Macarena Hernandez de Obeso, is a current Skoll Scholar and is dedicated to economic opportunity and prosperity for deprived communities in Latin America.
She shares the story of starting her new social enterprise that aims to bring together a global community, all the while studying her Oxford MBA!
In September of 2016 I started the most incredible journey of my life so far, an MBA at Oxford. At the beginning, I was sure that I was here to strengthen my business knowledge to be able to combine a sustainable business model with a social mission. However, I wasn’t sure which path I was going to achieve it in the future. I had in mind three options:
1. come back to the social enterprise where I was working before
2. join an international organisation or enterprise focusing on the design of tools and impact metrics to enhance the work of social entrepreneurs
3. start my own venture
Surprisingly, in less than two months, one of these became a reality.
Meeting my Co-Founder
During the first week of my MBA, I met Ana Maria. Being both born in Latin America and having dedicated part of our life to social impact, we realised that we shared a powerful goal; to create opportunities for people in Latin America by embracing their talents and helping them to reach their full potential. She had the idea to fund a charitable project offering Spanish language practice for foreigners through conversations with native speakers within the project’s community. I loved the idea, but not the business model; I thought it should be a social enterprise that could fund itself by creating access to economic opportunities and a flexible way of income for all Spanish native speakers in Latin America.
Launching our social enterprise
In November of 2016, we founded Language Amigo. Today, we are connecting, through video calls, language ’Learners’ who want to practice conversational Spanish, with native speaking ‘Amigos’ from Latin America. For Amigos, Language Amigo is a flexible way of income and for Learners, Language Amigo is a flexible way to practice.
Through Language Amigo, we are not offering Spanish teachers. We are offering to language learners the opportunity to put into practice their foreign language knowledge and have real world conversations with real and friendly people, Amigos. I believe that the main objective to learn a language is to be able to connect with people from another country, culture, and background. Through Language Amigo, you can do that.
Language Amigo’s first Learner-Amigo call
Language Amigo’s first Learner-Amigo call
I was very happy working on my new venture, but with every new path comes its challenges and scepticism. In February 2017, I was delivering a presentation about Language Amigo, to my communication skills’ group at the Oxford Language Centre. I explained that to generate income, Language Amigo keeps a percentage of the cost of the calls conducted between Amigos and Learners. The first question that I received after this presentation, from a Chilean student, was: “are you exploiting Latin American youngsters to create a business?” I couldn’t believe what I was hearing. I wasn’t sure what feeling this question had caused me. Anger? Deception? Surprise? Indignation? I realised that it is not obvious to everyone that a collaborative economy business model, such as Language Amigo, is creating economic inclusion for people who did not have an economic opportunity before. I was conscious that industries threatened by collaborative economy models, such as hospitality and logistics, have been raising critique against successful platforms and putting pressure into regulatory institutions. Nonetheless, the fact that an Oxford student from Latin American believes that we were exploiting our Amigos, completely shocked me.
But, we continue to grow
I believe that Language Amigo is creating value not only for Amigos but also for Learners. We are developing the means to create social and economic transactions between them. We are aggregating and connecting supply with demand that otherwise would never connect. We are constantly looking for potential customers to grow the economic opportunities for Amigos. We are constantly updating the Amigos’ training and generating support resources to improve the experience for the Learners.
Why is the value of creating a network and the means to include people into the economy undervalued? What is harder: to produce and deliver the product or service, or to find the market and attract it to generate demand for the product or service?
Currently, we are looking for institutions such as language centres, schools, universities, and enterprises that already have Spanish students to become our partners. We would like to be able to offer Language Amigo to their students and to co-create the best tool for them, their students, and the Amigos. Together we will be able to demonstrate that it is possible to create fair opportunities through the power of language.
Language Amigo Co-founders: Ana Maria (Left) Macarena (Right)
Skoll Scholar and design enthusiast, Ahmed Abu Bakr, shares his experience of an average Oxford MBA classroom. But it wasn’t the subject matter that he found captivating, it was the leadership of its professor that truly inspired him.
