Social Business in Peru: Generating Financial Sustainability and Social Impact
As a Fulbright fellow researching inclusive business in Peru, I was naturally excited when I received an invitation to attend a roundtable discussion on social business hosted by Ashoka in Lima. The event, entitled Social Business: Generating Economic Sustainability and Social Impact brought together representatives from the business and social sectors with the aim of presenting the work of Ashoka in this area, as well as of fomenting a dialogue on trends in the field, in Peru and worldwide.
The evening kicked off with a brief introduction to Ashoka’s social business initiative by Natalia Toledo, director for the Andean region. In response to a paradigm shift in which traditional, philanthropy-based relationships between the business and social sectors are breaking down, Ashoka recently partnered with some of its fellows to develop “social businesses,” defined as businesses whose principal objective is to generate social value, as explained by Ashoka fellow and Nobel recipient Muhammad Yunus in his latest book, Creating a World Without Poverty. The profits from these ventures are re-invested in the social organizations, thus guaranteeing their financial viability and maximizing their potential to generate social value.
In Peru, consultants from McKinsey worked closely with seven Ashoka fellows, coaching them in the development of business plans. Then, in March of this year, Ashoka hosted an event in Lima that gave these social entrepreneurs the opportunity to present their business plans to potential investors. Ashoka has focused on both teaching its fellows how to apply business concepts and models to their fields of work, facilitating their access to possible investors, and ultimately showcasing and promoting investment opportunities that, unlike traditional philanthropy, have the potential to generate sustainable economic, social, and environmental value.
After a video featuring a brief introduction to each of the seven social businesses in Peru (from a cooking school in a rural area of the country to a model for the sanitary reuse of water in areas of Peru lacking access to public services, these creative ventures span a range of sectors), a roundtable discussion followed. It was moderated by Bruno Giuffra, professor and host of a local TV show on entrepreneurship, and the panelists included two Ashoka fellows: Albina Ruiz, founder of Ciudad Saludable, a Peruvian NGO that develops efficient solid waste management systems, and Salomón Radyán, founder of Fundefir, a Venezuelan NGO that provides access to financial services through the creation of community-owned “Bankomunales”. Also on the panel were Federico Cúneo, former president of Peru2021, a business organization, and Nadine Freeman, Director of Sustainability for Ashoka Latin America.
The conversation started with a discussion about the role of Ashoka in advancing the work done by these organizations. Ruiz pointed out that Ashoka has been key in raising the visibility of her organization, connecting her with other social entrepreneurs worldwide, and giving her the tools to be more effective. From connecting social entrepreneurs in Peru with those in India to providing access to McKinsey consultants, Ashoka acts as a facilitator and multiplier of development efforts on a global scale, connecting social entrepreneurs not just to resources but to one another, and thus to new ideas, as well. And as Cúneo pointed out, Ashoka acts as a much-needed bridge between the social sector and the business sector, giving each access to the experience and expertise of the other in order to come up with innovate solutions to problems that neither can solve on their own.
In addition to extolling the virtues of networks like Ashoka, the roundtable touched on some of the current issues and trends in the broader field of development through enterprise. At one point the role of the state was raised, as was the global economic crisis and its impact on the field. After much discussion on the policy approaches to the social sector and the challenges of working in environments like today’s Venezuela, the overarching consensus was that the social and business sectors simply “can’t wait for the state” to advance an agenda of social sector innovation in Latin America. Commenting on the effects of the crisis, Freeman pointed out that the silver lining in today’s worldwide economic cloud might be that it represents an opportunity to evaluate and improve the work of the social sector. Ruiz echoed this, pointing out that moments of crisis, insofar as they obligate us to be more resourceful, often spark innovation.
On the challenges presently confronting the field of development through enterprise, two seemed to come up repeatedly throughout the evening: the misunderstanding that still persists in many circles regarding the exact meaning of terms like “social enterprise” and “inclusive business” and the conceptual boundaries that continue to draw distinctions among the sectors in society (state, business, civil society) and their respective roles in addressing the challenges of today, from poverty to climate change, all of which have proven to be too complex for traditional approaches to tackle.
The notion of development through enterprise, with the myriad of concomitant terms it has given rise to, from “social enterprise” to “inclusive business” to “social business,” is still in many respects an emerging field. While I get the sense that we have reached a point where many accept and understand that the profit and the social motives can in fact go hand in hand, much works remains to be done at the level of raising awareness – particularly among those who, historically, have not worked very closely with the social sector – about just what the field is and, as importantly, what it is not (philanthropy, corporate social responsibility, etc.).
This is especially evident in Peru and other Latin American countries, where, based on my experience, traditional boundaries between sectors such as the business elite and civil society remain sharply drawn, with mistrust and misunderstanding present on all sides. In my opinion, it is in large part for this reason that events like this – and forums such as NextBillion – are important, for by fostering public debate on these issues, they raise their visibility for the many, from businessmen to government officials to even NGOs, for whom this remains uncharted terrain.