Social Entrepreneurship: Meaning, Challenges, and Strategies by Hamza El Fasiki

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In this very time, there is always a way to know about the most stubborn problems in the world and ways to be acquainted with the actions being held to address them. Globalization has modeled the way we see things around. And to this very point, we have had enough chance to hear about talented people and the way by which they tackle social problems.

When considering the following Chinese Proverb: "give a man a fish you feed him for a day. Teach a man to fish you feed him for a lifetime" we understand that the Chinese wisdom has taught us the importance of moving from the simple act of giving to the difficult act of teaching.

Social Work is an example of that switch from helping as simple act to the most administered and complicated act of social leadership.

But how can we make it enough self-sustainable with charity? How would social leadership create a utile tie between doing and lasting?

Consequently, we started considering new types of divisions: not only people who have access to help and sustainability, but people who have no idea that help and sustainability are accessible.

The switch from social activism to sustainability necessitates a coherent tie between the actual social actions and their durable feasibility. The need for urgent socio-economic equity urges the innovation of a new approach by which social individuals can manage to merge their social and economic abilities.

Hence, this new accepted wisdom is forming a new concept of business operations. Therefore, new emerging organizations are taking the shape of what is known today as Social Entrepreneurship.

As it lies on it new arena, social entrepreneurship needs more clarification especially about the combined genes it seizes. And because it is an innovative approach between entrepreneurship and social change, it has been roughly blurred to map the field in its own.

This new entrepreneurial culture questions the hardship of using the language of business in dealing with extreme social difficulties.

It should be stated that social entrepreneurship is a porte-manteau term that covers both social intelligence and leadership skills. However, when the idea of business is included, tensions come into sight.

In this vein, business, as an operational field, puts into inquiry the risk of merging two separate worlds: Business and Society.

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Entrepreneurship, despite all its sorts, has demanded a lucid bind between the definite premise of business operations and their actionable engagement within social measures. Yet, a variety of academic commitments have shown the importance of promoting a practical bond between entrepreneurship and people.

To this very point, social entrepreneurship as a specific case is partially hooked by those replications. Hence, a great amount of need is set up to create awareness on how possible it is to create social change via modes of entrepreneurial actions.

While handling such a view, it is still possible to mull over the significance, by means of innovation, of creating a new generation of entrepreneurs blended with new untapped market segmentation.

Not only social entrepreneurship is creating a fresh age group of entrepreneurs but also new entreprenrial opportunities, new market breaks, and new arranges of value creation.

It is on this path that social entrepreneurs are facing the requirement of extra academic commitments, further engagements, and farthest understanding.

This book aims at investigating the different notions surrounding the concept of social entrepreneurship. This concept has been, and it is still, an instrument of social change within developing countries. This aim will be carried out though analyzing a corpus of the very ways that social entrepreneurs opt for to change societies. Thus, creating a mutual understanding of the field shall ignite others to think of how business, as a lucrative filed, though this is narrow, can be turned into a strategy for social wealth.

In terms of its components, this book will not be concerned with a certain case study; yet, it will be tackling the possible meanings, challenges and strategies; all in a theoretical framework. In this, a deep study has been conducted via academic commitments, personal experiences, and direct supervision.

Within the first chapter, a variety of working definitions, theoretical meanings and introductory clarities have been served to enhance the paper and to make it more acquainted with the possible meaning this book seeks.

Questioning the nature of the concept and its agents is one of the inquiries tackled in this part. To grasp that blurring expression of

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social entrepreneurship, this chapter clarifies on the similarities and differences between business and social entrepreneurs.

As for the second chapter, the book concerns itself more with the building-blocks of any nonprofit. Those core notions represent, indeed, the challenges that social entrepreneurs meet while being confronted with running ventures with social missions.

Having said so, social entrepreneurs are hampered with the challenge of creating communal consideration from within their ventures.

Because social entrepreneurs tend to perform in a more sustainable collaborative form of activities, it has become a must for them to fundraise, scale, and measure the determined social impact and turn it into a monetary account.

Least but not last, the third chapter considers the very ways that social entrepreneurs hold to create social wealth, i.e. strategies for alleviating poverty. These innovations that those leaders create help enhance the life of a humble amount of people within the Base-of-thePyramid.

For this part, there shall be an outlet to discuss the attachment of business with impoverished communities. This connection is entrepreneurially practiced on what has come to be called Microfinance at the BOP. Surrounded by this approach, Microcredit, Microfranchising, and MicroConsignment shall be the center of attention in the chapter.

Abbreviations like BOP, NE, and MCM stand for the Bottom-ofthe-Pyramid, Necessity Entrepreneurs, and the MicroConsignment Model, respectively.

Terms such as; social ventures, social enterprises, social business, organizations, hybrid firms are all synonymous to nonprofits.

This book will not be concerned more with defining each by turn.

However, it puts them into the context of social entrepreneurship.

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Throughout recent history, social entrepreneurship has marked an extraordinary imprint in the world of business. The Idea of social entrepreneurship is a new emerging field of business operations where entrepreneurs combine the excitement or passion of social mission with business-like ventures. It is because of those joint genes that social entrepreneurship is a very new concept that needs more understanding.

It is safe to state that thanks to social entrepreneurship new opportunities, new markets and new values are taking shape.

Social entrepreneurship means different things to different people, it could mean an organization that starts for-profit and ends nonprofit. For others, it could refer to any entrepreneur who would start up a nonprofit organization. Some would believe that social entrepreneurs are those business owners who simply integrate social responsibility in their operations.1 Still, these are vague!

What does social entrepreneurship really mean?

What does it take to be a social entrepreneur?

Before tackling these, a quick look at the origin and meaning of the term ‘entrepreneurship’ shall help grasp gradually the idea of social entrepreneurship.

1 “The Meaning of Social Entrepreneurship” by Greg Dees, Duke University Working Paper

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A quick consideration of the rich history of the term gives hints to early French economics (17th – 18th C.) where the term actually originates from. Thus, the meaning has evolved ever since.

In its narrow definition, entrepreneurship simply means starting up a business. Yet some believe that is goes further than this.

In French, the verb ‘entreprendre’ means someone who undertakes an effective project. Entrepreneurs, in this context, are taken for business leaders who seek new methods for economic progress..2 Yet, entrepreneurship in all its definitions sets itself within the context of the behavior it does3. This kind of behaviors includes: a)Taking the initiative b)Forwarding economic and organizing and reorganizing them, and c) Accepting risks and failures.

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Academic interests on the field of entrepreneurship made it much richer with dozens of different definitions that often turn around certain common key terms such us; initiative, risk taking, change, wealth, innovation and opportunity. To some scholars, the idea of entrepreneurship is not conditioned upon classes but simply a personal will to go successful.4 For further understanding of the term, the most famous theories on the term entrepreneurship shall help consider some of the meanings this book seeks.

Chief among key figures on defining the term ‘entrepreneurship’ is the French economist Jean Baptist Say in his theory on the notion of value creation.

In this he says that “The entrepreneur shifts economic resources out of an area of lower into an area of higher productivity and greater yield”5

2 “The Meaning of Social Entrepreneurship” by Greg Dees, Duke University Working Paper p: 1 3 Hisrich, PhD, Robert D., Michael P. Peters, PhD and Dean A. Shepherd, PhD. Entrepreneurship. 6 Ed. New York: McGraw-Hill Irwin, 2005 4 A Closer Look, Aspen Institute. :ĂŶƵĂƌLJ ϮϬϬϵ ͚ ŶƚƌĞƉƌĞŶĞƵƌƐŚŝƉ͛ 5 “The Meaning of Social Entrepreneurship” by Greg Dees, Duke University Working Paper. Origins of the word “entrepreneur” p: 1

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For Say, entrepreneurs create value. Economic resources and the creativity of the entrepreneur are what make the mission easy to reach.

Joseph Schumpeter, in his theory on innovation and change agents, says that “The function of entrepreneurs is to reform or revolutionize the pattern of production” 6 He believes that entrepreneurs, regardless to the type of business they run, are the ‘change agents’ who exploit untried methods.

They open new opportunities and forward the conventional patters of economic production.

Up till now, the Say-Schumpeter theory is based on the partaken point that entrepreneurs simply start profit-seeking businesses.

