By definition, businesses exist to make profits and incorporate any residual concerns about social good as part of their normal profit seeking behavior.

In other words, it is the case that businesses and their owners worldwide are concerned about social good as just being another imperative rather than the reason for their existence. Indeed, the late legendary, Milton Friedman, who is considered as the Father of Neoliberalism, put it, the responsibility of business is business and hence, social concerns come later.

This mantra has been followed over the last two to three decades by generations of capitalists who aver that they are in business for making profits alone and by extension; their businesses are creating social value.

Thus, whether one is a owner or an inheritor of a family owned business, or an executive at a professionally run firm, or for that matter, an up and coming entrepreneur, what they all have in common is a pervasive profit seeking behavior that places social concerns at the bottom despite the increasing tendency world over to make the corporates and business take greater responsibility for their social outcomes of business.

The Rise of Social Entrepreneurship and Why There is a Momentum behind This Idea

Having said that, there is another category of entrepreneurship which exists solely for promoting social welfare.

These entrepreneurs are known as Social Entrepreneurs since they are primarily focused on actualizing social value and social good as opposed to rampant profit seeking.

In other words, social enterprises are those that have the bottom line consideration of positive social good and creating social value instead of existing for profits alone.

It is not the case that these social entrepreneurs do not make profits or do not enjoy the proceeds from their ventures.

Just that their endeavor is to do good for society through their firms and profits generated are usually divided in a just and equitable manner or are reinvested into their firms as part a cyclical process of social welfare.

As can be seen from the discussion so far, social entrepreneurs reflect a growing trend among capitalists worldwide that the time has now come for such people to take society and its welfare seriously.

Indeed, the latest edition of the World Economic Forum in Davos, which is an annual gathering of the business and political elite and movers and shakers in the world, had as its central theme the responsibility of business towards social good and welfare outcomes.

The Pioneer of Social Entrepreneurship: Mohammad Yunus

Some real world social entrepreneurs are Mohammed Yunus of Grameen Bank in Bangladesh who pioneered the concept of Micro Credit or reaching out with money to those who lacked access to formal banking channels.

Through this endeavor, Yunus managed to vastly improve the lives of poor and the underprivileged wherein through provision of credit in small amounts to those lacking established businesses that are needed for documentation and other requirements that are sought by the formal financial sector.

The experiment in social good proved to be so successful that Yunus was awarded the Nobel Prize for his efforts and what more, he became an example and an inspiration for generations of social entrepreneurs to follow his path and work for the betterment of society rather than for individual gratification.

Indeed, this model was adopted by the Government of Andhra Pradesh in India, which launched the SHGs or the Self Help Groups that are outside of the purview of formal credit and instead, were relying on money lenders to borrow for their small businesses.

Thus, it can be said that Social Entrepreneurs reach those who the eminent management expert, C K Prahlad, calls the Bottom of the Pyramid and ensure that society benefits from their ventures.

Bogus Social Entrepreneurs, Technology, and Role of the Government

Having said that, one must also caution that there are many who in the guise of being Social Entrepreneurs often take the system for a ride and make huge amounts of money in the process.

There are countless examples worldwide of so-called social entrepreneurs who racked up massive profits at the expense of the poor and the underprivileged. Of course, we are not saying that Social Entrepreneurship as a concept has failed because of unscrupulous individuals.

Rather, what we are saying is that government’s world over must encourage and nurture social entrepreneurs and at the same time, put in place safeguards that would serve as a system of checks and balances.

In recent years, the increasing adoption of technology at all levels and in all fields of society has given a fillip to social entrepreneurs.

As it is easy to scale up and reap the efficiencies from the economies of scale and at the same time, leverage the synergies from integrating business and social good with technology, there is more than ever a consensus that when used properly, technology can indeed serve society better and encourage social entrepreneurs.

Conclusion

Lastly, whether you are student aspiring to serve society or an established professional looking to follow your passion, social entrepreneurship can help you in realizing your vision and actualizing your mission.

With famous rich business legends such as Bill Gates, Warren Buffett, and NR Narayana Murthy willing to provide seed capital for social entrepreneurs, there is no dearth of encouragement and incubating for them.

Moreover, governments are also helping social entrepreneurs in their endeavors and hence, we are at a Tipping Point as far as social entrepreneurship is concerned.

