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Social Economy for Poor Communities – Asian Experience

Social enterprises play a vital role in addressing social and environmental challenges in developing countries in Asia and the Pacific.

With a significant number of people living in extreme poverty in Asia and the Pacific, social enterprises, i.e., organizations that pursue social goals through commercial strategies, serve as a vital link to narrow the gap in the region’s income disparity.

…Social enterprises harness the power of the market to tackle social and environmental problems in a sustainable, scalable fashion. They may be set up as a nongovernment organization (NGO) or a small business, but they operate like a business rather than a charity while pursuing their socially oriented mission… (Bart W. Édes, Director of ADB’s Poverty Reduction, Gender and Social Development Division).

Asian Development Bank (ADB) supports sustainable and scalable models that combine private sector impact with the goals that are traditionally associated more with operational NGOs.

Impact on Asian poverty

Success stories involving social enterprises abound in Asia and the Pacific. For example, in Cambodia, thanks to Sahakreas Cedac Ltd., five thousand farmer families learned technologies to improve their rice production and build their cooperatives, providing them with links to markets where they can sell their produce. As a result, they are starting to earn higher income and can now afford to send more children to school.

Such stories were shared in the first annual regional Impact Forum held in Singapore in June 2012. The Impact Investment Exchange Asia (IIX), also a social enterprise, organized the forum, while ADB supported some sessions to highlight outputs of an ongoing study on the creation of a platform to connect social enterprises with impact investors to benefit poor communities.

Ideas meeting investments

The power of social capital markets lies not only in having great ideas but the ability for the ideas to meet investments. The Impact Forum presents the platform in which innovators can meet with investors who are inspired by the social enterprises’ vision and bring this vision to a larger scale,” said Professor Durreen Shahnaz, founder of IIX and Shujog, a Singapore-based, nonprofit sister organization of IIX that helps social enterprises around Asia to improve their organizational and fiscal accountability and enhance their governance in order to improve their attractiveness to potential investors.

Harnessing the power of the markets, ADB continues to collaborate with partners to strengthen the promotion of social entrepreneurship and impact investing for the benefit of the region’s poor.

Source - adb.org

The project “Free Debut”

The project “Free Debut”

The Russia’s only operating theater in which the actors are released prisoners.

Websites:

Project “Free Debut”

Project “Return” 

The project team:

It consists of 4 highly professional and creative people:

1) Manager – Arkadiy Baranovskiy

2) Assistant Psychologist – Alex Kushnir

3) The director – Anastasia Yablokova

4) Coordinator, columnist – Irakli Bezhashvili

History:

This project was born in the late 2010 as a part of the project of rehabilitation of released prisoners-Jews «Return». Initially, the project was conceived as a «workshop» where in the spec. training groups participants gain lost during the «imprisonment» social communication skills for future successful integration into the family and society. During six months of training the workshop formed a group of our permanent wards of 10-15 people. This workshop led them to decide to try themselves as professional actors. And this was a completely unique theatre for our country «Free debut».

The theatre gave a premiere musical composition «From letter to letter» six times, including the theater directed by Mark Rozovsky «Nikitsky’s Gate», at WW II memorial complex (Poklonnaya Hill) at Moscow House of Public Organizations, at Jewish Cultural Center in B. Nikitskaya and other places.

Competing organizations:

This project is unique (in Russia and Eastern Europe), so the organization has no competitors.

The main purpose:

We want (and we have all the abilities) to create a full repertoire of performances, which let the theater reach the financial sustainability and to tour around the country, participating in various art festivals and competitions.

Social focus of the project (mentioned in the media):

1) The «PROnas» (TV «The first channel») – The projects «Return» and the theater «Free debut»

2) The program «PrimeTime» (TV «Russia Today») – Theatre for ex-cons offers chance of return to life

3)  «The Moscow’s News» –  Photo session «From the prison on to the scene»

Business plan:

1) The vision of the project for within the next seven years (in Russian)

2) The model of social business (in Russian)

3) The business plan, budget, risks (in Russian)

Additional Information:

1) The presentation album – project “Return”

2) The presentation video with English subtitles – project “Return”

3) Recommendations and letters of honor can be reached – here 

EXPERT’S CONCLUSION

Potential of media capacity of the project:

Very high, with appropriate capital investment project has the potential to get international recognition.