Still, the term ‘entrepreneurship’ in its common parlance encompasses more than this. However, it would be true to say that the tradition of the Say-Schumpeter has helped future economists progress their use of the concept of entrepreneurship.7 Peter Drucker, by his turn, in his theory on the pursuit of opportunity, says that “The entrepreneur always searches for change, responds to it and exploits it as an opportunity”8 For Peter, entrepreneurs do not cause change but rather seek the change that they exploit to make into an opportunity. This move from seeking change to exploiting the opportunity makes Drucker credited with giving the term ‘entrepreneurship’ its new facet. It is thanks to Drucker that contemporary writers in management and business can use the concept of opportunity. Today, Say‘s notion of value creation is often mixed with Drucker’s notion of opportunity.

Again, Peter expands the idea, but this time he would argue that starting a business is not the work of only entrepreneurs. In this he says that “not every new small business is entrepreneurial or represents entrepreneurship” He exemplifies it by stating that a” husband and wife who open another delicatessen store or another Mexican restaurant in

6 Ibid. Origins of the word “entrepreneur” p:1 7 Ibid p: 1-2 8 Ibid. Current theories of Entrepreneurship p:2

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the American suburb” is not par-default entrepreneurial. As he points it, there is nothing new or innovative in opening a store or whatsoever. His assumption could be implied also in new non-profit organizations.9 In his theory, Howard Stevenson adds the element of resourcefulness in the term ‘entrepreneurship’. In this, he comes to differentiate between entrepreneurial management and administrative management.

The entrepreneurial management, as Stevenson says, is “the pursuit of opportunity without regard to resources currently controlled” More specifically, he says that what makes the difference in management is whether those entrepreneurs only see and pursuit an opportunity, the fact which eludes administrative managers, or they free themselves from any resource endowment which, if they do so, limits their capacity form being entrepreneurial managers.

Stevenson conducts the idea of resourcefulness to determine that entrepreneurial managers are not subjects on the market opportunity. He believes that entrepreneurs can mobilize their resources according to the need they seek. Stevenson says that” their search exceed their grasp”10

9 Ibid.

10 Ibid.

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Itâ&#x20AC;&#x2122;s the creation of innovative solutions to persistent social problems. It is the application of the creativity and imagination of entrepreneurship for social good, rather than private wealth creation. That could include inner city education, eradication of poverty or dealing with climate change. 11 In one of his attempts to define social entrepreneurship in a 10 minutes presentation12, Dr. Brett Smith, Assistant Professor and the founder of the centre of Social Entrepreneurship at the Miami University in Oxford Ohio, Considers the following Chinese proverb; "give a man a fish you feed him for a day. Teach a man to fish you feed him for a lifetime" But, Dr. Brett expands this proverb using one of the most trusted quotes on social entrepreneurship to say that social entrepreneurs would neither give a fish nor teach how to fish. Indeed, "Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry." Bill Drayton13. And that what social entrepreneurship is exactly about.

Again Dr. Brett Smith introduces a working definition of social entrepreneurship. In this, he highlights four main components14: a) Innovative: adapting creativity and imagination within specific contexts and situations. b) Marginalized: power channels that are seen as opportunities and not problems. adding changes among c) Social Value: marginalized places. d) Sustainable Systemic Change: holistic complete change often in a long-time scope.

11 Tom Robinsonâ&#x20AC;&#x2122;s interview with Dr. Brett Smith as it appears on Green Was Ten. Sustainable is now. Sustainability and social entrepreneurship, The New Greens. May 2008 issue of The Green Tree Gazette p: 24 12 http://www.vimeo.com/16631680 retrieved on 15 January 2011 13 Bill Drayton, American Social Entrepreneur, Founder of Ashoka. As it appears on http://www.betterworldheroes.com/drayton.htm retrieved on 12 May 2011 14 http://www.vimeo.com/16631680 retrieved on 15 January 2011

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Also, one of the best ways to define social entrepreneurship is to focus on how it would address a need in a market discipline that serves only business entrepreneurs.

Often the term social entrepreneurship goes side by side with the notion of social problems. How come? The notion of social in here means any social problem; being it poverty, joblessness, education, corruption, clean water or even access to electricity- the list might be endless.

Much of the work that is done to define social entrepreneurship deals with the term in a social-problem-based approach. That is to say ``social entrepreneurship involves the creation of innovative, sustainable solutions to immediate social problems with an emphasis on those who are marginalized or poor`` 15 But this is too broad for a definition. The use of social entrepreneurship in this context implies an affection of change in impoverished communities; that is to say, developing countries.

Still, is social entrepreneurship really limited to the orb of poor regions? Muhammad Yunus, the world’s leading social entrepreneur, founder of the revolutionary Grameen Bank, pioneer of microfinance, and winner of the 2006 Nobel Peace Prize, uses the idea of social entrepreneurship as a vehicle for the creation of social change in the most marginalized places in the world.16 Most of the works done to define social entrepreneurship revolve around the most shared theme that`` social entrepreneurship is motivated by the aspiration to achieve some socially desirable objectives``17 The work of Zahra and others introduces the notion of the ``Construction of Social Wealth`` This theory assumes that ``Social

15 James A. F. S., & Charles W. (2007). /ŶŶŽǀĂƚŝǀĞ ƉƉƌŽĂĐŚĞƐ ƚŽ ZĞĚƵĐŝŶŐ 'ůŽďĂů WŽǀĞƌƚLJ͘ / W͘ Reducing Poverty Through Social Entrepreneurship, the Case of Edun by Brett R. and T. F. Barr (2007) p: 27 16 http://www.youtube.com/watch?v=jk5LI_WcosQ retrieved on 15 Juin 2010 17 James A. F. S., & Charles W. (2007). Innovative Approaches to Reducing Global Poverty. IAP. Brett R. and T. F. Barr (2007)p: 29

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wealth is defined as the social value generated minus direct economic and opportunity costs incurred`` 18 Having said so, all the above-mentioned attempts to define social entrepreneurship agree on one of the most repeatedly trusted definition of social entrepreneurship. It is ``the process related to the discovery of opportunities to create social wealth and the organizational processes developed and employed to achieve that end``19

18 Ibid.

19 Zahra et al.2006, p: 11 from Brett R. and T. F. Barr (2007) p: 29

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Can anyone be aspired to be a social entrepreneur?

In their works on defining social entrepreneurship, Say, Schumpeter, Drucker and Stevenson assume that the behavior that those special leaders hold to address social problems is what makes them entrepreneurial. Anew, what makes the difference between a business leader and a social sector leader is actually the action they do.20 In his `idealized` definition of social entrepreneurship, J. G. Dees puts forward a focus on social entrepreneurs and their work21. As stated; “Social entrepreneurs play the role of change agents in the social sector by: a) Adopting a mission to create and sustain social value (not just private value), ¾ Social entrepreneurs have a social mission that leads them to value creation. b) Recognizing and relentlessly pursuing new opportunities to serve that mission, ¾ Social entrepreneurs use a unique lens to see problems as opportunities to explore. c) Engaging in a process of continuous innovation, adaptation, and learning, ¾ Social entrepreneurs have the capacity to innovate approaches that help keep their mission straight. d) Acting boldly without being limited by resources currently in hand, and ¾ Social entrepreneurs are bold to the extent that they can mobilize their sources without being limited by their inputs. e) Exhibiting heightened accountability to the constituencies served and for the outcomes created” ¾ Social entrepreneurs connect investors and community needs in feasible untried methods.

20 “The Meaning of Social Entrepreneurship” by Greg Dees, Duke University Working Paper 21 Ibid p: 4-5

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The exemplification of these characteristics determines the degree of social entrepreneurship and how its agents fit to be entrepreneurial.

In their book The Power of Unreasonable People, J. Elkington and P. Hartigan (2008) assume that the focus should not be on who are those social entrepreneurs in the sense of putting a standard issue of them. However, they accept as true the action which social entrepreneurs take.

In this vein of actions, social entrepreneurs are species of a rare breed of leaders who share the same characteristics. i.e., they have the ability to explore their capacity of innovation, resourcefulness, practicality and opportunism. Social entrepreneurs explore new ideas that are often turned into or established as new innovative ventures or business models.

Social entrepreneursâ&#x20AC;&#x2122; delightful contribution appears on those new creative approaches on delivering products, goods and services. It is not about the making of the `Deal` that social entrepreneurs care about but rather the achievement of that `Deal` which helps social entrepreneurs operate in longer scopes of time22.