To conclude, the world needs more social entrepreneurs and the ecosystems are also helpful for them to make a difference to society.

A social entrepreneur is somebody who takes up a pressing social problem and meets it with an innovative or path breaking solution. Since profit making is a secondary objective, therefore they are people who are passionate and determined about what they do. They possess a very high level of motivation and are visionaries who aim at bringing about a change in the way things are.

By definition social entrepreneurs are great people recruiters who present their ideas or solutions in a way that many people, who are either part of the problem or surrounding it, recognise a need for change and get onboard the change bandwagon. Thus mobilizing the masses for bringing about change is a hallmark of a social entrepreneur.

Social entrepreneurs operate with an aim of changing the face of society. Be it health, sanitation, education, they are present everywhere. There are people even who work on bringing about change in the modern innovations because their impact has been detrimental to human life. They thus work towards improving systems, creating new solutions, laying down fair practices.

Some of the very famous people who inspire others to take up social entrepreneurship are:

• Susan B Anthony: was the Co-Founder of the first women’s temperance movement and a prominent American civil rights leader for women’s rights in the 19th century.

• Vinobha Bhave: is a prominent figure in Indian modern history and was the founder and leader of the Land gift movement that helped reallocate land to untouchables.

• Maria Montessori: a pioneer in education. Developed the Montessori approach to early education in children.

• Florence nightingale: she laid the foundation for the first school of nurses and worked to improve the hospital conditions.

• Margaret Sanger: She was the founder and Leader of the planned parent hood federation of America, championed the family planning system around the world.

These are examples of some people who fought for what they believed in and brought about varying degrees of change in their respective spheres of work.

Social entrepreneurship has witnessed a boom in the past few years with more and more people getting attracted to it. There is now a healthy competition and world class graduates are giving up lucrative jobs to work and contribute in meaningful ways towards the society.

As Bill Drayton would say it aptly ‘Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the entire fishing industry’. Such is the passion and the commitment required to be called a social entrepreneur that it may not be misappropriate to say that it is more challenging that traditional entrepreneurship!

Although social business may be carried out in any area but sectors like healthcare, housing, nutrition, education, financial services to the poor and the down trodden remain the priority. Unlike profit making organisations, success in the field of social business is governed by the amount of impact it is able to create or the positive change it has been able to bring in the existing scheme of things.

As mentioned earlier, profit takes a back seat, but organisations into social business are not necessarily disallowed to make profits. Sustainability after all, of both the organisation and the investor, is important and profit makes it possible. There is essentially, but, a cap on the amount of profits the organisation can make and the profits are to be utilised in the business again. Generally, social businesses cannot make profits in excess of the actual investment.

In fact in Social Business, the line between profitability and social contribution is very difficult to maintain and it often so happens that social businesses become profit making organisations after a few years of operation. It therefore calls for renunciation of the corporate ways of thinking, because what may start as a mole may end up becoming a mountain, 5 – 6 years down the line.

The term social business is often confused with social enterprise. Both are similar in many ways, yet distinct in others. In fact social business may be called as a component of social enterprise or one of the ways by which a social enterprise expresses itself. Moreover a social enterprise may receive funds from people, through grants or from the government, a social business cannot.

The concept of Social business was given by Muhammad Yunus, who essentially presented as an alternate model to capitalism. It was meant to overcome the shortcomings and failures of capitalism that focuses only on profit making and ignores or fails to address other sides of business. He created a new system where profit making and social businesses exist simultaneously. Also, the social businesses are not prevented from making profits. They are however not allowed to take dividends and reinvest the money earned as profit in the business to scale operations and give maximum benefit to maximum people.

As opposed to devising means to alleviate poor or a trickle down economic system to alleviate the poor, the concept of social business emphasises an action based system where the poor participates in his/her growth. Prof. Muhammad Yunus used this to create Grameen Bank and disburse money to poor in the form of micro – credit without the condition of giving a property or asset as mortgage. This created opportunity for the poor and allowed for his participation in the free market thereby relieving him of the handicap of relying on the government for grants.

Finally there are two types of social businesses. The first type is the one that purely exists for tackling a social problem. The second type is the one that is owned by the poor and can make profits. The profits can then be distributed between the poor (those who run the business).

