Beyond microcredit: early evidence on microequity for the poor in Indonesia

DPhil (PhD) candidate in Economics at the University of Oxford, Muhammad Meki, and his colleagues evaluate their project into launching a microequity programme in Indonesia for microentrepreneurs in collaboration with Allianz.

Beyond microcredit

In many developing economies, a significant proportion of households derive their primary income from microenterprises involved in retail, light production of goods such as clothes, trade, and smallholder farming. Individuals who operate and work in such small firms tend to be poor; as such, improving their performance offers the potential for wide-scale poverty reduction.

There has been much talk about the potential for microfinance to lead to such poverty alleviation, however recent rigorous evaluations of microcredit have revealed more limited impacts. Reflecting on the evidence, it may be more appropriate to view microcredit as a way to ‘grease the wheels’ of development, rather than as a ‘silver bullet’ for transformational change (Banerjee, Karlan, and Zinman, 2015). Recent research also suggests that to help entrepreneurs better manage their enterprise, personalized approaches like consulting and mentorship can have more significant benefits than generic business training programs (Karlan and Valdivia, 2011; McKenzie and Woodruff, 2016; Valdivia, 2015; Bruhn, Karlan, Schoar, 2018; Brooks, Donovan, and Johnson, 2017).

2. March Mada (1st investee and 1st Super Star)_fish cake producer

March Mada (1st investee and 1st Super Star) – fish cake producer

Since a key part of economic development is the movement from having most people working in small enterprises, to working as employees in larger, more productive enterprises, some experts believe that we should focus more on the small set of ‘transformational’ entrepreneurs rather than on the large group of ‘subsistence’ entrepreneurs (Schoar, 2010). Even the aforementioned microfinance studies showed that while microcredit does not generate large impacts on average, it can provide a significant boost to relatively more successful entrepreneurs (Banerjee, Karlan, Zinman, 2015; Meager, 2016).

3. Agung Nugroho (Goodie)_broilers and gas cylinders seller

Agung Nugroho (Goodie) – broilers and gas cylinders seller

Adding microequity to the picture?

Equity-based financing may be an alternative way forward for transformational entrepreneurs, since it can provide them with a more flexible form of finance that is better suited to the needs of a growing business, especially as it often comes with personalized support from investors to overcome the unique business challenges they face. While equity financing has the potential to grow rapidly in emerging markets, especially with developments in financial technology and the digital economy, the minimum financing amounts tend to be well beyond the needs of many grassroots entrepreneurs. What they may need is a more nuanced form of equity-based financing, tailored to microenterprises: microequity.

Anitaria – JPAL research

Trust Network Finance

With the intention of exploring the potential for equity-based financing for microenterprises in Indonesia, Allianz Indonesia has embarked on a microequity pilot project near Jakarta called ‘Trust Network Finance’ (TNF). The program involves 4 phases:

  1. A selection phase in which microentrepreneurs are provided with a small initial amount of interest-free financing for their informal business, which increases if they repay successfully and share some of their profits, i.e., if they show characteristics of ‘transformational’ entrepreneurship;
  2. A mentorship phase where selected entrepreneurs are appropriately matched with mentors for personalized business development advice. Mentors are incentivized to invest their ‘sweat equity’, which will be formalized as a 10% ownership share in the enterprise at the third phase;
  3. A formalization phase in which entrepreneurs undergo formal business registration, and TNF and the mentor take formal equity stakes in the business;
  4. A graduation phase, in which TNF reduces its ownership stake, by selling to the owner or an external investor and using the sales proceeds to refinance the program.

As entrepreneurs graduate through the phases, they gain the right to recommend new entrepreneurs for the program and even become mentors themselves, building up the ‘trust network’.

As’at Adi Wibowo – JPAL research

Some preliminary evidence on this new approach

TNF has recruited approximately 150 clients since the pilot started in June, 2016, with the most advanced participants now having advanced to phase 2. In late 2017 we surveyed 80 clients, with the aim of learning about what kinds of people were joining TNF and what attracted them to join.

