Support flood recovery and relief efforts in Pakistan | Learn More

A Working Definition of Social Enterprise

Nov 15, 2019
A Working Definition of Social Enterprise

The term social enterprise has evolved rapidly in recent years. Though frequently used, the term is hard to define, as a social enterprise can have the characteristics of a traditional business, a nonprofit, or even a government organization. One leading voice in the field, the Social Enterprise Alliance, defines the term as organizations that address a basic unmet need or solve a social or environmental problem through a market-driven approach.

Given our own extensive history in the field, FINCA International has developed its own characterization of a social enterprise. In addition to the criteria laid out by the Social Enterprise Alliance, we believe a social enterprise should also provide goods or services that enables people to work toward lifting themselves out of poverty.

Meeting Unmet Needs in Innovative Ways

A social enterprise, first and foremost, has to meet some unmet need. Whether it is a gap left behind by private enterprises, government agencies, or other nonprofits, a social enterprise must fill a void left by other actors in an innovative way. FINCA partners MDaaS Global and Sanivation are great examples of social enterprises fulfilling the unmet needs of a population.

MDaaS Global works to address an unmet need for medical diagnostic services in Nigeria. With inadequate public spending on medical infrastructure and private clinics largely reserved for the wealthy, patients are often unable to receive the diagnostic testing they need. MDaaS Global fills that gap with an intense focus on sourcing low-cost refurbished equipment that allows it to provide services at a lower price than competing enterprises.

Meanwhile, Sanivation addresses the need for waste management in poor communities—including refugee camps—in Kenya while also creating a low-cost charcoal alternative. In developed countries, waste management typically is provided by local government. But in developing countries, oftentimes neither local nor national governments have the resources to deliver the service. Sanivation, seeing this unmet need, developed an innovative solution: turning waste into a source of fuel.

Customer-Paying-for-Sanivation-Fuel

Focused on an Environmental or Socially-Conscious Issue

Whether it’s environmental protection, social change, or a bit of both, a social enterprise must measure their success at least in part by their ability to effect systemic change. In other words, they must not focus solely on their financial bottom line.

This sort of issue-driven goal is illustrated by the various solar and clean energy social enterprises FINCA has partnered with, including Amped Innovation and BioLite. These firms focus on making a profit selling energy systems to people living off the electric grid, but they also measure their success by the degree to which they address environmental issues, such as deforestation and climate change. And with close to 600 million people in sub-Saharan Africa living off the electric grid, they are also addressing the social issue of access to energy by providing solar and clean energy options to those who would not otherwise have access to energy at all.

Helping People to Help Themselves

For FINCA, the final feature of a social enterprise is that it enables people lift themselves out of poverty.

FINCA partners Good Nature Agro and East Africa Fruits are doing exactly that by helping farmers in Africa increase their profit margins. Good Nature Agro is introducing more profitable cash crops to farmers and guaranteeing to purchase their crop at harvest time. East Africa Fruits is building out distribution infrastructure to enable farmers to get more of their product to market and in better shape, allowing the farmer to receive a better price. In this way, these social enterprises are providing services and support to farmers so they can work toward lifting themselves out of poverty.

A Combination of All Attributes

This article has used specific examples from each of FINCA’s partners to highlight the attributes of a social enterprise, but in reality, each of our partners possess all three attributes of a social enterprise. For example, Sanivation is filling a void for waste management, mitigating environmental harm by producing an alternative to charcoal and wood, and reducing fuel costs for the families so they can put more money into things like paying their children’s school fees or saving to start a business. By focusing on all three aspects that define social enterprise, FINCA and its partners are able to have a greater impact in a more lasting and sustainable way.