Social enterprise as innovative business model

ABAC Philippines presented some best practices in social enterprises in the country at the last Apec Business Advisory Council meeting in Singapore in April. These best practices were presented as innovative business models that can support entrepreneurship, encourage the growth of small and medium enterprises (SMEs), and help promote inclusive growth. A paper prepared by the Makati Business Club together with the Institute for Social Entrepreneurship in Asia was distributed during the presentation.

The paper shared the following information:

“In a region that is home to two-thirds of the world’s poorest, social enterprises have emerged as innovative business models that are demonstrating how the private sector can contribute more substantively to addressing poverty. Various models of social enterprises demonstrate a range of how marginalized sectors may be effectively engaged as client-partners, as supplier-partners, or as worker-partners. Best practices that cut across these different models assist the poor and marginalized not only to become effective business partners but also to enable them to improve their quality of life and in some cases empower them to become full or part-owners of these social enterprises. Most importantly, best practices also empower them to become leaders and members of self-managed cooperatives and associations that serve as vehicles for group action toward overcoming poverty, undertaking community development, and contributing to nation-building.

“Social enterprise models with the poor as client-partners are exemplified by microfinance institutions providing financial and social protection services. A best practice of a social enterprise engaged in microfinance in the Philippines is CARD Mutually Reinforcing Institutions (CARD MRI). [It] is a best practice not only because of its outreach but also because it is engaged in making poor women co-own and co-manage their enterprises.

“Social enterprises may be seen as an emergent and important segment of the [SME] sector. Although some of the most successful ones grow to become large, a majority face the same problems of viability and sustainability as SMEs, such as access to financing and markets. In addition, they face the more difficult challenge of ensuring that they resolve these through creative strategies in pursuit of their social mission. In this context, social enterprises succeed by pursuing innovative business models, as exemplified by CARD MRI, Alter Trade Group, Children Are Us Foundation, and Bina Swadaya.”

At the presentation in Singapore, Abac Philippines shared the stories of Rags2Riches, CARD MRI, TAO Philippines and Gandang Kalikasan. As many may know by now, Rags2Riches is a for-profit social enterprise that produces eco-ethical fashion and home accessories from recycled and organic materials. The products are designed by prominent fashion designers and made by 800 trained artisans (mostly women) living in poor communities. Sustainability is ensured through training sessions and seminars on business and life skills such as personal finance, health insurance and nutrition.

CARD MRI was created for and is owned and managed by landless rural women. It has grown into a microfinance institution, microfinance bank, SME bank, mutual benefit association, insurance agency, business development services provider and IT solutions provider rolled into one successful social enterprise.

TAO Philippines focuses on “financial empowerment of the masses.” It has a microlending business that provides loans and other financial services to Filipino women who own neighborhood stores, a thrift bank that focuses on SMEs as its primary target market, and a mobile e-commerce utility. It now employs over 4,000 workers.

Gandang Kalikasan traces its roots to Gawad Kalinga (GK), the nationwide movement for nation-building, and employs residents of GK communities, providing them fair living wages plus full benefits and healthcare. This social enterprise provides consumers affordable, health-enhancing personal care products made from organic and natural ingredients.

At the presentation, the private sector was called upon to support social enterprises to assist the poor in becoming effective players in various supply chains; serve as social investors to scale up the reach and impact of social enterprises that provide employment, economic and social services to marginalized sectors; and partner with nongovernment organizations to develop self-sustaining groups that are not donor-dependent and create opportunities for sustainable livelihoods. A call was also made for governments to provide support and incentives to SMEs as major partners in poverty reduction and sustainable development.

The presentation is but an initial step toward an Apec-wide policy to support social enterprises as innovative business models. It was received positively by the business leaders, and Abac Mexico has expressed interest to support the Philippines in this important advocacy. The Philippine government has also expressed keen interest in including social enterprises as part of its SME agenda in conjunction with our country’s hosting of the Apec in 2015.

Peter Angelo V. Perfecto is the executive director of the Makati Business Club and lead staffer of Abac Philippines.