Having recently finished the IOMBA programme — a specialized MBA with a focus on social entrepreneurship and international development — I am now happily in beautiful South Africa for an internship in the exciting and growing field of microfinance.
Ever since hearing about microfinance and its founder Muhammad Yunus some two years ago, I have wanted to become involved in the field. Microfinance is to me the perfect marriage of social impact and business practices that signals the coming of a new era in international development. As many large corporations try to demonstrate that they are socially and environmentally conscious through use of Corporate Social Responsibility (CSR) measures, NGOs and IOs have at the same time been trying to streamline their functions and adopt some of the efficiency and efficacy frameworks used in business. The recent financial crisis has only heightened the need for this convergence as the public pushes for more ethics and regulation in businesses while the shortfall in development funding is forcing NGOs and IOs to use limited funds more effectively. It is an exciting time.
In my opinion, there is no longer a need to separate genuine social and environmental benefits from the profit focused, efficiency of business. Many have however argued that CSR is nothing but a PR strategy for large corporations accused of causing various harms to communities and the environment. No doubt this is often the case. However, when done well, CSR can become so much more than that. Others will argue that a company’s duty is only to its shareholders, meaning that it should focus on profit only. I would agree. However, the difference for me is one of short term versus long term gain. For example, if a company tries to streamline its processes so that it reduces carbon emissions it will save money in the long term, though it may post a loss in the short term due to investment in new technologies. Similarly a company that invests in education in a poor, underdeveloped community where it has a factory set up will help ensure that it has a more highly skilled workforce available down the road despite garnering no immediate monetary benefit. If it also then pays fair wages it can use this fact as PR in order to attract business from socially conscious consumers who would be willing to pay a slightly higher premium for this fact. These businesses may not initially grow as fast as their profit-only focused counterparts, but I would wager they will be around for much longer. The effects of doing business this way will also be felt by the employees who are likely to feel more dedication to the company thus helping boost productivity, and surely someone should also ask the shareholders if they would like their investment to have a social as well as a monetary return on investment.
The NGOs and IOs on the other hand are now moving towards more social entrepreneurship models of business. They may need more grant funding to start but if there is a demand for the service they are providing to the community then there is no reason why they cannot charge a small fee and become self sustaining. This will allow both buy in and empowerment to the communities being helped and will also allow market forces to ensure that services and goods being provided are actually what the people want — and not some artificially engineered helping measure that none of the supposed beneficiaries ever asked for (as so often happens in international development).
In any case, this blog will follow my three month internship in South Africa in the field of microfinance, which is one of the best examples of a social enterprise. It will also include random thoughts on the general fields of social entrepreneurship and CSR. If you aren’t on the social and environmental business bandwagon yet, I am sure you soon will be.
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