Key takeaways

  1. Clients tend to like TNF, seeing it as a unique product;
  2. Client understanding of the later phases of TNF is relatively low on average, which likely reflects the relative complexity of this unfamiliar venture capital-like model, compared to conventional microcredit;
  3. There seem to be two groups of clients in the pilot: (i) a (larger) group of less dynamic entrepreneurs, who mostly see TNF as a convenient way to get operational financing for their enterprise, and are more likely to leave the program during the selection phase, and (ii) a (smaller) group of more dynamic entrepreneurs, who are relatively more attracted by the opportunity to reach the mentorship stage;
  4. Many clients in this majority-Muslim nation see the interest-free TNF product as complying with Islamic law, and this was a very important factor in them joining.

These early results are promising, and provide some guidance for TNF as it scales up. Perhaps the network of clients can be harnessed to better identify and target the transformational ‘diamonds in the rough’, who can use TNF to become successful generators of wealth and employment.

The research has been funded by the Department of Foreign Affairs and Trade (DFAT), Government of Australia, through a core grant to the Abdul Latif Jameel Poverty Action Lab Southeast Asia (J-PAL SEA). The views expressed in this publication are the authors’ alone and are not necessarily the views of the Australian Government, J-PAL SEA or other partner organizations. We thank our colleagues at J-PAL SEA, and the Demographic Institute at the University of Indonesia (LD UI), for their support in implementing the research. We thank the team of Trust Network Finance at Allianz Indonesia for their support on this research.

Authors

Muhammad Meki is a PhD candidate in Economics at the University of Oxford. He is interested in the effect of equity-like financial contracts on the investment and growth of microenterprises in developing countries.

Simon Quinn is an Associate Professor of Economics and a Deputy Director of the Centre for the Study of African Economies at the University of Oxford. Simon’s research interests lie primarily in the study of firms and development.

Russell Toth is a Senior Lecturer (Assistant Professor) in the School of Economics at the University of Sydney. He is a development microeconomist, with primary research interests in the development of the private sector in developing and emerging market countries.

Strategically Leveraging Networks to Support Social Impact

Oxford Saïd Researcher and Early Career Research Fellow, Tanja Collavo, gives us a whistle stop tour of her recent DPhil research.

The cultivation of networks is one of the most popular tools for supporting social entrepreneurship and social innovation. Venture philanthropists, hubs, foundations, national and local networks all try to foster social impact by connecting social innovators with their peers, with potential investors and donors, and with individuals and organizations that can become their mentors and advisors. Yet, there is little knowledge on “best practices”, on what works and what doesn’t, and on the different ways in which network-based support to social innovation can be structured.

Over the past four years, I have analysed the features of four very different social entrepreneurship support organizations (a foundation, a venture philanthropist, a network organization and a trade association). Each of them has been successful in supporting the growth and development of social entrepreneurship in England over the past 15 years through the creation and management of multi-stakeholder networks. I was surprised to find that, despite their differences, each of these organizations engages in similar activities with regard to network-management.

Shared network strategies

First of all, the four agencies invest significant effort in signalling through multiple means the initiatives and success of the individuals and organizations that are affiliated to them. For example, they talk about their operations, impact and achievements on websites and newsletters. In addition, they engage with local, national and international media platforms (newspapers, magazines, televisions, etc.) so that the positive news coming from their contacts can spread even beyond their own reach. Furthermore, they organize yearly award ceremonies that provide additional coverage and popularity to the most successful part of their networks, usually the social entrepreneurs and enterprises that they are trying to help.

Secondly, the four organizations have proactively created within their networks an environment favouring the coming together and collaboration of individuals and organizations from different sectors and backgrounds. For example, these organizations publish blogs and articles on the benefits of cross-sector collaboration and propose common projects to their network members in a way that highlights what each of them can obtain from collaborating with individuals and organizations from other sectors. Furthermore, they train their members in multiple ways in order to reduce sector and cultural barriers among them. Each of the four organizations has also developed a narrative stressing how real change and impact are only possible in the presence of cross-sector collaboration.