Social entrepreneurs often put their behavior into operational ventures that prime social returns of investments over the financial returns. For e.g. social entrepreneurs are eager to target marginalized populations that suffer from, often, poverty, health and education. `Ten Characteristics of Social Entrepreneurs` puts a list of the most shared 10 characteristics of social entrepreneurs.23 The list detains the common characteristics of social entrepreneurs. In this vein, there are different terms that revolve around, and thus construct, those characteristics. To be precise, practical solutions, innovation, resourcefulness, opportunity, belief, capacity, social development and determination are the entire core and the basic that capture the common characteristics of social entrepreneurs.

ĎŽĎŽ The Power of Unreasonable People by J. Elkington and P. Hartigan, Harvard Business Press: Boston, MA. 23 Ibid. p: 5

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The standards of commercial entrepreneurs are, to a certain extent, very different from those of social entrepreneurs. The practices and the culture they hold toward their operations split them into different categories of productive capabilities.24 The nonprofit sector, where social entrepreneurship fits in, has been a vital welfare whose nature changes with the changes of the government; all about ideological roles.25 Still, what are the differences between commercial and social sectors in the context of entrepreneurship?

The most deep interconnected differences are to be found in both the nature of the value being created and the type of the opportunity being pursued.26

24 â&#x20AC;&#x153;Toward a better understanding of social entrepreneurship: some important distinctionsâ&#x20AC;? By Jerr Boschee and Jim McClurg 2003 p: 5 25 Understanding Social Welfare by Ralph Dolgoff and Donald Feldstein. Sixth Edition 2003 Pearson Education, inc.

26 James A. F. S., & Charles W. (2007). Innovative Approaches to Reducing Global Poverty. IAP. Reducing Poverty Through Social Entrepreneurship by Brett R. and T. F. Barr

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D 9DOXH &UHDWLRQ It is safe to say that commercial entrepreneurs focus on the achievement of private economic gain. In addition to this, commercial entrepreneurs seek entrepreneurial activities where financial rewards exist.

According to Austin27 in business entrepreneurship “the primary focus is on economic returns while in social entrepreneurship, the focus is in social returns” Unlike business entrepreneurs, social entrepreneurs seek to achieve a possible social value that makes people get better. While commercial entrepreneurship is focused on economic value; social entrepreneurship, on the other hand, is motivated by social missions.

However all is not true, sometimes.

What differentiates social entrepreneurship from the conventional entrepreneurship is the purpose.

While conventional entrepreneurship is economically driven, social entrepreneurship creates social value.

However, this does not mean that economic value cannot be realized from business arms of social enterprises 28 Sometimes business entrepreneurs contribute some social value via operations that create for e.g. new job opportunities. Still, these opportunities are only a byproduct rather than the actual intended purpose of the driven mission. Similarly, social entrepreneurs sometime find themselves creating economic value throughout their operations.

However, this economic value is only a means to an end – creating social change – rather than the end itself.

27 Ibid. Austin 2006, p: 6 as mentioned in the following part : Differences in Commercial and Social Entrepreneurship p: 32 28 Laura Orobia Lecturer, Department of Leadership and Governance Makerere University Business School, P. O. Box 1337, Kampala - Uganda

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E 7\SHV RI 2SSRUWXQLWLHV Getting hooked on different sorts of value creation, it is pardefault that commercial and social entrepreneurs seek different types of opportunities.

In the work of Austin and others29, the primary difference lies on the nature of the opportunity which entrepreneurs pursuit. This nature, when getting discovered and explored, plays an important role in motivating the entrepreneur to hold a particular action.

In entrepreneurship, the nature of opportunity is the main motivator for entrepreneurs to do what they are supposed to do. More specifically, social entrepreneurs have that capacity to see problems as opportunities. While business entrepreneurs see profit in the most profitmaking places and markets, social entrepreneurs see poverty (i.e.

Bottom-of-the-Pyramid) as an opportunity to be explored.

All in all, the value creation and the types of opportunities that entrepreneurs hold, in spite of their status, are two determining components that set their nature apart.

29 Austin and others 2006, as mentioned in the following part : Differences in Commercial and Social Entrepreneurship by Brett R. and T. F. Barr (2007) p: 32

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In a world of a market that mostly serves for-profits, social entrepreneurs need to put a well-clarified strategy that makes it easy for them and for others to see the path of success. Nonprofits have their mission that keeps them up in their strategies. Yet, is it critical for them to have a well-structured strategy that redirects them from: a) b)

What they want to achieve, and How they will achieve it?

In the context of identifying the organization’s most needed priorities, it is essential to have clarified what success looks like and how this would be turned into that defined success. All is related.

In their article ‘Zeroing in on impact’ in the fall 2004 edition of Stanford Social Innovation Review, Susan Colby, Nan Stone, and Paul Carttar put it this way; “intended impact and theory of change provide a bridge between a non-profit’s mission and its programmatic activities”30 As a way to define their reason for being, non-profit organizations have to have a mission statement. But, this is too broad to specify their What and How strategies.

In terms of practicality, intended impact and theory of change do not seem to be that concrete. Indeed, they simply help the organization’s leaders see the operational fields where they make their actions. The coherence that intended impact and theory of change create between the What and the How strategies is what makes it utile while setting a business plan for any non-profit.

Intended impact and theory of change play an important role in turning the abstract operational strategies into concrete set of activities.

Some nonprofits start by identifying their intended impact while others start by stating their theory of change31. Either beginning is that pertinent.

However, the organization should ask questions that keep the flow between intended impact and theory of change cycling. By logic, it is impossible for a business to identify what is the deal without stating how it will operate in that deal, and vice versa.

30 “Zeroing in on Impact” by Susan Colby, Nan Stone, & Paul Carttar, Stanford Social Innovation Review. p: 26 31 Ibid.

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While getting expanded and growing programmatically, nonprofits must work on developing Strategic Clarity32 that holds them inspired enough to keep their mission.

To have a clear idea on the importance or the level of linkage between intended impact and theory of change, this chapter shall consider each per se.

32 Ibid.

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In its definition, intended impact is a statement or series of statement about what the organization is trying to achieve and it will hold itself accountable for within some manageable period of time. It identifies both the benefits the organization seeks to provide and the beneficiaries 33 One of the characteristics that intended impact should have is being actionable. Thus, the feasibly that nonprofits tend to achieve leads them to asking considerable questions.

In the light of what is does, an actionable intended impact ties, considerably, the mission with the vision for social change. Also, it spells out the outcomes and provides enough control over them. Accountability in this context is a result of that well-afforded control. Thus, intended impact must create clear atmosphere for achievability and measurability.

For organizations to clarify their intended impact, they should ask the following questions34:

Who are our beneficiaries?

What benefits do our programs create?

How do we define success?

What won’t we do?

What would make us obsolete?

33 Ibid. p: 30 34 Ibid.

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In its definition, theory of change explains how an organizationâ&#x20AC;&#x2122;s intended impact will actually happen, the cause-andeffect logic by which organizational and financial resources will be converted into the desired social results. Often an organizationâ&#x20AC;&#x2122;s theory of change will take into account not only its own resources but also those that others bring 35 Theory of change, by its turn, is supposed to put the intended impact into action. As a matter of fact, theory of change is expected to be very coherent. In that sense, it should indentify the needs of the selected category of beneficiaries and articulate the most significant powerful points to address those needs. Via a chain of cause-and-effect, theory of change should link the beneficiariesâ&#x20AC;&#x2122; requests to the solutions. Lastly, it has to be remarkably credible.

For organizations to clarify their theory of change, they should ask the following questions36: Â&#x192; What is the cause-and-effect logic that gets us from our resources (people and dollars) to impact? Â&#x192; Where are the gaps or leaps of faith in this logic chain? Â&#x192; What are the most important elements of our programsâ&#x20AC;&#x2122; content and structure? Â&#x192; Are there other ways in which we could achieve the desired outcomes? Â&#x192; What is the minimum length of time our beneficiaries need to achieve these outcomes?