In my first week of the MBA programme, I was introduced to the idea that we can all be classified into one of four categories: activists, theorists, reflectors, and pragmatists. Now of course, that was a clear oversimplification – we’re obviously not one or the other, but a mix of each in varying quantities. Nonetheless, the exercise forced me to explicitly recognise my inclination towards reflection.
And so, as my year at Oxford comes to an untimely close, I find myself taking stock of my time spent here. So what am I taking away with me? Well, a great many things: new skills, new friends, great memories, and an expanded perspective. But most importantly, I’m taking back inspiration. And today, I want to share one such story of inspiration from my time here.
I met him in the first week of our first term, on a Friday afternoon. Half of us were feeling the post-lunch drowsiness seeping in, while the other half really just wanted to get started with the weekend. There was nothing particularly remarkable about him at first glance. The most I could have said about him back then was that he seemed decent- kind, soft spoken, and as we eventually learned, modest to a fault. And he was teaching us statistics.
But over the course of eight weeks, I found in him a real life John Keating (ref: Dead Poet’s Society– be sure to watch it if you haven’t already!). Never have I had the privilege of seeing someone so very passionately and creatively impart knowledge – and let’s face it, statistics isn’t the most exciting subject out there- and win the heart of each and every student in the room. His name is Siddharth Arora, and his love and passion for the statistics was unmistakeable from his very first class. But what was truly remarkable was how he took on the full onus of helping us discover beauty in his subject.
Far too often have I seen teachers crush the spirit of learning in their students. Growing up, I have personally witnessed teachers ruin mathematics, physics, language, and a myriad of other disciplines for many of my fellow classmates. I have seen teachers teach through their authority, arrogantly, complacently, trying to stuff knowledge into the minds of students, and leaving no room for wisdom. Too often have I seen teachers forget that they must earn the attention that we chose to pay.
But Siddharth understood that. He cared enough to truly engage us. He showed us the presence of statistics in breath taking videos of the flight patterns of starlings, in the disturbing reality of climate change, and in the quotes of Rumi. He cared enough to go out of his way to make things like regression and conditional probabilities interesting, relevant and engaging for us all. He cared enough to voluntarily stay back on weekends and help us when we were struggling and he cared enough to provide us with snacks as we waited our turn to discuss our issues with him. And because he cared, we cared back.
It was particularly evident on the last day of his class. Incidentally, this was also the last class of term for all of us- a much needed study break was just waiting to begin. The clock struck five and he let us know that we were free to leave, but that he still had about 20 more minutes of content to cover. The weekend had begun, the term had ended, and everyone chose to stay back to finish a statistics class.
You see, over those eight weeks, Siddharth did so much more than simply teach us. He inspired us, shared his passion, gave us pearls of wisdom for life in general, and was there for us when we had needed him. He showed us genuine care, and got us to care back, and in doing so he demonstrated tremendous leadership within the classroom. And through it all, he personified humility and grace.
Section C, MBA class of 2017 with Siddharth Arora (more than 45 minutes after the end of class)
For me personally, he inspired a vision of the sort of person and the sort of leader I would like to be. Someone who doesn’t let authority, position, and credentials eat away at the intent to try harder, to be better, and to give more. Someone who empathises, and someone who cares. Someone who wins hearts through deliberate and protracted effort. And is humble and genuine throughout it all.
The Skoll Centre’s Apprenticing with a Problem awards support individuals to engage in experiential learning and deep immersion around the challenges that they seek to tackle.
Oxford MBA alumna, Laura Taylor was a 2016-17 awardee whose apprenticeship took her to New Zealand to learn about indigenous social entrepreneurship and cultural resilience.
Growing up in Hawai‘i, I learned early on that there are many ways of seeing the world—that each culture encompasses unique values, beliefs, and norms that influence our decisions and interactions. From an early age, I’ve been drawn to the issue of cultural resilience.
