Home / Opinions / Fostering growth of social businesses

Fostering growth of social businesses

With the choice to focus on Gross National Happiness, Bhutan has chosen to be great instead of big. Through such an approach, the country has become a small giant. As indicated earlier (Kuensel December 8, 2018), this broad policy framework provides tremendous opportunities for leap frogging in terms of Bhutan’s economic development, should the focus be on fostering the emergence and development of social businesses and a fair and just economy.

A social business has a number of interrelated characteristics, which demarcate the major differences with conventional companies that focus on Corporate Social Responsibility and companies that promote Shared Value Creation. The primary focus of a social business is not on shareholders’ value and profit maximisation but on societal impact (blended value). In the context of Bhutan this implies among others, focus on decent and sustainable employment for youth; income generation for poor; respect for the natural environment; and attention for gender equity. 

A second characteristic is, that social business operate through the market with real trade and real paying customers.

Third: a social business is financially sustainable. This implies that the major share of the income should be generated through the market. 

A fourth characteristic is that social business operate on the basis of patient (slow) capital – investors that accept an interest or dividend that is lower than what can be achieved in the regular capital market and that has a longer grace period. This implies that aspiring social entrepreneurs in Bhutan should no longer act as grant seekers, and that the government and international funding agencies may revisit their policy of providing grants and may consider to set-up Social Investment Funds. DFID, for instance, has in the meantime done so, ref the DFID Social Impact Fund). In this context it should be observed that micro-credit is generally not an option for social entrepreneurs: it is too expensive; amounts are too small and repayment periods too short. Moreover, with an acclaimed repayment rate of above 90%, most of the Micro Finance Institutions are risk adverse. 

A fifth characteristic of social businesses is, that such organisations take accountability towards their stakeholders seriously. They report not only about their Return on Investment, but also the Social Return in Investment.

Such an economic policy suggests that the government, civil society organisations and corporate sector raise awareness on social business as a crucial component of the GNH approach; contribute to a conducive environment and institutional architecture in terms of finance, resources, business development support, legal frameworks, educational facilities and support structures; and anchor such an approach with the economic policy framework of the government. It is a challenging, but innovative prospect through which the government can present an example that economic development of a country can be done differently.

 

Contributed by  Fons van der Velden

The author is a pracademic (at Context, international cooperation, Utrecht, the Netherlands) who works in the space between in-between social entrepreneurship, policy development, academic research and teaching.

Check Also

Water Woes: Investments, Infrastructures, Policies and Advocacies 

The expenditure made by the government to address water issues has not translated into the …

Leave a Reply