The ratio of the budget, and social impact of the project (from «0» to «10» degrees):

The highest degree (10).

Financial Statements:

The organization has financial reports, starting from the end of 2008. All reports are available here

Strong sides of the project:

The organization has very high level of professionalism, creativity and «mobility» of the project.

Weak sides of the project:

The organization has not own space for rehearsals and performances.

The main challenge to date:

To date, the main challenge –is  to save this unique project and for the opportunity to develop and transform the studio into a «full-enterprise» theater with all the necessary attributes: his own space, professional stage, sets, costumes, equipment, repertoire, and most importantly – the ability to conduct regular public performances, including for a fees.

FORM OF PARTNERSHIP

1) Long-term loans at low interest rates to achieve financial sustainability.

2) Investments on the following conditions (as agreed between the parties):

- Acquisition of a share in the future profits of the theater;

- Advertising in the place of performance, at official meetings, media news etc.

3) Charitable donations.

Recommendations:

To implement the business model as organization that should register a commercial company or should have appropriate commercial partner-organizer.

Contact information:

1) +7-964-500-64-86 (Arkady)

2) +7-903-716-26-56 (Alex)

info@shalom-zk.ru

Social impact bonds expand across the UK

The first social impact bond trial in Scotland has launched, one of six projects across the UK set to be supported by sponsoring agency the Department of Work and Pensions.

The social impact bond project in Scotland will fund Perth-based YMCA’s charity work with young people. It was announced at a social impact conference in Glasgow last week. Jill McGraith, the YMCA’s acting chief executive, said: “We thought there would be a couple of big investors but what happened was small individuals and businesses came forward.”

Social impact bonds also attracted political attention in Scotland last week, with Liberal Democrat MSP Alison McInness calling on the Scottish government to introduce social impact bonds to fund prisoner rehabilitation in Scottish jails. She said social impact bonds would help “revolutionise” rehabilitation with the help of charities.

Justice Secretary Kenny MacAskill, responding to McInness in Parliament, pledged to look at the idea.

The very first social impact bond trial in England is being piloted at HMP Peterborough, where private investors are funding prisoner rehabilitation through the One Service – a coalition of mostly charitable organisations, led by Social Finance, providing intensive help to 3,000 short-term prisoners throughout their sentence and when they leave prison.

If reoffending amongst this group is reduced by an agreed target with the Ministry of Justice, investors will get a return from government. But if the target is not reached, the investors will get nothing back.
‘NEET’ social impact bond

One of the six social impact bond projects to be supported by the Department of Work and Pensions (DWP)is a social impact bond led by the Private Equity Foundation (PEF).

The social impact bond has been commissioned by the DWP’s Innovation Fund, and is being backed by PEF and Big Society Capital with £900,000 in investment.

It will fund charity Tomorrow’s People’s ThinkForward project which will place ‘super coaches’ in ten schools in Shoreditch in East London, to tackle the number of young people not in education, employment or training (NEET).

If the programme in the ten schools meets a list of targets agreed with the DWP Innovation Fund, PEF and Big Society Capital will get a financial return.

Other social impact bonds to be supported by the DWP include one to be led by Triodos Bank to fund a programme of job creation in Bristol
Manchester social impact bond

Elsewhere, Manchester City Council has voted to pilot social impact bonds to fund intensive foster care for children currently living in residential care homes.

The Council plans to enter into a partnership with an ethical investor who will be contracted by the Council to both underwrite the scheme and provide the service itself on behalf of the Council.

The pilot scheme, called the multi-systemic treatment foster care project, will involve eight children and young people initially.

Manchester City Council was involved in a six-month feasibility study with Social Finance last year along with Liverpool and Essex councils to investigate the potential for social impact bonds to fund services targeted at vulnerable children, young people and their families.