Thirdly, the four agencies often try to elevate the reputation of the social entrepreneurs and enterprises present in their networks. They set up free events, webinars and initiatives explaining the benefits of social entrepreneurship for society and its superiority to other means to deliver social impact. Additionally, they present social entrepreneurs and enterprises in their online and offline communication, as well as in their events, in an enthusiastic light, defining them as the changers of the world or the creators of a more just and inclusive society. The elevation and legitimation of social innovators in these (and other) ways puts them in a stronger position when negotiating for help and support with players from other sectors that might be more established and resource-endowed than they are.

Finally, the four organizations manage the unavoidable competition (for funds, recognition for the “best approach”, attention, etc.) among the social entrepreneurs and enterprises that they support in a way that makes it possible and almost natural for them to collaborate and share ideas. For example, two of the agencies encourage friendships and frequent contacts among their network members, another one directly adopts a negotiation role when collaboration is needed among “competitors” for a specific project. In general, all four have tried to attract enough opportunities and resources into their networks to be able to provide something to everyone, so that the social entrepreneurs and enterprises they support do not perceive that the success of a peer might mean their own failure.

Diverging outcomes

However, despite the engagement in similar activities, the four organizations did not appear equally effective in leveraging their networks to help social entrepreneurs and enterprises. My data showed that if an organization manages a relatively small network – no more than 100-150 social innovators and partners/supporters – then it is in a good position to effectively employ its contacts to help social entrepreneurs and enterprises. Indeed, a manageable network opens up the possibility to know well enough the resources and contacts available and to propose meaningful connections and strategic advice. Additionally, in small networks it is easier to create a family-feeling and to set clearer expectations about each member’s contribution to the “common cause” — in this case the enhancement and scaling up of social impact — thus also making the maintenance of collaborations and connections easier.

On the contrary, if an organization deals with a larger network, its ability to provide helpful connections and advice is necessarily limited by the impossibility of knowing well each of the individuals and ventures attached to its network. In this case, the added value of the organization is rarely based on its offering of connections but derives instead from other resources. For example, one of the organizations analysed, which manages a large network, was praised by social entrepreneurs and enterprises for its delivery of helpful information on the legal landscape for social entrepreneurship and for signalling the resources available in the sector in terms of funds and expertise at the local level. Alternatively, organizations managing large networks might think about using their contacts to attract funds to redistribute among their affiliates for expenses they have a hard time getting funds for, such as capacity building or experimentation.

Are networks helpful?

Absolutely, but only under certain circumstances which are often determined by the network size and by the organization’s own capacities and resources. Therefore, a networking strategy should be tailored to the type of network an organization is managing. In any case, the analysis of four successful “networkers” in the social entrepreneurship sector suggests that the creation of connections and networking opportunities should be sustained through supporting activities, such as the four described above: the showcasing of a network’s members and projects; the establishment of an environment supporting the creation and maintenance of cross-sector connections; the support of social entrepreneurs and enterprises in negotiating with other players; and the management of internal competition.

None withstanding the importance of networks and the opportunities they provide to support social impact in many different ways, in a space that is almost saturated with networks it might also make sense to map out what is already there and maybe join or support an existing network rather than building a new one. Because several organizations provide similar types of support but not all of them do it effectively, in some instances it might make more sense to pool resources across “networkers” in order to jointly deliver a more powerful and comprehensive support rather than to keep trying to build new networks. If my research confirmed one thing is that there is already a lot of help available in the social entrepreneurship and social impact space but often “networkers” do not have the resource or capacity to be effective in everything they do and social innovators might end up not accessing any type of support because of the excess of supply makes it difficult to understand what network might be the right fit.