Like any other principle, the seven principles of social business define the purpose of a social business and its modus operandi. They outline the priority sectors for any organisation or individual that aims to venture into the field and also define the how the financials would be managed.

1. The first principle of social business defines the purpose of existence for any social business. It states that the business objective for a social business will be to overcome poverty or deal with some problem like education, nutrition, healthcare, environment and enabling technology access for the downtrodden and not just profit or share holders wealth maximization.

2. The second principle talks about the financial and economic sustainability. This is both from the perspective of the organisation and those who it aims to serve. Any social business is disallowed to take funds from outside like grants or NGO. Those who run the business are supposed to invest.

3. The third principle governs the return on investment. Investors in a social business are disallowed to take money beyond their investment. No dividend is given on the investment.

4. Amount earned over and above the investment is supposed to be reinvested back in for scaling the business and for improvement. Expansion here is aimed at reaching out to more number of people or to improvise the quality of services.

5. Social businesses are supposed to be responsible to the well being of the environment. They are to play a major role in betterment of the environment either directly or indirectly. Indirectly means through their operations they will ensure that they do no harm to the environment.

6. Those working with the business as its employees will get a fair compensation, which is in accordance with the industry benchmark. In addition the workforce will get better working conditions.

7. Since social business is not with the objective of profit maximization. Therefore only those who have a passion for contributing to the society and the environment will run a social business. This means that business will run in an environment of joy and not stress.

These seven principles were given by Prof. Muhammad Yunus in collaboration with Hans Reitz who is also the co-founder of the Grameen creative Lab. These principles are very simple in nature and easy to follow. They are important because they draw a distinction between social business and other businesses carried out in the name of contributing to social welfare.

The seven principles of social business are followed world over by organisations that either promote or run social businesses. Ashoka, the Omidyar network, NIKA water company in U.S, Grameen Bank in Bangladesh are examples of such organisations.

The major difference between the financial capital and social capital is that the latter fosters positive relationships and thus enhances the fulfillment and the confidence. Even after having so many benefits, social capital can also produce some unwanted results. Yes, it is surprising but true that when we analyze the other side of social capital, we may find that it can put burdens on the society.

Let us discuss how social capital can be detrimental to the society and can bring about the negative consequences.

Social capital producing negative outcomes is generally called as negative social capital. The potential downsides include restrictions on individual freedom, excess claims on group members and exclusion of outsiders. Additionally, instead of focusing on creating the bond between the two worlds – rich and poor, it emphasizes on bridging the gap between them. The result is that it is deepening the gap between the two. It also puts a barrier in social mobility.

Individuals working in social enterprises need to abide by certain rules and regulations and are supposed to do only what is expected. Their personal development and new ideas in most cases are not welcome. In such a scenario, it gives a sense as if it were creating unwanted results. Though every feature of social capital produces desired results but along with this, it also produces a liability too.

Social capital is all about bridging the gap between the rich and the poor. Yes, it definitely improves the economic conditions of the poor but also increases the gap between the two. The individuals who are benefitted by social capital almost lose their mobility. There is a slight change in their condition but they are stuck in the same employment all through their life. Apart from this, outsiders are totally excluded. It means that benefits of social capital can be availed by only a particular section of the society.

Robert D. Putnam, the author of ‘Bowling Alone’ links social capital to the decline in American political participation. According to him, the political institution and democracy are overpowered by the social groups and this lead to the adverse outcomes.

In normal circumstances, it isolates certain communities from rest of the world but social capital group which is extremely strong can become the reason for the isolation of a particular ethnic group from the society.

Later works of Robert D. Putnam also emphasize on the fact that the rise of social capital can also result in increased racial diversity in communities. The negative effect of social capital can also be seen in society. Earlier, women did not vote at the similar levels as that of men but the difference between them is almost diminishing.

Social capital is available to all types of communities regardless of their nature and slowly it is becoming a way for women to participate in local politics. Now the scenario is that they are more engaged in politics and have an informal way to operate.

What is negative is not their participation in politics but it is their way that is keeping this activity off the radar. They are not focused on national or international politics.

Apart from this, there are several other negative effects of social capital in the field of internet, civil society and educational achievements.