In a globalised economy, how can we protect the practices and perspectives that have sustained peoples and environments for generations? In an era of migration and resettling, how can we uplift the humanity that connects us, while preserving the diversity of thought, language and identity that enriches us?
These are questions I brought to my Apprenticeship—and indeed, to the MBA. Midway through Michaelmas term, as I grappled with conflicting worldviews, I was told, “Adding does not mean losing. A beautiful polished table would not be so if not for the wood underneath; rather, each new layer adds onto the next, building depth.” I held onto this reassurance: as I learned new theories, new methods, and new perspectives, I would not lose the knowledge, beliefs and values that I carried with me. Instead I would enrich them through new layers of understanding.
During my four-month Apprenticeship in Aotearoa New Zealand, I focused on social entrepreneurship as a vehicle for healing the cultural trauma of colonisation.
My intention was to learn from the Māori people who, in my home of Hawai‘i, are held up as exemplars in rebuilding an indigenous economy. Sharing similar histories of traumatic disconnect from their land, language and economic base, the Māori of Aotearoa and the Kanaka Maoli of Hawai‘i face similar disparities in health, income and educational attainment. From years of working alongside communities indigenous to Hawai‘i and the Pacific, I saw these disparities as rooted in the loss of identity and culture. And I saw the growth of indigenous enterprise as a key opportunity for restoration and healing.
The Treaty of Waitangi established Aotearoa New Zealand as a land of two cultures, and it provides legitimacy—a metaphorical/political tūrangawaewae (ground upon which to stand)—for Māori people. The right for Māori to be, to own, and to prosper has been embedded within the country’s laws and economic structures, and within Māori psyches, in a way that has not happened for Native Hawaiians.
Indeed Hawai’i can learn from this ownership-based approach, in order to bring greater control and a more equitable distribution of assets to Kanaka Maoli.
At the same time, through my Apprenticeship in Aotearoa, I have seen Hawai‘i’s strengths revealed. These include:
Its multicultural inclusivity—built on the value of welcoming that is integral to the Hawaiian culture, and the generations of cultures coming to thrive side-by-side (challenged, yet ever more important, with each new wave of immigration);
The hunger of its young people for spiritual and cultural sustenance;
And the establishment across the Hawaiian islands of sustainable, reciprocal models of relationship with the land.
While the control of land assets and the ownership of largescale farming, forestry, and fishing enterprises have uplifted Māori iwi (tribes) financially, New Zealand’s economic structure is arguably fueling rather than healing the rift between values and practice for Māori people. Indeed, I have come to believe that in order for healing to occur within business models, it must first take place spiritually and psychologically, within communities and individuals.
In Hawai‘i we are on track to get this right, and to build from this place of reconciliation a more inclusive, restorative, sustainable economy. In Aotearoa, I have found a need for something more.
Although my Apprenticeship is over, this learning and this work will continue for the rest of my life. I have settled in Aotearoa and am working at World Vision in an intrapreneurial role that involves nurturing social entrepreneurship, writing on the role of faith and spirituality in development, and supporting ambiculturalism within this 60-year-old non-profit.
At the same time I am staying connected to Hawai‘i and its burgeoning indigenous enterprise sector. Traveling home again in March I met with friends and former colleagues who are figuring out where enterprise models fit—and where they do not—within their mission to uplift communities. And two weeks ago I received an email from a Māori carver who, while visiting Hawai‘i, had happened upon my former workplace, Ho‘oulu ‘Āina, where his holiday revealed a broader purpose. Now back in Aotearoa, he has committed to fostering an exchange across our islands. His deep knowledge of Māori carving and heritage tourism will be shared with young Kanaka Maoli in Kalihi, while Kalihi’s knowledge of wa‘a (canoeing) will be brought back to Aotearoa to help to revive Māori’s own tradition of navigation. I aim to support this as best I can, serving as a bridge between my adopted lands.
Download the Laura’s Apprenticing with a Problem report.
Read more about Apprenticing with a Problem on the Skoll Centre website.