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Reflections from my term at Stanford

Tanja Collavo is a Skoll Centre Early Career Research Fellow, DPhil student at Oxford specialising in networking organisations operating in the social entrepreneurship sector. In the fall of 2017, Tanja spent an academic term at Stanford University to participate in PhD workshops in sociology and philanthropy and to discuss her working papers with Stanford Faculty. Here she gives her candid revelations after spending some time outside the ‘Oxford bubble’.

In the social impact world, people often discuss the importance of empathy and of putting yourself in the shoes of those people you’re trying to help. The truth is, when you live and work in the same place for a long period, and spend time with a like-minded crowd, it is extremely difficult to think outside the box. I have spent the last four years at Oxford University as a DPhil (PhD) student and, without noticing, I became entrenched in the ‘Oxford way’ of doing things, especially of interpreting the world of academia.

Only when I left Oxford to spend a term as a visiting scholar at Stanford University, did I realize how I had started to take for granted many things that were actually Oxford-specific: from small things like calling the final PhD examination a “viva”, to bigger things like the interpretation of a doctoral degree as a solitary challenge. Three months in a ‘different place’ suddenly showed me that to truly feel empathy or understand other people, cultures and ways of thinking, we should give ourselves at least some months in a new reality, in particular the reality of those we want to connect with, or help.

Besides this very general reflection – which seems obvious but we often forget when giving advice to social entrepreneurs, intrapreneurs and change-makers – I came away from California with several insights about practice in the context of academic research within the social impact world:

  1. The study of social impact (and of organizations oriented towards producing it) should be a multi-disciplinary endeavor. The Stanford Centre on Philanthropy and Civil Society (Stanford PACS) organizes a termly workshop that gathers PhD students and post-docs from different departments such as the business school, sociology, economics, political economy or history, and allows them to discuss philanthropy or civil society organizations through multiple perspectives. The combination of these perspectives has provided me a more thorough understanding of the third sector and of its key components such as foundations, associations, social enterprises and non-profit-distribution organizations. Furthermore, it has generated new insights on their historical evolution and on how some of the third-sector’s current features have been the product of a cultural and historical shaping rather than something written in stone. These new insights have improved my ability to read the sector I am looking at ― social entrepreneurship in the U.K ― and have showed me how some of my data actually speak about broader phenomena that might even be more relevant and interesting than those I am analyzing. They also showed me that without understanding the broader context and arguments, research cannot be explanatory or complete.

 

  1. Research advances more quickly and has more impact if it happens in teams rather than as an individual project. Working at Oxford, I got used to being alone in developing a research proposal, gathering data and figuring out how findings can be relevant for practitioners in the social impact space. At Stanford, I instead discovered that alongside their doctoral project, PhD students participate in several team projects, which are led by a member of faculty and to which researchers at different stages of their career contribute. The presence of a team increases the amount of data collected and analyzed and the chance of reaching conclusions that are well elaborated and developed. Indeed, working in a team where people have different backgrounds and levels of experience creates a constant feedback loop, as well as the feeling of being part of something that really matters, because it is far greater than a single individual and her interests or skills.

 

  1. Identifying a community of practice helps with getting feedback and with remaining excited about a project or topic. Because of my work in relative isolation, I often had doubts about what I was working on, how I was approaching it, or whether my research was something that could actually help individuals and organizations to improve their practices in delivering social impact. By having multiple opportunities to connect with peers that were interested in my same field or theories, I received important feedback, had the opportunity to bounce ideas and to test what was interesting and relevant for people who were not as invested in my research project as I was. Most importantly, sharing my insights and data and discovering that other people were excited about them, made me excited again about what I was doing and about its potential to have some academic and practical relevance.