35 Ibid. p: 28 36 Ibid.

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In her working draft on theory of change, Stacey Childress, a lecturer at Harvard Business School, initiates a note on theory of change as a basis for class discussion where she differentiates between the actual theory of change and its descriptive logic model. In this, she says that “theory of change is explanatory..... The logical model is descriptive...”37 The way she gets to put her idea is as below;

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In her work, Stacy Childress puts forth a question that all organizations should ask in their theory of change, specifically in their logic model.

She says: Why do you believe this set of inputs, deployed in that set of activities will result in specific short-term outputs that will lead to medium-term outcomes that, over time, will create lasting impact? 38

37 “A Note on the Theory of Change Concept” by Stacey Childress, Harvard Business School. P; 2 38 Ibid.

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The way she gets to put her idea is as below;

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Whatever model they use, and whether they set up their ventures as for-profits or nonprofits, even the most successful entrepreneurs can soon find themselves on a nonstop treadmill where they spend every waking moment chasing money 39 Convincing investors to invest in organizations that are driven by social missions has been confirmed to be a very hard task to do; especially for those social entrepreneurs who seek financing. It is mainly because of the fact that social enterprises mostly combine genes of non-profits and those of for-profits.

Investors are very serious when it comes to giving their money to those non-profits. Although some social entrepreneurs have made it perfect in their business plans to attract enough funders, it is still hard to convince them (investors) to invest their money without any worries.

Social entrepreneurs are now aware that the criterion any social entrepreneurship-funder sets up is the only way to assure answers to their requests. Appealing to these standards is the only way-out to the funding gap.

Social entrepreneurs are often able to raise start-up capital ranging from $100.000 to $250.000 from foundations, business plan competitions, fellowships, friends and family, angel investors, or sometimes even small venture funds. But when it comes to raising money to grow their social enterprises$250.000 to $2 million or more- social entrepreneurs have had less success 40 Starting up social businesses seems very easy to do - the availability of finance in start-ups. Yet, social entrepreneurs do not find the next steps

39 The Power of Unreasonable People by J. Elkington and P. Hartigan, Harvard Business Press: Boston, MA. P:55 40 â&#x20AC;&#x153;The Funding Gapâ&#x20AC;? by Michael Chertok, Jeff Hamaoui and Eliot Jamison, Stanford Social Innovation Review. P: 46

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easy to making the enterprise upon its legs. Though, when it comes to starting a social enterprise, social entrepreneurs have to make efforts in order to fit in the criteria of social enterprises fund-raising.

What makes it much more complex is the fact that most todayâ&#x20AC;&#x2122;s investors, in all their forms, know that not every social enterprise merits funding. In this, social entrepreneurs even know that the market for such opportunities is very competitive. Social enterprises and investors are two expressions of not even a one experience.41 Another reason why social entrepreneurs find it hard to attract enough modest funds is their unspecified position between being a real non-profit and a real forprofit.

)LJXUH 6SHFWUXP RI 6RFLDO DQG )LQDQFLDO 5HWXUQV 6RFLDO (QWHUSULVHV IURP ZLWKLQ The spectrum highlights the major points that make most social enterprises problematic in their narrow sense. Accordingly, due to the above-mentioned challenges that social entrepreneurs face when attempting to raise money, one clear idea often crops up to facilitate the

41 Ibid.

42 Ibid. p: 47

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tension and to make solutions. Is creating Hybrid Firms the best solution for them? Does the Blended Value really give hints to facilities?

By communicating two distinct but related organizations- one non-profit and the other for-profit- social entrepreneurs seek easyreached paths of financing that appeal to both philanthropic and commercial funders. The interrelated relationship between the components of those Hybrid Firms is based on the Blended Value as provided by Jed Emerson43 .

The blended value, in its narrow understanding, is simply achieving both economic success while maximizing social benefits. To realize this vision, companies must have accounting systems that serve the augmentation of conventional accounting.

In California Management Review in the article ‘Guidelines for Social Return on Investment’ by Alison Lingane and Sara Olsen, they suppose that Standard Social Return on Investment (SSROI) is the key way to fully realize that vision of hybrid firms. The SSROI describes the social impact of a business’s operations in Dollar terms.

While all organizations attempt to create value of one kind or another, the central premise of the blended value proposition is that value is itself a combination, a “blend” of economic, environmental and social factors, and that maximizing value requires taking all three elements into account 44 Blending economic, environmental and social factors all within economic hits is the starting point that governs hybrid organizations. Most funders, in all their forms, favor those blended value-based organizations. The Blended Value, indeed, seeks to foster our understanding of value creation.

In spite of all these problems, social entrepreneurs at least have found their way out in the recent years.

43 Jed Emerson has contributed lots of roles with some of the nation’s leading venture philanthropy, community venture capital and social enterprises. See: http://www.blendedvalue.org/about/emerson.html retrieved on 28 May 05 2011 44 ‘Blended Value Executive Summary’ 2003 p: 1, By Jed Emerson and Sheila Bonini

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Again, much of the works done in that vein have provided solutions to the filling in of the financial gap. There are two lists that shall help understand the scope of solutions that social entrepreneurs opt for.45 The 1st source of capital is Direct Investors; individuals and institutions that invest money directly in social enterprises. The 2nd source of capital is Intermediaries Investors; shareholders that invest other people’s money in social enterprises.

45 “The Funding Gap” by Michael Chertok, Jeff Hamaoui and Eliot Jamison, Stanford Social Innovation Review. P: 48 and 50

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Angel investors: wealthy individuals who provide start-up funds.

Philanthropic missions.

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institutions

with

charitable

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International development agencies: agencies that provide direct loans to low-income countries.

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Social venture capital funds: organizations with a focus on social and environmental criteria within enterprises.

Community development financial institutions: institutions that invest and give loans to low-income communities.

International Small-and-Medium-size Enterprise organizations that help SMEs within developing countries.

(SME):

Venture philanthropists: diverse group of a one socially intended impact.

Specialized foundations: small but growing groups providing individuals with expertise.

Socially Responsible (SR) mutual funds: organizations that invest in for-profit social enterprises that are publically recognized.

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Scaling social impact has become a major challenge for â&#x20AC;&#x2DC;social entrepreneursâ&#x20AC;&#x2122;â&#x20AC;Ś By social entrepreneurs, we mean individuals who start up and lead new organizations or programs that are dedicated to mitigating or eliminating a social problem, deploying change strategies that differ from those that have been used to address the problem in the past 46 While specifying the mission of the enterprise, social entrepreneurs have to specify their systematic strategic path of scaling social impact as well.

It is obvious that the position of those nonprofits, which is between lucrative and social, meets the challenge of expanding social impact.

When being financially supported, social entrepreneurs start their businesses in a very optimistic way that often leads them to enriching their mission. Yet, how can social entrepreneurs scale their social impact?

In social entrepreneurship, one of the most important and vexing challenges is how to expand the scale, scope and geography of effective social innovations. Upon the discovery and exploitation of an effective social innovation, social entrepreneurs often consider how to grow or expand the social value of the organization, a practice commonly referred to as scaling of social value 47 Scaling social impact means maximizing or expanding the social impact of the nonprofit to be spread elsewhere48. There are lots of factors that

46 Scaling Social Entrepreneurial Impactâ&#x20AC;&#x2122; by Paul N. Bloom Aaron K. Chatterji working draft 2009. P: 2 47 Promise of Leadership Conference SOCIAL ENTREPRENEURSHIP PLENARY â&#x20AC;&#x153;Delivering on the Promise of Leadershipâ&#x20AC;? by Professor Brett Smith 48 James A. F. S., & Charles W. (2007). /ŜŜŽÇ&#x20AC;Ä&#x201A;Ć&#x161;Ĺ?Ç&#x20AC;Ä&#x17E; Ć&#x2030;Ć&#x2030;Ć&#x152;Ĺ˝Ä&#x201A;Ä?Ĺ&#x161;Ä&#x17E;Ć? Ć&#x161;Ĺ˝ ZÄ&#x17E;Ä&#x161;ĆľÄ?Ĺ?ĹśĹ? 'ĹŻĹ˝Ä?Ä&#x201A;ĹŻ WĹ˝Ç&#x20AC;Ä&#x17E;Ć&#x152;Ć&#x161;Ç&#x2021;Í&#x2DC; / WÍ&#x2DC; â&#x20AC;&#x153;Reducing Poverty through Social Entrepreneurshipâ&#x20AC;? by Brett Smith and Terri Feldman Barr

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make it challengeable for social entrepreneurs to scale their innovations.