The concept of social capital also stresses that social networks lead to increased productivity in individuals, teams and organizations. This increased productivity can be both financial and otherwise. This means that social contacts can lead to increase in confidence, fulfillment by fostering positive relationships. The essence being that just like any other capital form (human, physical, financial) social capital is also important and beneficial to the sustenance of society.

The term social capital has been used in varied forms in various disciplines. World Bank, for example, uses it to define societal and economic development. Corporate pundits similarly use it to mean an approach of organisation development. Judson Hanifan championed the use of social capital. He used it in his discussions of rural school community centers. He promoted the importance of social intercourse among people for building goodwill and sympathy among fellow members and to promote cooperation.

Later on Jane Jacobs, Pierre Bourdeiu and James S. Coleman contributed from time to time in the development of the concept. Robert D. Putnam worked extensively later and it was his work that extended the idea of social capital to research and policy making discussions.

Barriers to Creation of Social Capital

There can be a multitude of reasons that can act as barriers to social capital creation or development. These factors vary across geographies and cultures. For example in developing or third world countries social networks remain nucleated around family and identity. There is little or no social capital creation across families and castes. This is on account of the mistrust between two families or strata that is detrimental to the very idea of social capital.

There is a strong body of evidence that goes to suggest that social capital leads societies and individuals to prosperity economically and allows the development to be stable. World Bank believes that social capital when utilized properly can enhance the efficacy and sustainability of projects. This they believe can be achieved through a collaboration of communities’ efforts and its ability to work together. It also promotes greater transparency in the overall system, fosters a better bonding and increases the overall accountability.

Application of Social Capital

The concept of social capital has gained significant ground as a means of enhancing overall quality and effectiveness specially those that involve large scale community action. Many organizations have designed practical constructs to make the idea feasible. World Bank, for example, developed Social Capital Implementation framework (SCIF). This was designed to access how social capital could be made use of in operations.

For social capital to be practically feasible it can be broken down into 5 elements both at practical and operational level. They are

1. Groups and Networks
2. Trust and Solidarity
3. Collective action and Cooperation
4. Social Cohesion and Inclusion
5. Information and Communication

These elements are important to the development of social capital and provide guidelines in the area at various levels of operation. By effectively breaking down into these 5 layers, each one can be administered separately and incorporated into operations.

Since social enterprises typically deal with people who live at the bottom of the pyramid, therefore they are the ones who are benefited to benefit hugely from the former. In other words social enterprises are beneficial to the poor, generally by providing them with a means of livelihood.

Since social enterprises do not work typically the way corporate setups or private firms work, they offer flexible working environment which is as per the liking of many people groups. This employment may be both short term and long term in nature or it may specially targeted to a specific workgroup or a geographic community or to people with disabilities. Self Employed Women’s Association (SEWA), for example, offers various kinds of assistance to self employed poor women.

There are advantages of a social enterprise that are entrepreneur specific like:

1. Social entrepreneurs find it easier to raise capital. There are huge incentives and schemes from the government for the same. since the investment industry here is ethical, it is easier to raise capital at below market rates.

2. Marketing and promotion for these organisations is also very easy. Since a social problem is being tackled with a solution, it is easier to attract attention of the people and media. The degree of publicity often depends on the degree of uniqueness of the solution.

3. It is easier to garner support from likeminded individuals since there is a social side to the enterprise. It is also easier to get people onboard at lower salaries than compared to other industry.

Similarly there are advantages that are specific to the environment, society and the people concerned. Some of them are as under:

1. Services in whichever section they may be offered are customized better to suit the needs of the individual or the problem. This is also designed in harmony with all other systems like the environment, society or the people.

2. Cost effectiveness is another advantage of a social enterprise. The solutions offered by these organisations in the form of either products or services are reasonable than compared to the same service provided by a profit making organisation. No wonder basc amenities like healthcare, education etc have become very affordable to people world over with the help of these institutions. Micro finance, for example, today caters not to the poor but to the poorest!

Although lots of organisations have also made corporate social responsibility an integral part of their business functioning but not many actually mean to create a difference. It is just a means to achieve more profits; there is an increasing need to watch out for the same and help and advocate those who really aim to add value.

