In this article in October 2016, I talked about inclusive definitions needed for social entrepreneurship – where those entrepreneurs in developing countries without technical and geographical access to voicing their well-earned performance.

While it is as important to ensure inclusivity in this space, in this article, I will unpack the oft-confused difference between micro-entrepreneurs and social entrepreneurs, as well as their commonalities in the realm of social impact investment.

The International Labour Organisation (ILO 2014, 54) refers to them as “own-account workers” – a very broad definition of what they make self-employed entrepreneurs.

On the other hand, the Grameen Bank (2014, para. 1), established by Professor Muhammed Yunus defines microentrepreneurs as “people who own small-scale businesses known as microenterprises. They usually employ less than five people…They can provide or supplement the source of income.”

The EU’s definition of microenterprise is a commercial venture with fewer than ten employees, and with an annual turnover below EUR€2 million (Commission of the EU Communities 2003).

Munoz (2010) in his book Contemporary Microfinance asserts that microenterprises add value to a country’s economy by creating opportunities for jobs, income, and stronger purchasing power, and adding further business avenues.

Interestingly, Battersby (2014, 792) notes this as a form of “grass-roots liberalism to foster liberal values at ‘the bottom of pyramid.’”

Based on some scholarly contributions, we can conclude to say that social entrepreneurs operate within the boundaries of two business strategies that are:

1) non-profit with earned income strategies: where a social enterprise perform hybrid social and commercial activities to achieve “self-sufficiency,” or

2) for-profit with mission-driven strategies: where a financially independent social purpose business perform social and commercial activities simultaneously to achieve “sustainability.” (Samer 2012, 26–7)

So what we can see in common there is the dire need for investment.

It is true that we need to firstly build ‘intellectual infrastructure’ ready for social business thinkers, but these organisations are still in need of financial support to prove to the world that they are needed – not only scholarly and practical inquiry but external funding mechanism are needed. Without any financial input, they cannot operate i.e. they cannot achieve their mission; hence no success story.

Perhaps, in order to attract funding or investment, there are many different factors that realistically opens investors’ wallet – on top of due diligence that many of us talk about.

Those factors could be a differing degree of social impact prioritised, the field of social impact, ROI, spiritual re-development and so on. The difference between traditional types of investment and social impact investment is that, that very factor for investment is extremely diverse yet fragmented.

Perhaps that is why social impact investment is so distinct, unprecedented, and far more exciting than any other instruments we’ve seen in the history.

References:

  • Battersby, Paul. 2014. “The Local and the Global Responsibilities of Business.” In The SAGE Handbook of Globalization, edited by Paul Battersby, Joseph M. Siracusa, and Manfred B. Steger, 787–95. London: SAGE Publications Ltd.
  • Commission of the EU Communities. 2003. “Commission Recommendation concerning the definition of micro, small and medium sized enterprises.”  Official Journal of the European Union 46 (124):36-41.
  • ILO. 2014. Global Employemt Trends: Risk of a Jobless Recovery. Geneva: International Labour Organisation.
  • Munoz, Joseph Mark S. 2010. Contemporary Microenterprise. Edited by Joseph Mark S. Munoz. Cheltenham: Edward Elgar Publishing Ltd.
  • Samer, Abu-Saifan. 2012. “Social Entrepreneurship: Definition and Boundaries.”  Technology Innovation Management Review 2 (2).
  • Yunus, Muhammad, and Karl Weber. 2010. Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs. 1st ed. Edited by Karl Weber. New York: Public Affairs.