One of these factors is geography. 49 Scaling social impact can be gained through three important approaches50: a) Replication of sustainable business models: illustrating that the model is possible to spread. b) Evolution of subbrands (see the case of Edun 51 ): realizing other markets that can generate plausible utile impact. c) Integration of the nonprofit’s supply chain: integrating the beneficiaries within the supply chain so that they can get new opportunities from within the line of production.

In their thinking of scaling social impact, social entrepreneurs think not of competitive activities but rather cooperative forms of activities. The willing to allow others to replicate the same business model helps changing attitudes and thus changing social actions. In this, i.e. Grameen Bank has allowed other banks to adopt the microfinance strategy.52 Defining the innovation is the most effectively transferable way of scaling social impact53. As a way to define their innovations, social entrepreneurs need to specify the nature of their ventures, the way it will help spread the innovation and how it will be accepted in other communities.

There are three main ways to define an innovation54, and in this, some social entrepreneurs consider either one of these: Being framed as;

49 “Different types of social entrepreneurship: the role of geography and embeddedness on the measurement and scaling of social value" by Brett R. Smith and Christopher E. Stevens.

50 James A. F. S., & Charles W. (2007). /ŶŶŽǀĂƚŝǀĞ ƉƉƌŽĂĐŚĞƐ ƚŽ ZĞĚƵĐŝŶŐ 'ůŽďĂů WŽǀĞƌƚLJ͘ / W͘ “Reducing Poverty through Social Entrepreneurship” by Brett Smith and Terri Feldman Barr 51 Ibid. see the case of Edun as a for-profit social entrepreneurship venture.

52 Ibid.

53 “Scaling Social Impact” by Greg Dees, Beth Battle Anderson, and Jane Wei-Skillern, Stanford Social Innovation Review. P:27 54 Ibid.

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a)an Organizational Model : structures for mobilizing people and resources to serve a one common purpose b)a Program: set of actions that revolve around achieving a one specific purpose ( for example: workshops), and c) set of Principles: guidelines or values on how to address a one given purpose ( these are mostly based on a set of pillars) These forms are the most effectively proven ways for social entrepreneurs to expand their impact, spread it and get it bigger as well.

Sometimes some of these forms are found in one type of entrepreneurial practices. Yet, the choice of social entrepreneurs often falls into one of them. These forms are ways to crucially achieve success, and effectively package the innovation to spread in other places.

When the innovation is defined in the context of one of these forms, social entrepreneurs get able to set up a decisive factor by which they compare the definition selected for their innovations with their actionable plans. If the definition fits to the action, then success is gained.

But what is the critical specification of the innovation that social entrepreneurs select? In other words, how do they spread the impact?

In this vein, social entrepreneurs have to take into consideration the elements that determine, either generally or specifically, their innovations to be spread and implemented in various places.

Apart from considering different ways to define their innovations, how do social entrepreneurs highlights the multiple mechanisms for spreading the impact? Indeed, this blurring questionable position has had great contributions by writers in managements and social business. Scholars have provided a set of three mechanisms for spreading social impact.55

55 Ibid. p: p: 28-29

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a)Dissemination: active provision of information and assistance b)Affiliation: formal agreement between two or more parties such as the case of franchising, and c) Branching: creation of local sites via a one large organization.

All in all, the core strategy for scaling social impact is fully based on mixing those mechanisms with those forms of defining innovations.

In this, it is affirmed that “replicating programs that do not produce results is at best waste of precious social resources and at worse a source of active harm to the participants”56 When being confronted to a variety of choices and options to successfully scale their social impact, social entrepreneurs need to find a one specific path that can lead them to implement those abovementioned choices and options.

Social entrepreneurs can rely on the Five R’s as a logical path. The following chart includes the Five R’s: Readiness, Receptivity, Resources, Risk, and Return.57

56 “Going to Scale” by Jeffrey Bradach, Stanford Social Innovation Review. P: 20 57 “Scaling Social Impact” by Greg Dees, Beth Battle Anderson, and Jane Wei-Skillern, Stanford Social Innovation Review. p:30

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5HDGLQHVV: social entrepreneurs are requested to have an objective evidence of success. This means the understanding of the definition of innovation and the knowing of the critical elements of the innovation. In other words, the innovation has to be ready to spread.

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5HVRXUFHV: social entrepreneurs should bear in mind that a plausible plan of resources is required within scaling strategies. Also, the notions of reducing costs Vs preserving effectiveness are two decisive terms to be taken into consideration.

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5HWXUQV: serving people is an assessment task that should be done well. Providing high-quality services is a determining point of social entrepreneursâ&#x20AC;&#x2122; booming results.

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Introduced in ‘SCALERS’ as an acronym, Paul Bloom and Aaron Chatterji 58 present a conceptual model of seven organizational capabilities that support successful scaling of a social entrepreneurial impact: Staffing, Communicating, Alliance-building, Lobbying, Earningsgeneration, Replicating, and Stimulating market forces.

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“The effectiveness of the organization at filling labor needs…with people who have the requisite skills for the needed positions, whether they be paid staff or volunteers” p: 5

E &RPPXQLFDWLQJ “The effectiveness with which the organization is able to persuade key stakeholders that its change strategy is worth adopting and/or supporting” p: 7

c) $OOLDQFH-Building “The effectiveness with which the organization has forged partnerships, coalitions, joint ventures, and other linkages to bring about desired social changes” p: 9

G /REE\LQJ “The effectiveness with which the organization is able to advocate for government actions that may work in its favor” p: 11 e) (DUQLQJV *HQHUDWLRQ “The effectiveness with which the organization generates a stream of revenue that exceeds its expenses” p: 13

I 5HSOLFDWLQJ “The effectiveness with which the organization can reproduce the programs and initiatives that it has originated” p: 14

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58 Scaling Social Entrepreneurial Impact’ by Paul N. Bloom Aaron K. Chatterji working draft 2009

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“The effectiveness with which the organization can create incentives that encourage people or institutions to pursue private interests while also serving the public good” p: 16 Scalers are the measurements of the effectiveness that social entrepreneurs seek to achieve within their operation-to-operation basis.

The initial idea behind the scalers is to obtain an evaluative entrepreneurial organizational plan of the interaction with external parties of the nonprofit. Bringing sources together and creating mutual understanding of the nonprofit’s back-bock assures the effectiveness of replicating the innovation.59 Partially related to scaling social impact, measuring social impact is another decisive point in the completion of the scaling. When social entrepreneurs are able to measure their social impact, it gets easy for them to mull over replicating it elsewhere. The measurement of social impact guarantees the likelihood of social impact expansion. Yet, how do social entrepreneurs measure that very deep intended impact statement? How do they translate the social impact into monetary value?

Fortunately for business entrepreneurs, measuring their financial impacts seems a very easy task to do. However, this is not the case for social entrepreneurs.

Although a number of guidelines and reporting standards have been advanced since the early 1990s, no framework has been articulated for quantifying the value of a company’s impact on people and the environment 60 The various ways that social entrepreneurs use to measure their impact on people and other social components are very problematic to the extent that few standards have been introduced to tackle that problem.

Yet, the Standard Social Return on Investment (SSROI) has been articulating a very determining paradigm for measuring social impact and turning it into an accountable or a financial value.

59 Ibid. p:5 60 “Guidelines for Social Return on Investment” by A. Lingane and A. Olsen, California Management Review. p: 116

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Today, poor people the world over are seeking opportunity and choice to have greater dignity in their lives- and they want to do it themselves, even if they need a little help. Today we have the tools and technologies to bring real opportunities to people all across the world 61 The base (or bottom)-of-the-pyramid is a term that represents the population of the world that primarily lives and transacts in an informal market economy 62 The idea behind creating markets at the BOP was born after the confusion between the immensity of needs with the poor populations and the reality of their demands.63

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61 The Blue Sweater: Bridging the Gap between Rich and Poor in an Interconnected World. By Jacqueline Novogratz. prologue p: xiii 62 THE BASE-OF-THE-PYRAMID PERSPECTIVE: A NEW APPROACH TO POVERTY ALLEVIATION TED LONDON William Davidson Institute & Ross School of Business University of Michigan. p:1 63 Revue française de gestion. Entreprises et pauvretés. Volume 36, numéro 208.209novembre/décembre 2010 64 http://www.baseofthepyramid.nl/index_en.html retrieved on 16 Juin 2011

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The stimulation of investment within the Bottom-of-thePyramid can help create a more positive business scenario where the poor can play an enhancing role in the emerging markets. By entering BOP markets, entrepreneurs can gain another source of benefits where they can both maximize profits and change societies. Taking the plentiful status of the world's poor populations into consideration necessities the creation of a market that serves the most marginalized communities. â&#x20AC;&#x153;Improving the lives of the billions of people at the bottom of the economic pyramid is a noble endeavorâ&#x20AC;? 65 Yet, How can social entrepreneurs engage themselves on those untapped new BOP markets? How can they make the most of those markets as opportunities?

