In the footsteps of Nobel Laureate Dr. Yunus:
By Abraham M. George
Laxmama lives alone with her three children in the tiny village of Sidhanalli in the southern Indian state of Tamil Nadu, and just recently she was faced with a personal family crisis. Her 17-year old unmarried daughter underwent a botched partial abortion in the hands of a village “doctor.” Bleeding profusely, Laxmama took her daughter to a nearby private hospital where the physician reluctantly agreed to complete the abortion for a discounted charge of Rs. 4,000 (nearly $100). With little savings of her own, Laxmama turned to her local money-lender who immediately advanced her the funds at terms acceptable to her – Rs. 200 in interest and Rs. 200 in principal each month over 20 months. The loan was arranged in less than two hours, confirming the terms with her thumb impression on a two line promissory note. The surgery went off well, and her daughter has recovered since then.
The high interest charged by her money-lender would result in Laxmama repaying double the amount of the loan, but she feels that no one else would have provided the funds in such a short time to save her daughter’s life. She doesn’t know about today’s so-called social entrepreneurs who might have been willing to advance her a micro-loan at a relatively much lower interest rate. Even if she had known, she couldn’t have waited to go through the loan approval process.
Micro-credit is touted often these days as one good example of “social entrepreneurship,” especially since Dr. Yunus received the Nobel Prize last month. Yet there has been very little effort to define and distinguish it in practical terms. The assumption is that social entrepreneurship is “business for benevolence.” Some associate it with doing business in a deprived area, especially in a rural environment. Just as business entrepreneurs create and transform whole industries, social entrepreneurs are presumed to apply entrepreneurial principles and act as agents of change for society, seizing opportunities to advance sustainable solutions that create social value.
The question then is whether all entrepreneurial activities involving the poor can be termed social entrepreneurship.
The term "social activist" has been in existence without much ambiguity for quite a long time. Anyone who is engaged in bringing about social change is deemed to be a social activist. Many organizations are engaged in advocacy for causes such as fair labor laws and practices, women and minority rights, environmental protection, and others. Some of these organizations, for example, offer consultancy services to other institutions in ensuring compliance with regulatory requirements. None of these businesses are considered social entrepreneurs, even though their work might lead to social good. What makes them any different from today's self-proclaimed social entrepreneurs?
In my opinion, none of these cases fall within the true meaning of social entrepreneurship. As for Wal-Mart, it is engaged in a business activity to maximize profits for its shareholders, and not necessarily to benefit the poor. In fact, many accuse Wal-Mart of "squeezing" its suppliers who in turn might exploit their workers to keep costs low. Even though the consequential result of its business activity is job creation for many poor people who might not otherwise have comparable employment, the intent and purpose is not social good.
Unlike local money-lenders who offer credit for the specific needs of borrowers (such as crop loans given prior to planting seeds and repaid after harvest, and loans to cover expenses toward medical emergencies like surgery), MFIs do not earmark their loans. Many borrowers utilize the loan to pay dowry for their daughters, cover expenses for festivals, and for other reasons that have little to do with income generation. The absence of any direct involvement on the part of MFIs to help the poor use the loans properly makes this form of lending simply a commercial activity. While MFIs also add value to their customers (in this case, for the relatively poor people), their primary intent and activities are not necessarily aimed at doing social good.
So, who is then a social entrepreneur? It is hard to find many individuals or institutions that meet the true test. Those who take on financial risk by engaging in a business or business-like activity designed mainly to benefit the poor are certainly social entrepreneurs. Hopefully, the entrepreneur who fits this definition is able to generate enough income to at least cover the expenses so that the business is sustainable.
Businesses who conduct themselves in a socially and environmentally correct manner (by paying fair wages, ensuring worker safety, and adhering to environmental standards) are meeting their community responsibilities. Instead of searching for social entrepreneurs, it is time to raise the bar for our expectations of anyone who does business, especially in the rural sector.Abraham George is the founder of The George Foundation (www.tgfworld.org), an NGO engaged in humanitarian work in India, and the author of “ India Untouched: The Forgotten Face of Rural Poverty.”
Copyright © Abraham M. George, November 2006.