[image source: ‘Silver Fern New Zealand Icon’ by Simon Falvo via Flickr]
A group of 2016-17 Oxford MBAs go on the annual Africa Trek. This year’s destination: Nairobi and Kigali
Part 2: Rwanda
A city in transition: the above image shows the recently built CBD which has sprung up in the past decade, while the image below shows the areas hugging the CBD.
Rwanda is a small land-locked country, with a population of 11.2 million. For most, the atrocities of the 1994 genocide come to mind when the country is mentioned. However, the government is trying hard to overcome this history through pursuing a strong development agenda, leading to impressive annual GDP growth of 6.9%.
Arriving from Kenya, the contrast between the two countries was immediately stark. During our cab ride from the airport I noticed the perfectly manicured shrubs along the side of the road and the immaculately clean streets, with workers out-and-about sweeping, cleaning and repairing. I also noticed the beauty of the city – rolling green hills covered in terracotta houses, transitioning into new skyscrapers as we neared the city centre.
New offices and hotel developments in the CBD.
Another defining feature of the city are the thousands of motorbike taxis that swarm up and down the hilly roads ferrying commuters to different parts of town. A highlight of the trip was using this mode of transport to get between company visits, with a group of nearly twenty suited-up MBAs pulling up concurrently.
Hailing a large group of moto taxis to take us to our first company visit.
Operations manager Albert Munyabugingo discussing the growth of Jumia Food in Kigali.
Jumia Food is part of the Jumia group, a leading actor in online commerce in Africa with an ecosystem of online services and marketplaces including: Jumia (online shopping site for electronics, fashion and more), Jumia Market (allows users to sell their products online), Jumia Travel (African travel bookings), Jumia Food (food delivery service), Jumia Deals (classifieds), Jumia House (real estate), Jumia Jobs (recruitment), Jumia Car (vehicle marketplace), Jumia Service (e-commerce fulfilment and delivery).
Jumia Food launched in 2013 in Rwanda and was the first food delivery service in the country. Operations manager Albert Munyabugingo described the various tech components of the business, including the customer, vendor (restaurant) and dispatching software, and how these all had to integrate seamlessly to ensure a good customer experience.
The business model is based on the 10% – 35% commission paid by the restaurants to Jumia, with higher commission getting restaurants more visibility on the platform. The restaurants are given twenty minutes to prep the orders, something we believed would be quite a challenge given the more relaxed approach to service we had experienced. Also interesting to hear was their strategy to grow their middle-band customer, as they saw a higher customer lifetime value here than targeting wealthier, ex-pat clients who are more likely to leave the region in the future.
Munyabugingo spoke about some of the issues of doing business in Kigali, including internet outages (which necessitates Jumia staff manually phoning through orders to restaurants) and heavy rainfall which can affect delivery times.
The Office and Impact Hub Kigali
MBAs visiting the Impact Hub, run by Jon Stever, third from the left.
Jon Stever is an American expat who founded The Office in October 2012, the first open community working space in Kigali. Comprising a five storey-building in central Kigail, the space brings together makers, entrepreneurs and organisations that are working in social enterprise and civic and cultural arenas. Stever is also involved in running Impact Hub Kigali, a coworking space that operates out of The Office.
Stever gave the group a great overview of the entrepreneurial landscape in Kigali. In terms of issues, he spoke about the lack of trust and collaboration between local entrepreneurs and entrepreneurial support organisations which hampers collaboration and cross-pollination of ideas. He also discussed the high cost of internet connectivity and issues of down time. However, it was extremely inspiring to hear him talk about government efforts to improve business infrastructure, and the lives of Rwandan’s more generally.
Stever previously worked as an economist for the Ministry of Finance and Economic Planning and spoke about the passion of civil servants and the tight performance management practices used to hold all civil servants to account.
One Acre Fund
Seeing One Acre’s work on the ground – we visited a village in Karongi to speak to farmers who use One Acre’s services and observe some of the fields where they were testing different seed.
A member of the One Acre team discusses the trials that are being carried out to test different seeds. Tests such as this one help the organisation select the seeds that are best suited to the local weather and soil conditions and produce the highest yield.