Prahalad and Hammond 66 as a way to answer these questions, focus on the importance or advantages of serving the poor.

These advantages lie on the gaining of â&#x20AC;&#x153;a new source of revenue growth, greater efficiency, and access to innovationâ&#x20AC;? 67 In this, Social entrepreneurs are often aware that growth has to be on their list.

Because the BOP markets are in their early stages of economic developments, it has been easy for social entrepreneurs to see them as new sources of growth.

However, there are many challenges that social entrepreneurs bear in mind. CEOs should, first, start changing their preconceptions on the BOP markets, analyze the new untapped fields of innovation, and address the local needs of those markets.

65 Serving the Worldâ&#x20AC;&#x2122;s Poor, Profitably by C.K. Prahalad and Allen Hammond Harvard business review September 2002. P: 4 66 Ibid.

67 Ibid. p: 6

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If you ask a person in a poor place what they need most, they will tell you that it is a way to make more money. The way to address the challenge of persistent poverty is to create sustainable income-earning opportunities for millions of people. Income is development 68 In BOP markets, the most fundamental concern of social entrepreneurs lies on the alleviation of poverty from the world in a way that sounds more business-like. Nevertheless, social entrepreneurs know that the perspective of the BOP markets is quite different from other marketbased poverty alleviation.

In the core of finding strategies to serve people at the BOP, it has become a necessity for social entrepreneurs to base their perspective on the value creation. This latter has to address both people at the BOP and the venture itself; indeed, both are interrelated.

Helping poor people stabilize their financial situation by providing goods and services are instances of social actions within BOP markets. 69 Thus, two new introductory approaches have been introduced by Rangan70 to social entrepreneurship at the BOP; that is to say: “BOP as consumer” and “BOP as producer” However, what are the strategies for serving BOP markets?

MarketͲbased approaches for serving lowͲincome communities are growing in popularity. Yet what the field still needs is a greater appreciation of the strengths and weaknesses of various strategies and business models 71

68 Martin Fisher, Co-Founder & CEO, KickStart Director 69 Prahalad & Hammond, 2002 70 The- Base-Of-The-Pyramid Perspective, A New Approach To Poverty Alleviation by TED LONDON William Davidson Institute & Ross School of Business University of Michigan 71 Ibid. taken from Brett R. Smith, Ph.D. Founding Director, Center for Social Entrepreneurship Miami University 3rd Research Colloquium on Social Entrepreneurship University of Oxford June, 2010 PPT Slides

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In this vein, there are three approaches to poverty alleviation as cited by Dr. Brett R. Smith 72 in the 3rd Research Colloquium on Social Entrepreneurship University of Oxford, June 2010. They are: a) Poor as consumer hypothesis: where poor people get access to goods, b) Poor as producer hypothesis: where poor people are engaged to enhance their situations, and c) Poor as entrepreneur hypothesis: where poor people get into real entrepreneurs.

The last hypothesis seems to have a need to be addressed more. In micro-business, entrepreneurs are of two73: a) Opportunity Entrepreneurs; who become entrepreneurs after a personal choice. Wealthy people are a good example. And, b) Necessity Entrepreneurs; who become entrepreneurs after a lack of choices. People at the BOP are a good example. Most of Necessity Entrepreneurs become so through the imitation of others.

This last category of entrepreneurs; NE, is the concern of the BOP. And for the sake of this chapter, three main approaches will be tackled to analyze the very ways that social entrepreneurs hold in order to serve poor populations within the Base-of-the-Pyramid.

In that light, Microcredit, Microfranchise, and MicroConsignment Model are the modes of approaches for the BOP markets.

ϳϮ Founding Director of the Center of Social Entrepreneurship at Miami University Oxford Ohio 73 “A Good Business for Poor People” by Lisa Jones Christensen, David Lehr, and Jason Fairbourne, Stanford Social Innovation Review

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Microcredit is the practice of extending small loans to people in poverty so that they can start small businesses and develop savings.

It is the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans 74 The practice of providing micro-loans to people at the BOP has been proved to be an innovation of great eminence. The immense effect it gives to the poor has changed societies over recent history. The easiness of adapting microcredit provision as a mode of social entrepreneurial actions makes the world of the poor very revolutionary.

Poverty was not created by the poor, but is rather a result of the socioeconomic system we have designed for the world. The poor are victims of the very institutions that we have built and feel so proud of 75.

Muhammad Yunus, the world’s leading social entrepreneur, founder of the revolutionary Grameen Bank, pioneer of microfinance, and winner of the 2006 Nobel Peace Prize, demonstrates factors that prove the pure reasons behind poverty. It is on that socioeconomic interaction between conventional banking and poor where roots of creating poverty exist. On the upper contrary side of the BOP lies the top of society where fault, therefore, ignites itself.

Strategies of BOP and Grameen Bank are two expressions of one meaning- that is to alleviate poverty. Poverty as ’Distant History’76 is a feasible reality that Yunus envisions. For him, reconstructing traditional economic frameworks to serve the poor is conditioned upon changing perspectives and concepts. Indeed he seeks to create a new socioeconomic system, in the sense of simply reusing that system, which transforms the world of finance. In this, for his vision, “redefining

74 Micro credit Summit, 1997MICRO taken from CREDIT & GRAMEEN BANK: A NEW APPROACH TOWARDS DEVELOPMENT by Sadik Hasan. P: 46 75 “Credit for the Poor” by Muhammad Yunus, Harvard International Review. p: 20 76 Ibid. p: 24

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traditional notions of credit, reaffirming self-employment, and creating social businesses”77 can bring positive changes for the poor.

Grameen Bank is Yunus’s personal project (launched during the 1970s) what makes that project very successful is its ability to achieve two distant concepts:

The ‘Efficacy’ of microcredit, and The ‘Reliability’ of the poor

The project stands for a testimony to the alternatives, which are available and based on risks, as ways to renovate conventional banking. This latter often excludes the poor, while in microcreditbased banks, the poor is the only raison-d’être.

But what is the strategy that Grameen Bank and other microcredit-based banks select?

At Grameen Bank, Muhammad Yunus has tried to reveal that “credit for the poor can create self-employment and generate income for the poor.” 78 Microcredit strategies are innovative in their narrow sense. It is that financial support that Grameen Bank (as an example) gives to the poor to turn them into real entrepreneurs who can stand by themselves and generate their own regular income; thus, they become self-employed. In its limited definition as cited by Dr. Brett R. Smith79, microcredit is” the access of credit often used to pursue selfemployment”80 Heading for a status of NEs, the poor enjoy a wide range of changes that help them contribute to their own development.

Microcredit as a solution seems to be very new to the extent that it needs more thinking when implemented in those new untapped BOP markets. Still, with a strong strategy, all get facile.

77 Ibid. p: 21 78 Yunus, 2007: 54 taken from Brett R. Smith, Ph.D. Founding Director, Center for Social Entrepreneurship Miami University 3rd Research Colloquium on Social Entrepreneurship University of Oxford June, 2010 PPT Slides ϳϵ Brett R. Smith is Assistant Professor and the founder of the centre of Social Entrepreneurship at the Miami University in Oxford Ohio 80 Brett R. Smith, Ph.D. Founding Director, Center for Social Entrepreneurship Miami University 3rd Research Colloquium on Social Entrepreneurship University of Oxford June, 2010 PPT Slides

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At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the overall development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable 81 As for Muhammad Yunus, there are two main strategies that Grameen Bank selects; a) Elimination of difficulties: bureaucracy, inaccessibility, collaterals. And, b) Designing a new concept of loan: possible loan conditions, facilities ( the bank goes to people and not the contrary) As termed by Muhammad Yunus, `Social Business` is a new concept that brings the exact solution for that extreme problem of poverty. It is an innovative way to run private businesses for the sake of poverty alleviation.

