NGOs and Social Entrepreneurship – Part 1
Posted on 02 November, 2020 at 14:10
By Kudakwashe Ngoma
Social entrepreneurship unites the passion of a social mission with an image of business-like discipline, innovation, and determination. Many social entrepreneurs launch whole new ventures applying innovative and often risk-taking approaches to create scalable solutions, which includes inventing new products and services. Others join existing social enterprises aligned with their interests and passions. In light of NGOs, social entrepreneurship is the merger of a noble cause or mandate and a business-mindset. More often than not, an NGO would venture into a discipline in which they already have some basic level of expertise and skill.
The critical distinction between
general entrepreneurship and social entrepreneurship lies in the value
proposition itself. For the entrepreneur, the value proposition anticipates and
is organized to serve markets that can comfortably afford the new product or
service, and is thus designed to create financial profit. From the outset, the
expectation is that the entrepreneur and his or her investors will derive some
personal financial gain. This profit is essential to the venture’s
sustainability and the means to its ultimate end in the form of large-scale
market adoption and ultimately a new equilibrium.
The social entrepreneur,
however, neither anticipates nor organizes to create substantial financial
profit for their investors – philanthropic and government organizations for the
most part – or for themselves. Instead, the social entrepreneur aims for value
in the form of large-scale, transformational benefit that accrues either to a
significant segment of society or to society at large. Unlike the
entrepreneurial value proposition that assumes a market that can pay for the
innovation, and may even provide substantial upside for investors, the social
entrepreneur’s value proposition targets an underserved, neglected, or highly
disadvantaged population that lacks the financial means or political clout to
achieve the transformative benefit on its own. This does not mean that social
entrepreneurs as a hard-and-fast rule shun profit-making value propositions.
Ventures created by social entrepreneurs can certainly generate income, and
they can be organized as either not-for- profits or for-profits.
Lately, non-governmental
development organizations are searching for new models to enable them to fulfil
their missions. The common goals they strive towards, like eradicating poverty,
inequality, insecurity and injustice, remain relevant. It is the way NGOs are
organized and financed that is changing rapidly. A new business or funding
model is required because reliance on external funding has proven not very
sustainable while it has become more accepted to generate social and economic change
by embracing entrepreneurial values. In their search to become more financially
self-reliant, development NGOs are experimenting with social entrepreneurship.
Many are doing this to strengthen their financial situation, but social
entrepreneurship can do much more and opens up new ways to help poor
communities. However, NGOs embracing social entrepreneurship face risks of
being diverted from their missions and excluding intended beneficiaries.
The impact of Covid19 has also
pushed many players in the non-profit sector to look at new ways of doing their
business and doing so sustainably. A study carried by KFM Consultants revealed
that over 50% of local organisations did not have significant reserves that
they had built over the years that they could fall back on, and at a time when
the Western countries were battling with the pandemic, it was important to look
for other sources of funding, this time from the inside.