By Vibeka Mair, civilsociety.co.uk

Market place

Here is an example of NGOs development in dynamics:

Fig. 1

Interpretation (see Fig. 1):

In June 2011, three NGOs with similar activities, rating and capitalization (NGO No. 1 – 4, NGO No. 2 – 2.4, NGO No. 3 – 2) passed all the formal administrative procedures and financial checks – i. e. IPO. In September, two organizations (NGOs No. 1 and NO. 3) altogether announced the launch of new project (in both cases market capitalization rose to 5 points). In December 2011 it became clear that the new project of NGO No. 3 was interested in the mainstream media (that took interviews, videos, etc.) and the organization has attracted some larger investor’s attention (capitalization rose to 8 p.), and by March 2012 NGO No. 3 received an additional funding that expanded the organizational possibilities for further development of the project (market capitalization rose – up to 15). On the contrary, NGO No. 1 faced a lack of qualified personnel in an organization that could implement this project and put it at risk the future of the project (market capitalization fall to 3.5 pts.). Then it turned out the cost of the services of qualified personnel exceeds the amount provided by the project’s budget, and this trend continued (to 3 pts.). Immediately after the IPO NGO No. 3 launched an internal reorganization, which led to a change of project manager and replacing it with a more efficient, but expensive one (market capitalization rose to 6 pts). The new appointed manager initiated a profound reform of the project, which didn’t get approval from the organization’s board, which led to an open conflict of interests (market capitalization fall to 1.8 points). Later, an independent mediator was connected to settle the conflict, who offered the decision that was acceptable to both sides (market capitalization rose to 2.6 pts).

N. B. The “weight” of parameters:

The weight means value and the quality index, which will give an idea about the organization in a particular aspect. Each of the indicators should be evaluated with a 10-point scale. For example, parameters concerning an “effectiveness of social program”, and a “quality/quantity of the target group” should be of greater importance (and, accordingly, should be placed higher in the scale: for example – 9.5 points) than a “PR and rate of mention in the Media” (for example – 5 points). A “ratio of total budget of the organization and its actual impact on the target group”, we think, should have the highest weight – 10 points. Similarly we should score the other parameters. The sum of all indicators, taking into account their “weight”, will mean a real market weight (“capitalization”) of the organization.

MARKET INDEX – “GLOBAL INDEX OF KINDNESS” (KINDEX)

“Index of kindness” – is the most important indicator of happy life in a social state, since it will show the ultimate dynamics of the quantity/quality of charitable activities of the nation. It will help understand the real level of comfort in this social community. The global index of kindness will be calculated by the total “market weight” (see above) of all the NGOs divided by the number of participating non profits organizations. Other factors affecting the index: General situation in the charitable sector inside the country and abroad. Macroeconomic factors in the country. Macroeconomic factors in the world. Political events as well as other non-economic events (wars, diseases, etc.).

project

Nonprofits have to recognize that they’re businesses, not just causes
(Bill Strickland)

All achievements, all earned riches, have their beginning in an idea.

Don’t wait. The time will never be just right.
(Napoleon Hill)

To date, the level of success of non-profit or so-called third sector and social services rendered by it are difficult to estimate professionally in the absence of the real “market” and clearly established criteria by which one could test the activity of NGOs. It is very difficult to assess the effectiveness of the organization, the quality of social “products”, the impact on the audience and the advantages of NGOs in comparison to one another. Today we can say with confidence that the “classic” charity is not always an effective way of solving the social problems.
Currently, there are tens of thousands of NGOs that are raising tens of billions of USD, however, not all of the information presented by them in the web is reliable in the relation to the expenditure of donated funds. Some specialized web portals, which attempt to collect the info on real operating NGOs and their social activities are trying to solve this problem by examining the actual activities of the organization, its charter and financial documents, as well as analysis of other parameters, for example: an American NGOs rating organization www.charitynavigator.org; as well as a simpler Russian equivalent www.blago.ru. However, they solve the problem only partially because all of the information presented by these “agencies”, although detailed, but “static” – so for a potential donor/investor it is not possible to make a living dynamic picture of the organization’s development for the past years. In addition, these portals, as a rule, work with already big and recognized organizations and therefore prevent new and small organizations (“start-ups”) from receiving much-needed initial financing. The reason is obvious: large and recognized charities “brands” don’t allow appearing of the small but effectively working ones – in order to keep its monopoly in the market of limited financial resources.

