‘Social enterprises backed by social finance, tech are key to stimulate economy at the bottom of the pyramid’

Ease of Doing Business for MSMEs: Small businesses led by women and youth and ‘ecopreneurs’ can play the crucial role of change agents in fostering sustainable economic development and building resilience among disadvantaged communities.

By Dr Rajan Samuel 

Ease of Doing Business for MSMEs: A traditional business model focuses on employing people to expand their market shares and customer base while ensuring an increase in the profits of a company. Entrepreneurs plan and set up their businesses while trying to bring in innovation to break the traditional norms. The social entrepreneurship model is aligned with the same business concepts but functions with one fundamental difference: Social entrepreneurial ventures take the risks and efforts to design and implement solutions for improving the socio-economic conditions of low-income populations and marginalised communities.  

Social entrepreneurs are at the forefront of applying the principles of businesses and management in driving societal change at the grassroots level by making optimum use of technology, human capital and social capital. Social finance is a blended financial product that takes into account all the welfare resources available for the people with the government, civil society and other institutions to improve their standard of living. Technology serves as a bridge to connect the poor with mainstream finance and markets. The Government of India’s Jan Dhan scheme is a great example of this under which the deposits have crossed 1.5 trillion rupees.  

Driven by a broader social responsibility agenda, social entrepreneurship seamlessly integrates social goals with economic resources and tools. Rather than maximising pure profits, social entrepreneurship aims at addressing social issues like housing, climate change, women empowerment, sanitation, primary healthcare and illiteracy through innovation. It lays emphasis on the fact that economic growth should be effectively balanced to create a more equitable society. The core objective of a robust social entrepreneurship framework is to create an inclusive and participative society through people-centred development initiatives. This plays an important role in bringing the vulnerable population within the social and economic mainstream.  

Conventional businesses are the products of a laissez-faire economy which is pivoted on the concept of free-market capitalism. The government has no role to play in a free-market capitalistic economy that exclusively runs on supply and demand dynamics. Profits earned by such businesses are channelled directly to the company’s promoters or excess profits may be distributed as dividends among shareholders. While social enterprises also earn revenue, their goals are not fully commercial or limited to creating profit for a few individuals. They have a clearly defined goal to create a positive social impact in people’s lives and in uplifting the community.  

Micro, Small & Medium Enterprises (MSMEs) are key to enabling a robust social entrepreneurship ecosystem. Small businesses led by women and youth and ‘ecopreneurs’ can play the crucial role of change agents in fostering sustainable economic development and building resilience among disadvantaged communities. By addressing social issues directly, MSMEs can help bring vulnerable populations within the socio-economic mainstream.  

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Community engagement is crucial for the seamless execution of any social entrepreneurial project. Social businesses give wings to the economic hopes and aspirations of communities living at the bottom of the social and economic pyramid. They function on the principle of inclusive participation and collective decision-making of all stakeholders involved. Businesses committed to creating an egalitarian society through social initiatives believe that every individual is an asset and need to be equipped with the necessary resources and tools to unleash their latent potential. Their focus is on conceptualizing and implementing policies and programs which can transform people belonging to low-income communities from mere ‘beneficiaries’ to stakeholders in their own growth and progress. 

The entrepreneurial aspirations of women and youth from low-income communities are severely constrained due to a lack of access to working capital. Many a time they do not have a bank account and are not in a position to furnish collateral. Financial institutions consider such investments as risks and refrain from providing any financial support. Microfinance Institutions (MFIs) have been instrumental in plugging this gap and scaling up the financial inclusion of women and youth from marginal populations.  

MFIs have played a pivotal role in improving the socioeconomic status of women and making them a part of the growing economy. By providing them with low-interest and collateral-free loans at flexible repayment tenure, MFIs help women to set up micro-businesses and make them financially self-reliant. By encouraging the participation of women in income-generation activities, MFIs make them active representatives in household and community decision-making processes.  

Information technology can be a key enabler in enhancing the financial inclusion of the underserved and unbanked population by helping to reduce the cost of providing banking services. This can help them start small businesses, earn a steady income and raise their standard of living.  

The core objective of any social enterprise should be economic, social and environmental sustainability. The emphasis will have to be on creating sustainable livelihoods for vulnerable and low-income groups by reducing income inequalities and ensuring that precious environmental resources are not wasted. It is the solemn duty of social enterprises to ensure that the requirements of the present generation are fulfilled without compromising on the needs of future generations. The development of social enterprises will be instrumental in promoting gender equity and creating an equitable socio-economic order in the country and at a global level. Small businesses will be at the forefront of this change which will boost economic development at the bottom of the pyramid. 

Dr Rajan Samuel is Managing Director at Habitat for Humanity India. Views expressed are the author’s own. 


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