The Role for Social Enterprises and Social Investors in the Development Struggle

Abstract

This paper reviews the existing development literature, arguing that the currently dominant views and proposed solutions to achieving social and economic development neglect the possible contributions the private sector, and social enterprises specifically, can make in attaining the Millennium Development Goals. Given this latent potential, it will argue that social investors have a crucial role to play by providing a greater inflow of capital into nascent and growing social enterprises in developing countries. Drawing on conclusions from a UK-based study of the social investor, the unique motivations and expectations of this investor class will be outlined. Social entrepreneurs in developed and developing country contexts can both use this information to tailor their business models and plans toward attracting the financial capital needed to grow to scale and realize the positive social externalities for which they were established.

Key Words:

• Social enterprise
• developing country
• social investor

Notes

1. Social enterprises are private sector entities that do not have profits as their primary objective but focus on social, ethical or environmental outcomes.

2. The global socio-economic population segment of individuals living on less than US$2 a day whose collective size and wealth presents significant opportunity for businesses to succeed in developing country markets.

3. See http://www.thegiin.org/cgi-bin/iowa/resources/research/index.html for extensive research on impact investing.

4. As defined by the Global Impact Investing Network, http://www.thegiin.org/cgi-bin/iowa/investing/index.html

5. An inductive data collection technique, in which a series of 14 in-depth semi-structured interviews were conducted, was used to collect the data that informs the findings presented in this section. A range of UK-based individuals and organizations that currently invest or are considering investing in social enterprises was sampled. This included both commercial and social investment institutions, charitable trusts and foundations, independent financial advisors and individual retail investors. In order to triangulate and confirm the findings from the interviews, a survey was distributed to 216 social investors, of which 20% responded.

6. See http://www.thesroinetwork.org and http://www.thegiin.org/cgi-bin/iowa/reporting/index.html