC4 expects a default rate of two
to three per cent over time.
“Diversity is the secret of our
success – the recipe is to minimise risk,” Kjaer says.
Kiva.org takes a different approach.
Its lenders do not receive interest and the organisation relies on networks of
volunteers, as well as local microfinance institutions to disburse funds. Its
default rate is less than one per cent. Jennifer Hamilton, INSEAD MBA alumna
(‘04D) and Kiva’s CFO, says the organisation has lent out more than 30 million
dollars since it was founded in 2005.
Lorenzo Saa, the head of
microfinance at the UniCredit Group and co-founder of MicroRate, a venture
which develops ratings for microfinance institutions, says the key issue
holding back microfinance is the fragmentation and the small size of current
providers. “By engaging individuals and providing a new source of funding,
peer-to-peer models can alleviate the constraints of microfinance institutions
and democratise the market.”
“This will lead to better financing
conditions for entrepreneurs,” he adds.
Doing
business equals doing good
Social entrepreneurs talk about
their organisations as businesses – not charities. They’re not
profit-maximising but profit-optimising businesses seeking social
transformation, with profits being used as a means to an end, says Hartigan.
Social entrepreneurs don’t work with the unemployed, the elderly, or the poor
to fulfil their ‘corporate social responsibility’. “Working with these groups
and providing the kind of goods and services they do, is their core business –
not a public relations afterthought.”
We can no longer divorce where we do
business from where we do good, she argues.
Mainstream business, financial and
political leaders are having to come to grips with emerging trends in value
creation because consumers and voters are increasingly demanding that they do
so.
“You are part of a historical
transition that will culminate with every business, large or small, having to
be a social business,” Hartigan says. “There has never been a more urgent time
for connecting markets and meaning.”
http://knowledge.insead.edu/innovation/entrepreneurship/the-business-of-positive-change-1870
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