 

  1. The frequent engagement of faculty with students and its genuine interest in learning about new projects and ideas fosters a productive research environment. I was really surprised by the ease with which I could interact with world-class faculty at Stanford. All the professors I contacted found at least thirty minutes to listen to my project, even if they had no obligation to, and some of them even invited me to join their workshops in order for me to meet other students, learn about their projects and get additional feedback on mine. Attending these workshops allowed me to appreciate the extent to which a close and frequent interaction between faculty and PhD students is extremely beneficial for both. Faculty remains on top of their game, gets new inspiration, and actively participates in the training of those who will become their future colleagues. Students feel supported, have a point of reference whenever they are in doubt, and learn quickly how to network in the academic environment.

Now that I am back, I am determined to bring some of the positive insights and practices that I experienced at Stanford back to my own community in Oxford. If I learnt something in these months at Stanford it is that we should all strive, whenever we have the opportunity, to leave our nest, get ready to learn and confront ourselves with different realities. Especially if the goal is to create real and lasting social impact, we cannot afford to be entrenched in a single community.

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Are multiple definitions of social entrepreneurship holding us back?

By Skoll Centre Early Career Research Fellow,  Tanja Collavo.

Some social entrepreneurs and social enterprises are expressing the desire to avoid such a label. Additionally, knowledge among citizens of what social entrepreneurship is and means is still generally low, even though the sector has been around for several decades. What might be amiss? I argue that the ongoing failure to coalesce around a recognised definition or model of social entrepreneurship is part of the problem, revealing risks and opportunities for the sector at a worldwide level.

My research on social entrepreneurship in England suggests there are three different – and only partially overlapping – conceptions of what social entrepreneurship is and of how it should be supported. The first and most prominent part of the sector is focused on the concept of social enterprise, that is, businesses trading for social purpose. It is very heterogeneous in terms of players involved and ways in which social enterprises are described and organised. Within it, the main source of funding for both social enterprises and sector intermediaries is the government, and both the citizen and business sectors are mostly seen as customers.

The second and more “niche” part of the sector is more cohesive and focused on social entrepreneurs, described as lone heroes disrupting the system to eliminate the root causes of social inequality and injustice. Here, the role of the government is very limited and businesses and charities are seen as advisors and funders, rather than customers, while communities are the beneficiaries.

The third one, despite being the original conception of the term in England and the most widely adopted “on the ground”, is presently the most neglected by the public discourse. It describes social entrepreneurs and enterprises as acting to enhance their communities, either through involving community members in economic activities and decision making, or redistributing resources within a given area or population of interest. In this part of the sector, boundaries and players’ roles are very blurred and there are multiple typologies of social entrepreneurial activity, sometimes overlapping with other areas above.

Is this division a trivial matter interesting only for academic debates? I argue that there are a number of important practical issues, which either directly or indirectly stem from the lack of a clear definition. First of all, it hinders the ability of government or international bodies to create tax benefits or effective funds to support social entrepreneurship. Without being able to constrain the field of organisations entitled to receive such support, such efforts are frequently ineffective.

Secondly, the lack of a clear definition contributes to maintaining low levels of knowledge about what social entrepreneurship and social enterprises are, and what their value for society is. This, in turn, often hampers their ability to attract private funds. I know, indeed, from the interviews I conducted for my PhD project that some social enterprises and entrepreneurs face the problem of being perceived as “too business-like” for foundations, charities and private donors and “too social” for traditional investors and businesses (and sometimes even for the social investment sector).

Thirdly, the lack of a clear definition means that it is also much harder to establish roles and rules of interaction within the sector. Businesses are sometimes requested to be commercial partners or to involve social enterprises in their supply chain and sometimes they are requested to act as advisers and philanthropists. Government and local authorities would like to outsource public services to social ventures rather than to businesses but often they find themselves unable to distinguish between the two and to obtain the guarantee that there will be no “mission drift” once a contract is awarded.

Finally, the lack of a clear definition implies a lack of clear sector boundaries and of a clear positioning within the wider economic system. Many supporters and insiders continue to proclaim their hope that social entrepreneurship will become mainstream and either change the way that all businesses operate (‘social enterprise’) or will make the whole third sector more efficient and financially sustainable (‘social entrepreneurship’). Can these things happen while the sector keeps pushing in different directions, thus reducing its relevance both within the business and the third and public sectors?