We visited One Acre’s Rwanda headquarters in Rubengera, a 2.5 hour journey west of Kigali on the edge of Lake Kivu, which separates Rwanda from The Democratic Republic of Congo. The journey was breathtakingly beautiful with lush rolling hills covered in thousands of small rectangles of cultivated land dotted with homesteads.
It was interesting to note that the further we journeyed from Kigali, the worse the roads became, eventually the jeeps we were travelling in were using the full width of the road to dodge the wide potholes that pitted the asphalt. This reminded us all of the transport and logistic difficulties companies and organisations face when working in the region. It also perhaps points to the tension in government spending between urban and rural areas.
One Acre’s headquarters are built into the hills over-looking Lake Kivu and comprise accommodation and work space purpose-built for their staff, 98% of whom live in the field. Each space has a deeply peaceful feel – the kind of place you might come to do a mindfulness retreat. The physical design of the space fits their purposeful mission: to support small scale farmers to increase yields and to move out of poverty. The organisation currently serves half-a-million small-scale farmers, with the aim of increasing their reach to a million by 2020. They deliver their highly-localised services through a field staff of roughly 5000, working in Kenya, Rwanda, Burundi, Tanzania, Uganda, and Malawi.
Jeremy Golan, Financial Advisory Services Manager for Rwanda, described One Acre’s offerings, which have been refined over their ten years of existence:
Farming inputs, including high-yield seeds and fertilizer.
Credit to purchase inputs, which is later collected via community-based groups to build accountability. One Acre also offers other finance products such as crop insurance.
Distribution / delivery to bring the faming inputs to within walking distance of the farmers.
Training on agricultural techniques.
Market facilitation to increase profits.
Golan, who has a background in consulting, emphasised that the organisation is run very much like a private sector company, with many of the management team coming from corporates or consulting. This ensured that operations were kept lean and the organisation was constantly innovating to find better ways to serve their farmer clients. It was inspiring to hear that some of the best minds, pulled from the likes McKinsey & Co, where now channelling their skills and energy to help those most in need.
What struck me most about One Acres work was the level of trust they need to develop with farmers, as their work targets the heart of their client’s livelihood and identify. Offering people alternative seeds, or recommending slightly different farming methods is essentially asking farmers to shift their behaviour away from well-practiced norms. It seems this trust is created by building a staff who are farmers themselves and live in the villages One Acre aims to serve, by running highly-localised tests at village-level to show the value of different seeds and techniques, and by taking a very long-term view on building both social and infrastructural capital.
To conclude, the Africa Trek will definitely be one of the highlights of my MBA. It was a rare opportunity to have a privileged access to CEOs and other business leaders, and to learn first-hand about the business models and activities they are pursuing to help build the region. As an African, and as a business student, I am hugely excited by amazing work I witnessed in East Africa. The experience opened my eyes to the opportunities of the region, but also reminded me that there is much work to be done to ensure those living in poverty are supported to move up and live more dignified lives free of carting heavy water drums, free of preventable illnesses and free of the structural violence that comes with poverty. There is much work to be done.
Author: Gillian Benjamin
Gillian Benjamin is a social design practitioner from South Africa. Driven to use design to create social impact, she founded a design studio to serve social justice organisations and later worked at the Cape Craft and Design Institute running design thinking projects in healthcare, education and the built environment.
Skoll Centre Early Career Research Fellow Tanja Collavo hosted a workshop at Marmalade 2017 on the strengths and weaknesses of the social entrepreneurship sector in England… and where next.
The State of Social Entrepreneurship in England – Strengths, Issues, and Solutions.
What is the state of social entrepreneurship in England? In the course of my DPhil research at Saïd Business School I interviewed key people at social entrepreneurship organisations, revealing a snapshot of strengths, weaknesses, worries and ambitions for the future development of the sector. At this workshop I presented some of my findings and asked participants to give their thoughts and elaborate actionable proposals around the issues most important to them.