MARKET FOR CHARITIES – CONCEPT

Research of the third sector points to a general trend for all NGOs – gaining financial self-sustainability through the gradual “commercialization” of the sector by generating revenue through business ventures and corporate partnerships: consulting, training courses, sales of technology solutions of social problems, etc. Therefore, more and more they use the new term – “social enterprise”. Social entrepreneurship is a new way of social and economic activities, combining the humanitarian mission of “acting for good” with the achievement of economic efficiency and profitability.
According to Bill Strickland, CEO of Manchester Craftsmen Guild,
“Nonprofits have to recognize that they’re businesses, not just causes. There’s a way to combine the very best of the not-for-profit philanthropic world with the very best of the for-profit enterprising world. This hybrid is the signal of the future for both profit and nonprofit companies.”
Thus, social entrepreneurship is now seen as a real prospect of the evolution of the nonprofit sector: for example, the degree of “commercialization” of NGOs in the U.S.A. today is exceeding 60%
Since we’re talking about the uniting of two sectors, profit and non-profit, we want to offer the next logical stage of further development with completely clear and understandable “market” rules. We believe that today it is necessary to create a web-platform similar to the stock market for commercial companies, which will connect potential donors/investors and social entrepreneurs for investment in NGOs and their social projects.
In this “market platform” will be presented NGO’s (sellers) and their social projects (“products”). This platform will also attend potential investors (institutional investors – foundations, commercial organizations, private individuals), which (in view of interested areas, the organization, in its rating and other parameters of the social activity) will choose partners for donations/investments.

SOCIAL STOCK EXCHANGE – BENEFITS:

For NGOs:

  • will give a huge stimulus to improve efficiency and creativity of their work;
  • will greatly facilitate the search for new partners, donors/investors for the ongoing activities, as well as for promoting new ideas, projects, and “start-ups”;
  • significantly will reduce the services for fees provided by professional fundraisers.
“Institutional IPO” (abbr. «initial public offering») and its regular updated rating, awarded by a third and independent (!) party (see above examples of such organizations), will mean that it has passed all the necessary procedures, its activities are legitimate, transparent, effective and, most importantly, has a good dynamic and prospect.

For donors/investors:

• will increase the trust for the organization and for the market of NGOs as a whole;
• will increase the guarantees of reliability of supporting social project and significantly reduce the risks of supporting/investment in inefficient organization or project;
• will remain anonymous by making payments through the service “e-broker”.
We believe that the creation of NGO market and NGO “stock prices” will correlate with time, and even affect the stock prices of commercial companies that support them, as well as the so-called “global index of kindness” will influence over time the stock market index of commercial companies.
In addition, NGO market will create real opportunity to observe the dynamics of NGO’s development, and thus, will allow to make predictions and provide a powerful informational tool about position of non-profit organizations, categorized by activity and regional presence.

MARKET INDEX – “GLOBAL INDEX OF KINDNESS” (KINDEX)

“Index of kindness” (KINDEX) – is the most important indicator of happy life in a social state, since it will show the ultimate dynamics of the quantity/quality of charitable activities of the nation. It will help understand the real level of comfort in this social community.
The global index of kindness will be calculated by the total “market weight” (see below) of all the NGOs divided by the number of participating non profits organizations.
Other factors affecting the index:
General situation in the charitable sector inside the country and abroad.
Macroeconomic factors in the country.
Macroeconomic factors in the world.
Political events as well as other non-economic events (wars, diseases, etc.).

CHARITY MARKET – THE FUTURE

We sure that Charity Market has very good prospects not only as a social project, which will solve many problems of NGOs and radically change the world of NGOs in the next 10 years, but also as a very promising commercial project, which will be able to reach not only financial self-sufficiency by providing consulting and administration services for fees to organizations and projects willing to offer themselves on the electronic exchange platform, but also very profitable to owners through the issuance of shares and its stock price changes.
In addition, it is obvious that the project is naturally develops and organizes social sphere protection, which gives the community an additional resource of stability and prevent social shocks.