I would like to conclude this post with two thought-provoking questions. First of all: why not refer to social enterprises as sustainable businesses? This might be the first step to merge this part of the sector with movements such as the B Corporations, in order to jointly represent a new, more socially-savvy side of the business sector, able to ask for tax incentives and to attract social investors and funds. Social entrepreneurship could be reserved as a definition of innovative projects carried out by third sector organizations trying to tackle the root causes and not just the symptoms of social issues, thus distinguishing them from the traditional charities and NGOs delivering fundamental but more traditional social products and services. Activities not fitting with these two definitions but that are important at community-level could be labelled as “community-based entrepreneurship” or just be re-included in the broader third sector.

Secondly, can sector supporters and intermediaries try to find a compromise sector definition accepted by all? As expressed by some interviewees contacted for my PhD research, the most influential organisations in the sector appear to be connecting and networking with one another but are in reality very territorial. They all hold on to their own conception of social entrepreneurship and they all hope to drive the sector in their desired direction, thus making it increasingly difficult to find a solution to the definitional and support debate. Sometimes creating a good ecosystem of support might entail stepping back and coordinating what happens as a skilled director rather than as the star of the show. Allowing the formation of clarity around the sector, its definition and its boundaries, while continuing to lobby and campaign for it, might really unlock those financial resources, public support and understanding that many organisations are craving for.

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Amphibious academics: making research matter

By Julian Cottee, Skoll Centre Research & Insights Programme Manager

Our previous blog looked at ‘Six Reasons Why Research Matters for Social Entrepreneurship’, ranging from gaining a deep understanding of problem and solution landscapes, to innovation, and a critical birds-eye view of the sector. The Skoll Centre has since been exploring research for social entrepreneurship through a series of seminars led by impact-focused early career researchers from across Oxford University. Each has discussed their own research experiences and drawn out lessons for better aligning research with the needs of the social innovators.

Evidence and impact

Evidence and impact evaluation are top of the list for many practitioners when asked how research can help their work. Anna Custers, a Skoll Centre Early Career Research Fellow, explored this topic in depth through her experiences with a number of randomised controlled trials (RCTs) assessing the impact of poverty reduction measures in the Global South. The RCT methodology, originally designed for evaluating the impact of medical interventions, is now becoming more widely used outside of clinical settings. Social scientists in a range of fields are adopting RCT approaches, and while many policymakers view them as a ‘gold standard’ for evidence of impact, they are not uncontroversial. RCTs are complex, lengthy and expensive to set up, and they can only be used to evaluate a narrow gamut of interventions. Their strength in demonstrating the counterfactual – what happens in groups not receiving the intervention – also raises significant ethical questions. If demonstrating impact through RCTs were to become a routine part of the funding and policymaking landscape for social entrepreneurship, the range of projects would be curtailed, the speed of implementation would be reduced, and additional research funding would be needed. Further discussions revolve around the question of how much evidence is ‘enough’ to demonstrate impact, and to what extent this differs depending on the scale of the initiative being assessed. An expensive RCT might be appropriate for a highly scalable ‘big bet’ intervention that can be widely replicated if impact can be robustly demonstrated, but many, if not most, projects are smaller and more locally specific.