The debate was lively! The overall agreement was that the sector is growing, vibrant, diverse, exciting, and constantly changing thanks to the very low barriers to entry. Its core strengths are its ability to break silos across sectors and organisations, and its democratic nature, encouraging bottom-up solutions to social problems and the retention of the wealth produced at the local level. Additionally, the perception is that the quality of products and services delivered by social enterprises is constantly improving and that this is a great business card to increase their market penetration both in the business-to-business and business-to-consumer markets. In this sense, many workshop participants welcomed the shift of the sector towards business and believe that more and more social enterprises should aim to become business-savvy and competitive.
But participants also agreed that there are still many key issues holding back the growth and success of the social entrepreneurship sector:
No one talks about failures
There is very little learning inside the sector because media, intermediaries, social entrepreneurs and enterprises talk a lot about successes but hardly ever about failures.
The passion paradox
Most ventures start because of founder’s personal experience with or passion for the problem they are trying to tackle. This has obvious positives but also can lead to a “do something now” mindset promoting easy solutions and immediate action more than the elaboration of long-term strategies. Further consequences can be the lack of professional sectoral knowledge and lower inclination towards collaboration due to high levels of personal ownership and commitment, also associated with stress and burnout.
Difficulty accessing supply chains
A third issue present in the sector is the low presence of social entrepreneurial organisations in supply chains, both in the business and in the public sectors. In fact, in most cases, social ventures are too small to bid for contracts and too young to have a proven track record that would facilitate their winning supply or service contracts.
Too dependent on government and poor finance
Participants described the sector as still too reliant on government and as lacking appropriate financial support matching its funding requirements and specificities. Financial support was described as particularly scarce at regional and local level, with core sector and financial intermediaries being based in London and mostly focusing on organisations and areas geographically close to them.
Lack of collaboration amongst support organisations
Finally, the group agreed on one of the main findings of my research projects: the lack of collaboration among sector intermediaries. This leads to a duplication of efforts and to a degree of confusion among social entrepreneurs and enterprises about where to look for support and how to reconcile the different messages they hear from the different intermediaries they are affiliated with.
Out of this list of issues, the workshop participants picked two areas that they thought were especially relevant in order for the sector to keep on thriving: the access of social enterprises supply chains in private and public sectors, and the low collaboration among sector intermediaries.
Social entrepreneurship in supply chains
The group tackling the issue “access to supply chains” found several core causes for this issue. Some causes can be attributed to failings of social enterprises themselves:
a lack of transparency and metrics that would lower the perceived risk of social ventures;
a low understanding of tender processes;
and the inability of social enterprises to scale and integrate or collaborate in order to bid for big projects and commissions.
Other challenges are created by the surrounding ecosystem:
procurement practices and contracts that do not favour the involvement of social enterprises and small organisations in supply chains of corporations and public bodies;
the existing regulatory environment;
and the still low recognition of the value and specifies of social enterprises outside of the sector.
Proposed solutions to improve the situation relied on the involvement of social entrepreneurs and enterprises and/or in that of sector intermediaries. Social entrepreneurs and enterprises should, with the help of intermediaries, lobby both the government for changes in legislation regarding tendering processes, and private companies to convince them about the possibility to collaborate with social enterprises to enhance the sustainability and credibility/effectiveness of their CSR practices. Furthermore, on their own, social entrepreneurs and enterprises should collaborate to win contracts and present stronger evidence about their performance and competitiveness, which would reduce the perceived risk for procuring organisations. Finally, sector intermediaries and research bodies should: analyse where the Social Value Act has worked; prove the benefits of values-based supply chains; and ensure social ventures involvement in supplier network platforms like Ariba.
Increasing collaboration amongst intermediaries
The second group of participants decided instead to work on the problem of low collaboration among social entrepreneurship sector intermediaries. The origins of this situation can be found in the presence in the sector of multiple umbrella bodies and intermediaries that publicly state that they are cooperating and collaborating with one another but in reality are very territorial and not interested in what other intermediaries do because “they occupy a separate niche in the sector”. In addition, many intermediaries have very specific views and beliefs about the definition of social entrepreneurship, about what the sector should look like, or about its role in society. This makes it difficult for them to really collaborate beyond sporadic cooperation for specific projects and events.