Having said so, Muhammad Yunus tends not to create new designs and new systems but rather to reuse markets in a way that serves the BOP. What makes â&#x20AC;&#x2DC;Social Business` very unique is its status that does not, necessarily, fit in charitable sectors. Rather, it is very competitive and collaborative to the extent that new enterprises contend to get in those new BOP markets.82 On the other side of the effectiveness of microcredit, new modes of entrepreneurial actions do emerge to complete, if not to fix, what the provision of microloans as lone could not reach.

Other micro-actions within the world of finance take place within the BOP; all is thanks to Muhammad Yunus.

81 Micro credit Summit, 1997MICRO taken from CREDIT & GRAMEEN BANK: A NEW APPROACH TOWARDS DEVELOPMENT by Sadik Hasan.p: 46 82 The Electronic Journal of Sustainable Development (2009) 1(3) Creating a world without poverty: Social business and the future of capitalism By Muhammad Yunus Review by Per L Bylund and Mario Mondelli.

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Microfranchising is a development tool that leverages the basic concepts of traditional franchising, but it is especially focused on creating opportunities for the worldâ&#x20AC;&#x2122;s poorest people to own and manage their own businesses 83 The emergence of the field of microfranchising and its new operational tools, if linked to microfinance context, is a way to complete what microcredit could not do.

As mentioned above, microcredit is a financial support to the poor by providing microloans. Yet, what is very challenging to the poor is the expertise of managing a business. By getting into NEs, the poor lack the knowledge and skill of being entrepreneurs.

When opening a store for example, the poor are unable to analyze the markets and manage its selling. As a result, a need to selfreadiness to be an entrepreneur via ongoing training and support becomes a condition within BOP strategic modes of poverty alleviation.

So, as a way to defeat that risk, a new mode of entrepreneurial actions emerges to fill in the gap of microcredit, that is to say; microfranchising.

As a way to understand the new mechanisms of microfranchising, defining â&#x20AC;&#x2DC;franchiseâ&#x20AC;&#x2122;, as a separate term, shall help grasp its meaning within micro-business or social business.

In its traditional sense, franchising is the practice of copying or imitating a successful business and duplicating and replicating it to another location often followed by new processes that fit that new location. 84 There are two terms to be grasped in that vein, franchisor and franchisee. On the one hand, the term franchisor goes to those business owners who enjoy the overall rights of the business. On the other hand, microfranchisees are those NEs who seek to replicate other businesses by following terms of recruitments that are often set by microfranchisors.

Micro-entrepreneurs and microfranchisees are a one-pack meaning.

83 Working Paper on Microfranchising at the Base of the Pyramid by acumen Fund August 2008, Written by David Lehr from the introduction 84 Ibid. p : 3

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What makes a franchise very strong is its proven business model in terms of implementation. Operating potential licenses for replications creates new opportunities. As way to adopt these to the BOP, microfranchises put into operation the same mechanisms but in a more microcosmic sphere.

Addressing low-income consumers and recruiting low-income franchisees are parts of a trusted wisdom that brings together social (for the poor) and financial (for the franchisor) benefits.

“Poverty yields to growth when local enterprises succeed”85 In the light of that quote, bringing optimal solutions to poverty would be done simply by the poor themselves. It is on the power of engaging local villagers to create social change.

Among the most trusted benefits that microfranchises bring to people are offering ready-made, low risk jobs for poor people to gain regular income so as to support their families and to fully participate in their communities.

In its technical side, projects at the basis of franchising often encompass a three-tier structure that comprises the management (staff), company operators (micro-franchisors), and the beneficiaries (microfranchisees). In their theory of change, microfranchisors believe that systems of education and poverty, as examples of social problems, are strictly linked. And this is why education is often included on the list of operations. Middle-income people who have no further education and who have a lack of business experience are the most favored category of people within BOP to be recruited as microfranchisees.86 However, what makes microfranchising very attracting to people, especially business owners, is the generating of additional revenue for the company’s distribution growth. This makes BOP markets explored as opportunities.

Through their plans of actions, microfranchisors have to be very careful. Along with the new methods of actions that microfranchisors have to hold are releasing free applications for poor people to get access to recruitments, giving out microloans to assist in start-up costs,

85 MicroFranchises as a Solution to Global Poverty, Kirk Magleby, November 2005.p :14 86 “A Good Business for Poor People” by Lisa Jones Christensen, David Lehr, and Jason Fairbourne, Stanford Social Innovation Review

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establishing a capable management team, setting up the Screening Process: companyâ&#x20AC;&#x2122;s ID87 (T-shirts), and organizing training workshops: on the job training plus meetings.

By following this new strategy, microfranchising fills in the gap of risks that microcredit couldnâ&#x20AC;&#x2122;t complete. Not only this successful mode of entrepreneurial actions generates additional mobilized markets to the company, but it helps stabilize poor peopleâ&#x20AC;&#x2122;s economic situation and generate a consistent income. Through its operations, microfranchising tends to help those people feel that they contribute to their community growth.

87 Ibid.

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In his book Social change 2.0, David Gershon demonstrates that “people are willing to change if they have a compelling vision and are provided tools to help them bring it into being.” 88 By crossing microcredit and microfranchising, a new method has been introduced as a successful less-risky mode of entrepreneurial actions within the BOP. Despite having microcredit and Microfranchising mechanisms, not even one of them has created a model that creates access to direct and absolute solutions.

The idea of the MicroConsignment Model was introduced by Greg Van Kirk89, an Ashoka Fellow, who sees it as the best model that can finally fill in the gap of all the pre-mentioned finance-based approaches to poverty alleviations.

MicroConsignment Model “also lowers the barriers to entrepreneurship by providing micro-entrepreneurs with an opportunity to ‘test drive’ a business by investing only their time.”90 This means that the idea behind MicroConsignment Model is to deliver essential products and services at reasonable prices to rural villagers. Instead of being hampered with financial capital and entrepreneurial knowledge, the poor can invest simply their time by following minute rules of the MCM. Often, the MCM addresses the Wh-questions in a way that turns them into a consignment structure91: • What: indispensable high added-value products and services (vision/reading glasses; water filters, solar lamp…)

• Who : rural villagers • Where: rural villages • How : highly scalable delivery system

88 Social change 2.0 by David Gershon, West Hurley, N.Y.: High Point. “ introduction: Reinventing Social Change p: 3 89 Greg Van Kirk is the co-founder of Community Enterprise Solutions and its counterpart organization, Soluciones Comunitarias. He was awarded an ASHOKA Fellowship for the development of the micro-consignment model in Guatemala.

90 CIO NETWORK “Social Entrepreneurship: The MicroConsignment Model” Written By Brett Smith. See: http://blogs.forbes.com/ciocentral/2011/05/10/social-entrepreneurship-themicroconsignment-model/ retrieved on 11 May 2011 91 “The MicroConsignment Model” by Greg Van Kirk, Innovations / Tech4Society 2010 .p. 130

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What makes the MCM very tick is the way it links the distribution network with the essential products and services to the poor in rural areas.

The MCM facilitates the development of new approaches that fit between donations (which are often short-term oriented and not responsive to consumer wants) and large multinational corporations (which are often initially resistant to enter markets where distribution channels are underdeveloped and margins are lower) 92 In the MCM, donations and sustainability are two opposed terms that do not complete each other; thus, they do not convince business owners in rural areas. In fact, those essential items should never be donated but rather delivered to the poor by the poor. That is to say; handling durable access to vital products and services.

Yet, why there is a need to have a new approach since microcredit and microfranchising already succeeded in certain contexts?

The reason why local entrepreneurs are engaged in the MicroConsignment Model is because of their lack of stable savings, the fact that prevents them from having outlets for buying and selling items themselves.93 In a microcredit-financed model like microfranchising, microentrepreneurs do the following: a)Get a microloan b) Buy products c) Sell products d)Generate income e) And pay back the loan.

This equation is perfectly based on the SELLING part. If the products are not sold, the whole chain fails and all people who are engaged (business owners, banks, beneficiaries) are affected.

