Social Enterprise Development
Skeptical about the impact of charity, the philanthropist was keen on trying out a more entrepreneurial approach, with the hope that it could ultimately be more impactful and sustainable. From the very outset, the philanthropist was therefore keen to invest in the creation of a self-sustaining enterprise that would eventually become independent of any donor money within 3 to 4 years of operations.
The philanthropist, after reviewing 8 organizations that we had identified, decided to support a Latin American NGO that sought to establish a social business with the aim of delivering pro-poor products in rural areas through a nationwide distribution network. Within 18 months, the company developed, prototyped, manufactured and subsequently sold its products to hundreds of families in impoverished rural communities.
We identified the opportunity for the philanthropist when the social enterprise was still at its conceptual stage. Furthermore, we have been present on the ground regularly to follow the project’s development and understand its challenges. Through our close working relationship with the NGO, we helped to strengthen the organization’s internal capacity and provide the philanthropist with a transparent picture of the progress of the project and its financial results. Without monitoring and evaluating the situation regularly on the ground, neither the philanthropist nor the social enterprise would have uncovered basic challenges that threatened the success of the endeavor.
The project has managed, in a relatively short period of time, to provide pro-poor solutions and products designed to resolve health and wealth issues in remote rural households. In addition, the manufacture and maintenance of products through locally trained workers provides a source of income for the local communities, some of which have youth unemployment rates as high as 75%, and transfers valuable skills to disenfranchised youth.
The project received immediate attention from the national media and was highlighted in a reputable journal on social innovation. While the development and manufacturing of the products has proceeded well, the organizational capacity struggled to keep pace with the growth of the social enterprise, posing a serious challenge to the further growth and self-sustainability of the social enterprise.
What We Learned
Many social entrepreneurs have earned the trust of the local communities through the delivery of concrete support; this in turn allows them to understand the needs of poor communities better than anybody else. On the other hand, while social entrepreneurs are visionaries and empathetic leaders, they oftentimes lack the basic skills of running a for-profit business. For a social enterprise to be successful, basic managerial tasks such as business planning and accounting are indispensable; thus, it is important that philanthropists pay more attention to these basic yet essential capabilities, and determine how they can best utilize their own human and social capital to remedy these shortcomings in the social enterprises that they support.