In this case, the proposed solution was to start from existing successful platforms involving several intermediaries (such as the Social Economy Alliance) and create a “network of networks”. This would have shared ownership and governance, would avoid exclusive definitions, and would initiate collaborations among different organisations around specific projects, such as “improving the access to supply chains for organisations in the social economy”. Cooperation on specific projects could be a starting point to create trust and a mutual understanding. At the same time, this “network of networks” should map out all the different intermediaries present in the sector and develop an online list differentiating organisations according to their core competences and easily accessible for organisations interested in obtaining support from the ecosystem. The creation of such a database would simplify the research process for individuals and organisations in need of help and would create the opportunity for intermediaries to understand where their respective strengths are and, thus, for sharing best practices and outsourcing to each other non-core activities.
The meeting finished with some networking and the hope that these solutions could lead to some concrete initiatives in the sector as well as to other opportunities to meet and discuss also the other issues present in the sector and ways to solve them in a collaborative way. Is anyone there up for the challenge? From my side, the door is open to anyone willing to know more or to jointly organise something along these lines to help the social entrepreneurship sector as well as other parts of the social economy grow and thrive even more.
Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.
Skoll Scholar and Oxford MBA Candidate 2016-17, Ashley Thomas, draws on this year’s Skoll World Forum theme in relation to social impact business models.
There is a fault line between models of international development financing. On one side, there is the traditional donor and philanthropic capital that utilises grant money to support projects. On the other side is the social enterprise space that seeks to create sustainable impact through revenue generation. There has been a lot of excitement in utilising grant funding for social enterprises to build and tweak their business model, but to date there has been little appetite for true hybrid models of ongoing subsidies for social enterprises.
This is a conversation that I had in numerous sessions and coffees throughout Skoll World Forum. It was also one of the key themes from the session hosted by Mercy Corps and USAID on sharing the learnings from their investments in the Innovation Investment Alliance. There is a common ground emerging; these conversations are hinting at the start of innovative new business models that allow for hybrid grant and revenue streams.
Social enterprises are addressing market failures. They bring products or services to underserved markets, often at low margins, and often at high costs. However, market failures exist for a reason; many companies are realising that even at scale, high volume low margin products are not able to generate the revenues that are necessary to be sustainable. However, social enterprises often sell themselves on this vision- that with initial capital to pilot and build systems, they will be financially sustainable at scale.
Philanthropic capital- which does not require financial returns, can help bridge this fault line, and maximise the potential impact of social enterprises. This does not mean we should revert to the large scale unsustainable development models of the 1990’s, but use philanthropic capital as way of targeting the market failure and allowing social enterprises to maintain their focus on their mission and outcomes. This hybrid model is being utilised in the FundiFix hand pump repair service designed by Dr. Rob Hope out of the University of Oxford. The model uses monthly user subscription payments to pool capital to finance prompt hand pump repairs. However, the willingness to pay only accounts for 2/3 of the cost of the service, and the remaining cost is subsidised through grant funding. This is also used in much larger social enterprises. Ella Gudwin from Vision Spring spoke about how their model has shifted from seeking to maintain cost recovery- and retailing glasses at increasingly higher prices, to minimising the “philanthropy per pair” and serving their target customer. They were able to do this under a scaling innovation grant from USAID and Mercy Corps, demonstrating that donors are also recognising the need for the pivot into these hybrid models.
It is increasingly clear that there is not one single model for social enterprise, and a single-minded focus on achieving commercial sustainability may limit the impact. Innovative hybrid models that use the social enterprise ethos of cost effectiveness in combination with smart grant funding that can subsidise the product can address the market failures preventing social enterprises achieving impact at scale. There is immense opportunity to achieve scale and impact through creating this common ground.