Piecing together the social enterprise ecosystem in MENA
For every Dumyé doll purchased one is gifted to an orphan. (Image via Dumyé)
Sourcing a definition for social enterprise could prove as puzzling a task as the term itself.
It’s a for-profit business with a non-profit mission; a sustainable business model not relying on charity to make a positive difference; a business that puts a social mission at the center of its strategy - it all finds a spot in the broader definition of social enterprise.
For Soushiant Zanganehpour (below), founder and director of TriBeCa Consulting Group, however, the definition of a social enterprise is quite straightforward.
“A social enterprise has a very direct, closed loop model,” Zanganehpour explained. “It needs to be actually solving a root cause of a problem. Today, anyone with the intention to do good [via business] has been lumped into the branding of ‘social enterprise’. The distinction needs to be placed on how well their model is doing good, how efficiently it delivers value, how transformationally are they making a difference?”
Social entrepreneurship in MENA
The Middle East and North Africa has long been home to an evolving entrepreneurial ecosystem.
The region is also home to many societal and developmental challenges. A social entrepreneur identifies a critical, authentic social issue and develops a business model around it in a way that its growth is measured by the positive impact delivered.
Social enterprise in MENA is still in its nascent stages, said Tena Pick (below), cofounder and CEO of The Sustainability Platform (TSP).
“Ten years ago, we did not know what social enterprise was”, she said. “It is still a very young field with a lot of issues, especially a lack of understanding of the importance of social impact and how to go about developing a profit model for a social enterprise.”
Since cofounding Consult and Coach for a Cause (C3) in 2012, Medea Nocentini said social enterprise as a term resonates much more now in MENA than before.
“[Entrepreneurs] kind of know the basic principles. Even if we have [entrepreneurs] come with only an idea, those [ideas] are a bit more polished than a few years ago,” she said.
Pick pointed out, “A social enterprise alone cannot solve a problem; there needs to be a thriving ecosystem to enable the impact.”
Along with TSP, C3 and TriBeCa, there are quite a few players in the regional ecosystem, including thriving social enterprises like Dumyé, Glowork, Palestyle, Social Tent and Ustad Mobile.
Business plan competitions from The Hult Prize, The Venture or The Schwab Foundation further add to the social enterprise culture to enable a positive impact on the region.
Impact Hub Dubai, one of the 90 accelerator spaces around the globe, caters especially to a social entrepreneur.
“With social enterprises we're more cost effective and work with them on a more exclusive basis,” said Shubhang Bhattacharya, Impact Hub Dubai’s marketing and communications manager. “They need to be financially sound to stay motivated and keep their business afloat. We act as a platform for these social enterprises to get noticed, structured and funded.”
The fledgeling ecosystem aside, social enterprise, like any traditional business is eventually faced with the funding hurdle. With no separate legislation for social enterprises, these entrepreneurs dip into the same pool of investors as other business.
“Here investors want high returns on their investment,” Pick said. “The capital here isn't necessarily patient.”
According to Acumen, patient capital demands accountability while having “a high tolerance for risk, long time horizons, is flexible to meet the needs of entrepreneurs, and is unwilling to sacrifice the needs of end customers for the sake of shareholders.”
Such investments could prove useful for any investment portfolio, Nocentini suggests.
A great strategy for portfolio diversification, she said it can help any investment fund’s risk mitigation strategy as it counterbalances the typical high risk, high return investments. “A social enterprise is more resilient, less seasonal and more sustainable in the long term as long as they respond to the fundamental needs of the community.”
However, relative to more mature ecosystems, Zanganehpour said the quality of ventures coming out of the MENA region is not very high. Entrepreneurs here, therefore, have to undertake more substantive efforts to attract the interest of investors.
“As an investor you are not only looking at deals [...] you are likely looking at a series of varying approaches that originate from a variety of other countries,” Zanganehpour said. “For entrepreneurs, if you think you have a solution, please save yourself the valuable time of running to an investor before you’ve done research on 10 other similar approaches to the problem, so you know how you stack up against the competition.”
Is there an attraction?
As is the case with traditional business, investments are made in people and not just the idea.
VentureFin, a global equity and loan-based crowdfunding platform, partnered with The Hult Prize to help combine social good with strong business criteria and facilitate investment for the same.
“We look at a range of traditional [business] model aspects,” explained VentureFin partner and chief operating officer Joshua Rajkumar. “We assess if it is a viable proposition, is the market ready, how dedicated you are, and do you really understand the problem.”
Joshua Rajkumar conducting a workshop at Dubai Business Women Council. (Image via Joshua Rajkumar)
Pick told Wamda that entrepreneurs should not be disheartened by the seeming lack of funding in the region. First, a social entrepreneur should be confident to execute their plan and scale their idea.
Corporate Social Responsibility initiatives might be a small and sure way forward in strengthening the social enterprise scene in the region. Many corporates have begun including social impact in their strategies, said Nocentini who is also VP for Corporate Development at OSN.
“When it comes to CSR, there is a convergence of needs and ideas that makes business sense for organizations to embrace. CSR [work] and social enterprise are not mutually exclusive. Any initiative delivering a social impact is a good start even if it is not the corporate’s priority,” she explained.
There is, however, interest in the region to fund social enterprises.
“The status of social enterprise is early, but by no means poor,” says Rajkumar. “People here tend to be risk averse and there is a long way to go. But, there is curiosity in the angel investor space.”
That identifying and working to resolve a valid social problem might be a unique process in the MENA region is not lost on Zanganehpour, who previously was Head of Strategy and Operations, and later Special Projects Lead at the UK’s University of Oxford Skoll Centre for Social Entrepreneurship.
“It is a very difficult and politically sensitive operating environment here to work on socially oriented businesses and projects,” he said.
And who’s doing it? One is Glowork, a social enterprise based in Saudi Arabia, focused on integrating women into the workforce. When it started off, thinking of bringing women to workplace was a taboo topic, said Khalid Alkhudair, founder and CEO.
Getting women onto the Saudi workforce. (Image via Jasniya Badsha for New York Times)
“People believed it was a burden to hire women,” Alkhudair explained. “We began by marketing to men and families.”
Since starting five years ago, they have set 27,000 women to work. Glowork also takes into account the number of vacancies created and filled, and the number of companies hiring women that previously didn’t, among other criteria to measure impact.
With the state of funding promising, it falls back on the entrepreneur to find a problem to solve.
Alkhudair is convinced that socially driven business have a bright future.
“Social impact’s vision is not profit driven,” said AlKhudair. “This is where job creation will come out of in the next couple years. Social impact will drive vacancies and the youth to the market. Socially driven businesses will not be contained.”