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.