Thursday
August 25
2011

Nilima Achwal

Unlikely Partnerships in the Social Sector

In the final part of my three-part interview with Ashoka’s Europe director Felix Oldenburg on how to create a large and sustained impact, he shared his thoughts on how to use existing social structures-churches, welfare systems, and foundations, among others-to scale innovations.

  • In part one, Oldenburg talked about how to unleash social impact as a social entrepreneur.
  • In the discussion-stirring part two, Oldenburg challenged the current paradigm on investing for social impact.
  • Now, Oldenburg explores existing-sometime labeled as “old”-social structures that entrepreneurs should not overlook while scaling their innovations.

Social entrepreneurship is often thought of as the “new” approach to solving social issues, but it’s important to remember that examples of social entrepreneurship can be found throughout history. In fact, much of what is thought of as the “old” social sector-government welfare systems, faith-based charities, etc-was started by social entrepreneurs. However, over time, many of these institutions became riddled with problems, especially when the entrepreneur left the organization, a bureaucracy developed, and funding became an issue. This is nowhere more apparent than in continental Europe, where government funding accounts for the vast majority of social sector funding and centuries-old structures deliver the bulk of social services.

Social entrepreneurs and their mainly business-minded supporters may look down on government-owned funding mechanisms and non-entrepreneurial foundations, seeing them as financiers of a social status quo rather than supporters of social innovation. Instead, entrepreneurs should think about how they can use existing social infrastructures to quickly scale up their own businesses. The old infrastructure can be though of as a highway with massive throughput, as compared to a social start-up’s footpaths for distribution-and there’s no use building a new system of footpaths, if you can use the highway.

As social entrepreneurship comes of age, we must make a place for collaboration between the old and the new, which will allow us to channel more resources to social entrepreneurs than the “cool” social enterprise support system could ever mobilize. He calls out three major “old” social institutions that social enterprises can leverage, especially in Europe: established welfare organizations, government-funded banks, and foundations.

1. Established welfare organizations

Social entrepreneurs can use the massive delivery capability of established welfare organizations, instead of building parallel distribution structures. For example, one social entrepreneur, Rose Volz-Schmidt of wellcome, an enterprise that offers volunteer services to families within the first few weeks after the delivery of their babies, could have grown her organization incrementally. Instead, she chose to leverage a system that was already functioning well across Germany: Caritas, a Catholic non-profit with schools, nursing homes, migrant centers, and more, with 500,000 employees across Germany-several hundred times larger than the organizations of all German Ashoka Fellows combined. Volz-Schmidt turned local Caritas organizations into franchisees of her system for a small fee, spreading her services to every city in Germany within five years.

2. Governmental funding schemes and banks

All across Europe, there exist government-owned (“public promotional”) banks that aim to build businesses and markets that provide a public good, before these industries become commercially viable. They have played a key role in development for decades, the World Bank being one of its best-known examples. On a domestic level, many government-owned banks have pioneered entire sectors, like the renewable energy sector that is now attracting commercial funding. Compared to the fledgling social investment sector, government-owned banks are massive entities, with the biggest one in Germany valued at about 500 billion dollars (US) in assets. These investors provide the most readily available, purpose-oriented capital for social entrepreneurs in Europe. This capital is cheap and guaranteed by the government, and until recently, these banks have been an untapped opportunity for social entrepreneurs. Soon, Ashoka will launch its first partnership with a German government-owned bank, KFW[SA1] .

3. Foundations

Finally, foundations are important pieces of the puzzle that are often misunderstood by social entrepreneurs-they can be utilized not only as funders, but also as influencers of public policy. Many social entrepreneurs hit a glass ceiling in impact because of policy, so foundations, that have built up their capacity to work with the government and influence public policy, could be critical in lobbying for necessary changes.

Most foundations only get approached from social entrepreneurs for capital, not from the policy change perspective, but foundations may actually contribute more to an organization from a policy perspective. Though a foundation may not be skilled or interested in growing an organization beyond a pilot phase, it could be excited to partner to catalyze systemic change.

We, as supporters of social entrepreneurship, will find powerful and wise allies in these established systems. However, if we stay in our niche of social entrepreneurship, we will remain frustrated by the slow pace of change in the “old” social welfare systems and myopic to the idea that the smartest entrepreneur will use these systems to leverage her own organization’s social impact. If we take a deeper look at some of these older, more traditional structures, we will be surprised at the unlikely allies that emerge.

Discussion Topic: Do you know of any other existing infrastructures that can help social innovations grow?

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Categories
Entrepreneurship
Tags
social capital, social entrepreneur