The Skoll Foundation – North America

Founded by Jeff Skoll, the first president of ebay, the Skoll Foundation supports the social enterprises and highlights their work by establishing their partnerships with Sundance Institute and NewsHour with Jim Lehrer. NIKA Water Company is another social enterprise in America. The company sells bottled water in the country and brings clean water to the developing world with its profits. It uses its 100 percent profit in the activity.

Grameen Bank – Bangladesh

Social enterprise is not a new concept but it started becoming popular only in 1960s. There may be different rules and regulations for social enterprises around the world but their basic concept remains the same. Their ultimate aim is to serve the people of the society who are at the bottom of the pyramid. In Bangladesh, Muhammad Yunus incorporated the Grameen Bank, a microfinance organization that makes small loans to people living in rural areas without requiring collateral. The bank does not believe in charity but in offering help to people as an initiative to break through the poverty cycle.

Echoing Green – USA

Based in New York, Echoing Green is a non-profit organization that operates in social sector investing. For last twenty years, it has been working in this field encouraging and helping young entrepreneurs to launch new organizations.

Rang De – India

Rang De is a not profit online organization in India that lends small loans to individuals planning to start a new or grow their existing business. It is a successful attempt to bring together the two parts of India one of which is successfully progressing while one is left out due to shortage of resources. Founded in the year 2006 by Ramakrishna NK and Smita Ram, Rang De, today is a major online platform in the country.

Schwab Foundation for Social Entrepreneurship

Founded by Professor Klaus Schwab and his wife, the main purpose of Schwab Foundation for Social Entrepreneurship is to promote social innovation. The foundation does not give grants but addresses social problems and provides platforms at the country, global and regional levels.

Omidyar Network

Established in 2004, the Omidyar Network is a philanthrocapitalist investment firm that fosters economic advancement. With a network of for-profit companies, the network encourages participation in the areas of government transparency, microfinance, social media and property rights. Headquartered in Redwood City, California, it was established by Pierre Omidyar and his wife Pam.

In recent years, prominent among the revolutions in personal finance and savings has been the rise of microfinance or microcredit as it is also known as.

To understand how this works, picture yourself as a small businessperson (you can be a farmer with a marginal landholding, a woman with a home based business or a group of small businesspeople) who is in need of finance but in amounts that are considered negligible by mainstream banks and financial institutions.

What happens is that because of the lack of small credit avenues, you would be forced to borrow from the local moneylender at exorbitant rates of interest which would leave you poorer than richer at the end of the day.

Further, considering that most small businesspeople do not have collateral such as titles to their meager property and other forms of assets, even those institutions that are in a position to offer them credit would think twice because neither the borrower has a credit history nor is any asset pledged as collateral.

Microfinance and Microcredit to the Rescue

This is where microfinance and microcredit institutions enter the picture as these agencies often with governmental backing in implicit and explicit forms make it a point to lend the small amounts that such entrepreneurs need.

Indeed, as the success of this trend shows, more often than not, all that is lacking for the aforementioned segment is access to small capital which was hitherto denied to them. Not anymore as most Third World countries now have established microcredit institutions for the express purpose of lending to the poor and the marginalized and make it a point to lend only to them.

The microcredit revolution has been pioneered by the Nobel Laureate and Bangladeshi entrepreneur, Mohammed Yunus who with his Grameen Bank ensured that those at the “Bottom of the Pyramid” have access to credit in a manner that is easy, without red tape, and on terms that are congenial and favorable to the borrowers.

The Microfinance Revolution in the Third World

Traditionally, governments were unable to find resources especially in the Third World which they could channelize to the small entrepreneurs as well as had to face resistance from established banks and financial institutions who pointed to the abysmal record of repayment.

Microcredit has found a way around the criticism that small entrepreneurs default on their loans by ensuring that groups of such small entrepreneurs receive loans wherein each of them stand guarantee for the others. In this way, the microcredit agencies ensure that they are making loans to a pool of borrowers instead of individuals alone.

Moreover, microcredit agencies also make it a point to lend for shorter durations as well as encourage repayment by educating and enlightening the borrowers of the advantages of credit repayment and further access to funding.

Some Notable Failures and Lessons for the Future

Having said that, it is not the case that microcredit has been an unqualified success all over the Third World.