92 CIO NETWORK “Social Entrepreneurship: The MicroConsignment Model” Written By Brett Smith. See: http://blogs.forbes.com/ciocentral/2011/05/10/social-entrepreneurship-themicroconsignment-model/ retrieved on 11 May 2011 93 “The MicroConsignment Model” by Greg Van Kirk, Innovations / Tech4Society 2010

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In MCM, the business is in reverse 94 . The start begins with products at no cost. This new approach releases the burden of debt payments. The logic of the consignment structures lies on the fact that if micro-entrepreneurs fail in selling, then the products simply go back to the owner to be consigned to other local villagers.

How does the MCM create value? There are two levels of value creation within the MCM as a social innovation. On the one hand, social value rests on the encouragement of the scope of microentrepreneurship. How? In rural spots, the distribution channel is very inefficient to the extent that needed products do not reach those marginalized vicinities. As a way to trounce that challenge, the MCM looks for creating chains of micro-entrepreneurs who can make sure that the delivery chain is valued.

Thus, self employment helps the poor at the BOP to better stabilize their life from nothing- it is a first push to invest only in their time 95 . On the other hand, social value is tapped on the level of the consumer. Having a well-organized chain of product and service distribution helps the villagers have an open access to key products at affordable prices. 96 In its procedural side, the MicroConsignment Model follows the tradition of consignment’s arrangements and ownerships. Normally, the price and the ownership are maintained by the supplier. Yet, ongoing training and support are two elements that most suppliers abide by in order to guarantee the effectiveness of the MCM. In addition to this, the sequence between the first buyer (companies) and the end user (villagers) is a time-consuming notion before bringing feasibilities.

However, limitations are still subsisting within the MCM. First, it is not easy to promise the availability of funding. The MCM follows the re-use and re-cycle approach of operating capitals. Yet, significant amount of start-up capitals is needed in a wide range to put the MCM into feasibility. Second, the MCM Is limited in terms of identifying microentrepreneurs who are eager to pursue self-employment out of a necessity. 97

94 Ibid. ϵϱ CIO NETWORK “Social Entrepreneurship: The MicroConsignment Model” Written By Brett Smith. See: http://blogs.forbes.com/ciocentral/2011/05/10/social-entrepreneurship-themicroconsignment-model/ retrieved on 11 May 2011 96 “The MicroConsignment Model” by Greg Van Kirk, Innovations / Tech4Society 2010 97 “The New New Thing: The Micro-Consignment Model” by Brett R. Smith & Greg Van Kirk p: 13.

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The general purpose of this study is to bring a deeper understanding of the phenomenon of social entrepreneurship in a largescale context by analyzing and describing how social entrepreneurs use the power of business to address the most stubborn problems in the world.

The book also seeks to achieve this purpose by handling into sight the milieu that social entrepreneurs operate in their challenged position between running hybrid firms.

Entrepreneurship has a variety of definitions. Yet, the meaning of Entrepreneurship, per se, has evolved ever since the 18th C. French economics with some of the most canonized theories in the field of management. Among them, Jean Baptist Sayâ&#x20AC;&#x2122;s advancing contributions.

Nevertheless, there are others such as Joseph Schumpeter, Peter Drucker and Howard Stevenson who have contributed with a range of theories in the field. Their hypothesis revolve around centrally the notion of value creation, innovation and change agents, the pursuit of opportunity, and the element of resourcefulness, all respectively.

Despite the different definitions of entrepreneurship, the bulky meanings of it often turn around certain common key terms such us; initiative, risk, change, wealth, innovation and opportunity.

Some of the problematic notions in the book circle around the hardship of utilizing those selections of meanings and keywords within social entrepreneurship.

There is certainly a close relation between entrepreneurship and social entrepreneurship. The entreprenrial culture, as a lone, can bring a constructive life to other new concepts.

The concept of social entrepreneurship and the creation of it often lie on the determining characteristics of social entrepreneurs themselves. These latter have always met the ambiguity of specific traits.

Yet, their pursuit of unique opportunities and their creation of social value characterize them as change agents of a rare breed.

The switch from a simple entreprenrial background of startingup businesses to the social entreprenrial culture of caring, not only about oneâ&#x20AC;&#x2122;s business, but also othersâ&#x20AC;&#x2122; business has introduced a huge novel knowledge for academia and the world of business.

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Thanks to these new-fangled acquaintances, business literature has detected a non-stop orb of challenges that social entrepreneurs meet while running ventures with social missions.

The marketplace where social entrepreneurs operate in does typically serve for-profits. Social entrepreneurs in here need to put a wellclarified strategy that makes it easy for them and for others to see the path of success. Handling a critical structured strategy that redirects social entrepreneurs from what they want to achieve, and how they will achieve it is to be done only via what is now know as Intended Impact and Theory of Change.

Social entrepreneurs are always able to run their venture in the early stages of fund-raising. However, because social enterprises are neither for-profit nor non-profit, it has become very rigid to persuade investors to devote their money without any worries.

As a matter of fact, communicating two distinct but related organizations- one non-profit and the other for-profit- is the complete way to the funding gap. Hybrid Firms has become the expression that most social entrepreneurs opt for. Based on the Blended Value, this new type of firms has shown how firm it is to fund-raise and develop from within.

While getting expanded and growing programmatically, nonprofits must work on developing strategic clarities that hold them stimulated enough to remain on the realization of the social mission.

Scaling social impact contains lots of exigent factors that make it challengeable for social entrepreneurs to expand and spread their innovation elsewhere. Plus, measuring social impact is another decisive point in the completion of the scaling.

Scaling social impact can be gained through a bunch of applicable approaches. Before so, social entrepreneurs have to select not competitive activities but rather cooperative forms of activities. The willing to allow others to replicate the same business model is the first step to begin stepping forward scaling.

Defining their innovation, highlighting the multiple mechanisms for spreading the impactÍ&#x2022; specifying a logical path and conceptualizing a model of organizational capabilities, all help social entrepreneurs successfully scale their venturesâ&#x20AC;&#x2122; social impact.

These entrepreneurial confrontations are to be truly faced only on operational experiences. To this reason, social entrepreneurs function

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within milieus where business, as manner, has to merge with society as a segment.

Microfinance at the Bottom-of-the-Pyramid is one of the strategies that social entrepreneurs opt for to create social change in the most impoverished communities in the world.

The review of microfinance contributions in the BOP concludes that microfinance institutions have been effective in contributing, directly and indirectly, to the growth of the poor. Microfinance contributes to improving income and reducing difficulties, introducing sustainable solutions, and engaging peoples in micro-entreprenrial projects.

The Base (or Bottom)-of-the-Pyramid is an expression which characterizes the residents of the world that largely survives and transacts in an informal market cost-cutting measure.

Being it so, the BOP begins to be an opportunity that social entrepreneurs opt for. Because business entrepreneurs see only chaotic results from the BOP, social entrepreneurs have vindicated the importance of serving the poor.

Supplying solutions to the BOP has created new opportunities for the business and the people. In order to do so, there are several approaches to poverty alleviation that rank from the poor as producer hypothesis to the poor as entrepreneur hypothesis. In this latter lies the concern of social entrepreneurship.

Understanding the differences between Opportunity Entrepreneurs and Necessity Entrepreneurs create meanings over the perspective that social entrepreneurs seize about the poor.

Microfinance, microfranchising, and MCM appear as the true testimonies of the strategies that social entrepreneurs decide on.

The leverage of providing financial and expertise-related support to the poor in the BOP, and the amount of acceptance it meets often result in understanding how each of the microfinance-based approaches work. one question businesspeople in that vein often ask is; why do we have to move from one approach to another? To this very point, we conclude that systematically there is a gap in each approach. Hence, a must to fill in the gaps comes out to render the strategies more reliable, more definite, and more entreprenrial.

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All in all, the effective and efficient concept of social entrepreneurship holds much more promise for addressing the most stubborn problems in the world. Yet, grasping the exact notions surrounding social entrepreneurship is still basic, rather than deep. Our understanding of the field is limited with the changes that occur from within the concept.

This study offers a theoretical outline for us to get a clear idea on the revolutions done by social entrepreneurs. It is for this paper to acknowledge the very ways, by means of books, that have been written on the concept, thus, what is reached from this paper is a deep reading on those contributions.

This accomplished work tends to question the viability of time and how all the pre-noted meanings, challenges and strategies of social entrepreneurship will be held flat to the near future.

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