Ideas around the role of research in evidence provision were further developed by Dr Jenny Tran, speaking about a recent Skoll Centre-funded research project that interviewed 31 policymakers, funders and practitioners in the field of social innovation in healthcare in low- and middle- income countries. The interviews probed attitudes and beliefs relating to evidence within these three groups. Among practitioners for instance, responses ranged from seeing research and evidence as an accountability mechanism – “Research is a tool of justice…how are we holding ourselves accountable to our patients?” – to something that just needs to be done to satisfy the expectations of funders – “We do what we have to do”. The funders interviewed also had mixed attitudes towards evidence, with some admitting candidly that gut feeling was as important as data in making funding decisions. Organisations spoke of a lack of time and expertise to collect good data on their impact. One theme that clearly emerged from the interviews was a lack of consensus on how to operationalise a model of data generation and use amongst all three groups that is of an appropriate scale in terms of the time and resources demanded, as well as being robust and rigorous. RCTs were rarely seen to be the answer. Tran’s paper recommends a number of future pathways for improving research in this space, including further elaboration of the concept of ‘lean research’ striking the balance between appropriate scale and rigour; better technical education; and changing the way evidence generation is funded. All of these are ripe for future exploration. In addition, there is little or no attention currently paid to how organisations measure negative impacts, or their incentives for doing so. This too is an area that deserves further study and the development of practical tools for the generation of objective impact measurement.

Research for Action Partnerships

Oxford University’s Smart Handpumps project

Oxford University’s Smart Handpumps project. Image credit: www.oxwater.uk

Two other seminars in the series focused on the role of research not in the generation of evidence, but in others kinds of knowledge creation, through embedded partnerships between academics and practitioners. Kate Roll, Senior Research Fellow at Saïd Business School, spoke on the Oxford-Mars Mutuality in Business project, a large multi-year research project exploring the idea of mutuality as an organising principle for business. The project is unusual in that it is carried out by an academic team in collaboration with the Mars in-house think-tank, Catalyst. The allure of the set-up is clear from the point of view of carrying out research guided by real-world priorities – there is potential for unique access to knowledge, skill and legitimacy on both sides – yet challenges are also many. In particular, spanning the research-practice boundary brings to the fore different perspectives on questions such as:

  • When is work finished? (medium-rare or well done)
  • With whom can we meet? (negotiating internal access)
  • What is a good output? (collaboration, consultancy, opportunism)
  • Who needs to be involved? (setting boundaries in joint research)

Drawing on the theory of organisational hybridity, Kate explains such collaborations as a case of striving to effectively bring together differing ‘institutional logics’: “as the degree of incompatibility between logics increases, hybrid organisations face heightened challenges” (Pache and Santos 2013). In order to realise the unique opportunities for insight and impact, researchers are obliged to adopt the character of the ‘amphibious academic’. Even if they might be happier in water, like the frog, they too can cope ably on land.

Successful examples of such collaborations are not numerous. They require connections, funding and abundant engagement and amphibious capability from all partners. Alex Fischer and Heloise Greeff, members of the Skoll Centre’s Research for Action Network, spoke about Oxford’s Smart Handpumps project, a long-running collaboration with NGOs and government. While the project began by exploring the causes and impacts of broken water pumps in rural Kenya, it has since transitioned to address how broken pumps can be fixed quickly and cost-effectively. The project is now driving technological and systems innovation to the point that it has led to the creation of a social enterprise that will service the handpumps sustainably into the future using the technical and institutional knowledge generated in earlier phases. Alex and Heloise described a ‘research-action spiral’ in which innovation and research have circled around each other in a productive dance. These impactful outcomes of the project could not have been anticipated at the beginning of the research process – a powerful argument for research led by problems and not just solutions. Often, following intuitions and blind alleys was just as important for the development of the impact of the project as any planned research pathway. This highlights the value of flexible funding and creative leadership in action-research projects. Universities are an important ingredient in this kind of innovation and research, as they provide safe spaces for the exploration of novel ideas that may not otherwise be pursued. The role of PhD students too is of significant value – unlike research assistants or employed post-doc researchers, PhD students follow their own research agendas within the wider project, generating new ideas and possibilities.

For more Research for Action from the Skoll Centre, sign up to our RfA Network Bulletin.

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The rise and challenges of social entrepreneurship

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:

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

What’s next?

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.

Want to learn more about the interconnected networks within social entrepreneurship and social enterprise? Come along to Tanja’s talk ‘Networks in social entrepreneurship – how to support the sector while mobilising it‘ on Wednesday 17 May, at the Saïd Business School, Oxford.