For instance, in the state of Andhra Pradesh in India, there has been a spate of failures of reputed microcredit agencies wherein because of mismanagement, fraud, and over stretching their limits to force the borrowers to repay, these agencies ran afoul of the regulators leading to a full blown crisis in this sector.

The lessons from this debacle are that just like the Central Banks and the Regulators monitor traditional and mainstream banks and financial institutions, they must also regulate the microcredit agencies.

Moreover, the government must also ensure that both the credit disbursement and repayment adhere to strict norms wherein the tendency to become over greedy either by the agencies or the borrowers is contained and instead, a balanced approach is adopted.

Suggestions to Improve the System

Despite these failures, microcredit has indeed ushered in a revolution among the poor and the underprivileged in many Third World countries.

Some of the suggestions that experts have made to improve this further include broadening the base of borrowers by including artisans, and even medium scale enterprises as well as cooperatives so that following the principle of group lending, there can be an attempt to foster greater discipline as well as tighter procedural norms in the process.

Apart from that, the other suggestions include enhancing the skills of the small entrepreneurs so that they do not become stuck in the same skill based work for which they have taken the loans and risk stagnation.

In other words, the aim is to ensure that the process becomes scalable, repeatable, and improves with each iteration.

Self Help Groups (SHGs) as Success Stories

Another aspect of microcredit is that once the borrowers achieve scale, they are in a position to access funding from traditional sources as well as setting an example for other borrowers and potential borrowers who would emulate them in terms of fiscal discipline and repayment.

Moreover, by encouraging the formation of Self Help Groups or SHGs wherein each member of the group is given a seed capital and the group as a whole receives funding, these SHGs are then encouraged to rotate the seed capital among themselves as well as fund future growth from their revenues and accruals from past activities.

As the name implies, these groups are catalyzed by the government or the microcredit agencies to help themselves and help the whole system in the process. Some of these groups can be found across India and other parts of Asia wherein with the seed capital and the initial funding, they have been largely able to stand on their feet and set an example for other groups to follow.

The aim of social entrepreneurship is to promote the cause of social and environmental goals that have an impact in either in the present or the times to come. Such entrepreneurs are generally a part of or associated in some way with some nonprofit organisations (NGO’s). Although profit making is also as aspect of this concept but it may not be the sole purpose of the organisation.

Andrew Mawson worked extensively upon the concept of social entrepreneurship and extended the same to bring about reform in the community structure. He also laid the foundation of the Bow center in east London. For this he was conferred upon the peerage of Lord Mawson and he works for developing partnerships for regeneration work initiated by him.

Social entrepreneurship is relatively a new term. It came in to notice just a few decades ago. But its usage can be found throughout the history. In fact, there were several entrepreneurs who established social enterprises to eliminate social problems or bring positive change in the society. Vinoba Bhave, the founder of India’s Land Gift Movement, Robert Owen, the founder of cooperative movement and Florence Nightingale, founder of first nursing school and developer of modern nursing practices might be included in this category. They had established such foundations and organizations in 19th century that is much before the concept of Social Entrepreneurship used in management.

There were entrepreneurs during nineteenth and twentieth centuries who made efforts to eradicate social evils. Apart from this, there are many societies and organizations that work for child rights, women empowerment, save environment, save trees, treatment of waste products, etc. Apart from addressing the social issues, social entrepreneurship also includes recognition and addressing the environmental problems and financial issues for rural and urban poor.

These days, the concept of social entrepreneurship has been widely used and that too in different forms. The establishment of Grameen Bank by Muhammad Yunus, Ashoka: The Innovators for the Public by Bill Drayton, Youth United by Jyotindra Nath, Rand De by Ramakrishna and Smita Ram, SKS Microfinance by Vikram Akula and Roozi.com by Nick Reder, Brent Freeman and Norma La Rosa has popularized the term.

In fact, all big brands and companies are adopting the concept of social entrepreneurship and trying to address the issues in our society by opening schools in far flung areas, educating women for family planning, making it possible for farmers and poor individuals to access low interest credits, establishing plants for waste treatment, planting trees and going green.

The concept of Social Entrepreneurship has also been included as a separate branch of management courses. Even youth is also looking forward to volunteering their services and brilliant ideas to bring a social change through social entrepreneurship.