Stirred with the passion for creating opportunities through connecting people, capital, and ideas, Ehon Chan is the Excutive Director of Social Entrepreneurship at the Malaysian Global Innovation & Creativity Centre (MaGIC). His incredible line of work has focused on creating innovative, impact-focused projects and purpose driven businesses, tapping into the opportunities brought by digital media and technologies. SME Magazine had the opportunity to interview Chan and get his take on Social Entrepreneurship.
What is your understanding of a Social Enterprise? Are there any fundamental differences in the people who work for a social versus not-for-profit startup?
There is no uniform definition for ‘social enterprise’ around the world. We define social enterprise as an entity which has a social mission at the core of everything that they do and has a business model to meet the social mission. The entity should solve a legitimate social problem, which means they should have beneficiary/ies who is/are underserved or marginalised. There is some fundamental differences, for example, for someone who works in a social enterprise, there is the element of ‘profit’ in the bottom line in order to sustain and further grow the enterprise. This means that the set up, mindset and organisational structure have to take into account the elements of running a business.
How do social enterprises contribute to the Southeast Asian society?
Southeast Asia (SEA) is a going through an interesting period of rapid economic growth. However, there is also a disparity between the rich and poor, and we see pressing social issues in many parts of Southeast Asia from access to basic necessities like education to urban poverty. From our observation, we find that most social enterprises in SEA are working on solving local issues, unlike many social enterprises in developed nations. They may be of small scale, but many are exploring innovative models to spread their innovation and impact, instead of scale. The roles of these social enterprises are important to ensure that the rapid economic growth of the region is met with solutions to pressing social problems.
There has been a rise of interest in social enterprises in the region. What factors do you feel has contributed to this rise?
There is an increasing awareness about social entrepreneurship lately, sparking more interest amongst the general public. This is due to several factors like an increasing media interest, more conferences and events highlighting the concept, and also the work of organisations and intermediaries like MaGIC Social Enterprise. There is also an increased interest at a private sector and government level, given the triple bottom lines of social enterprises. This provides a solution for government and private companies seeking to solve social issues while remaining financially positive.
With these increase awareness, there’s escalating interest amongst the general public, particularly the younger generation. We know that young people generally choose to work in organisations that’s doing well but also doing good as well. The Deloitte Millennial Survey 2015 surveyed 7,800 young people from 29 countries found that most young people want to work for companies that focus on people and purpose. This is an important finding because the millennials will account for 75% of the workforce by 2025. Hence, it is not surprising that most social enterprises are led by, or have a majority young people in the team.
Funding has been considered as a major challenge for social entrepreneurship, what are the ways to finance a social enterprise?
Without a legal entity for social enterprises in many parts of the world, they general register as either a society (not-for-profit company) or a private company. As a society, you can rely on several sources of finance such as grants, donations and loans. However, as a society, without equity, these social enterprises cannot attract equity-based investments. As a private company, they can take loans and equity-based financing. Without tax incentive, private companies are less likely to attract grants and donations. However, due to lack of understanding and awareness about social enterprise, many financial institutions feel apprehensive providing loans to social enterprises. With negative perception and lack of success stories locally as well, there is not many investment options for social enterprises as well.
Hence, the three strategic thrusts outlined in our blueprint is crucial for this sector to develop. We need to build a movement for social entrepreneurship to prove that this sector is indeed growing and will grow to be an important contributor to national economy. In order to grow and sustain the movement, we need to build an enabling ecosystem where social enterprise can access financial and human capital to help them grow. Finally, policies and legal structures need to be reviewed and introduced to make them friendlier for social enterprises.
How can social entrepreneurs attract talent when there aren’t high salaries and options?
For social enterprises registered as private businesses, they should explore equity options just like a startup or commercially-driven enterprises. Otherwise, they can always look into other forms of arrangements particularly with corporates such as secondment, pro-bono consulting and also services for a reduced fee.
Are there any other challenges?
The main challenges are lack of institutional awareness, negative public perception, lack of legal recognition and policy structure to support the sector, and lack of access to human and financial capital. All these have a cascading negative effects on the development of the sector, for example reduced consumer confidence, inability to price competitively and inability to attract significant capital for growth. Some of these challenges and their effect also create a chicken-and-egg situation. However, we need to approach each of these challenges with solutions in a smart and strategic way so that the development of the sector is sustainable.
How has the government contributed to the development of social entrepreneurship? Have existing government polices helped? What kind of support from the government would you like to see?
The commitment of RM20 million by the Prime Minister of Malaysia YAB Dato Seri Najib Tun Razak to set up a Social Entrepreneurship Unit under MaGIC is a massive development for the sector here in Malaysia. Prior to MaGIC Social Entrepreneurship, the social enterprise sector is driven by a group of like-minded individuals and social entrepreneurs who leverage on their limited assets and connections. The establishment of MaGIC Social Entrepreneurship as a government agency has not only enabled investment in growing the sector through building awareness, training and investment, the Unit has been able to advocate for the sector at a governmental level. Obviously, the government can work with MaGIC Social Entrepreneurship to review existing policies and also legal structure to further enable the sector and incentivise the growth of the ecosystem.
Can social enterprises survive the economic gloom?
It is difficult to say because this is a fairly generic question and we do not have data in Malaysia, however we do know that during the recent economic crisis in the United Kingdom, social enterprises have shown more resilience. The study published in 2011, “Are social enterprises more resilient in times of limited resources?” took a sample of 153 social enterprises and found that during the crisis:
– social enterprises grew at a rate of 17%, compared to 6% growth of SMEs and 20% of fast-growing companies
– social enterprises operating more than 5 years have a survival rate of 66% compared to 47% of traditional companies.
What kind of future do you foresee for this industry?
I think that beyond social entrepreneurship, we’ll see more corporate social intrapreneurship or corporate social entrepreneurship responsibility where corporations will start adopting more ethical and sustainable approaches, focusing on triple bottom line as their outcome. More so, we’ll see more corporates mobilise their services and assets to support the growth of the sector in a sustainable way, for example introducing patient loans, micro-insurance and other form of financing to further support the growth of the sector.
In 10 years time, we’ll see 75% of the millennials in the workforce. This generation want to see a more innovative and compassionate workplace where businesses exist to solve societal problems. This is exciting and we’ll see businesses mobilise as a force for good. This is where we’ll see the real potential of social enterprise being unleashed.
Get further enlightened on social enterprises by viewing the cover story ‘Rise of Social Enterprises‘ in SME’s latest October 2015 Issue.
Ehon Chan has been the cofounder of Hub Australia, a network of communities driving innovation through collaboration, and Spur Projects, a not-for-profit making it easier for men to take preventative action rather than to suicide. He was an Advisory Board member for Bendigo & Adelaide Bank’s PlanBig and leading crowdfunding site, StartSomeGood. He was the Chairman’s of the World Happiness Forum and is currently serving as Movember Foundation’s Men’s Health Advisory, the world’s largest men health charity.
His effort and contribution to social change has won him numerous awards and accolades such as Suicide Prevention Australia’s “LIFE Award”, The Age’s “Top 100 Most Influential People”, Australia Trade Commission’s “Top 30 Digital Influencer”, Shoe String Magazine’s “Top 25 Social Entrepreneurs”, Startup Daily’s “Top 50 Social Crusaders and Changemakers” and GOOD Magazine’s “GOOD 100 People Moving the World Forward”.