Social Entrepreneurship & Social Investment: Opportunities and Challenges

1. Social Entrepreneurship & Social Investment: Opportunities and Challenges Ehaab Abdou Advisor, Middle East Youth Initiative, Ashoka fellow DSG, Friday Nov 20, 2009

2. Outline • Overview of MEYI & SE research • General Challenges • Policy recommendations

3. About the Social Entrepreneurship research agenda • Phase A. Generating Knowledge and Building Partnerships (August - December 2009) • Understanding the State of Social Entrepreneurship in the Middle East • Social Entrepreneurship Jams • Phase B. Laying the Foundation for Long-term Social Investment and Scaling Up (January 2010 - July 2011) • Building Awareness and Advocating for Social Entrepreneurship • Exploring and Developing Mechanisms for Long-term Financial Sustainability

4. Expected output Actionable recommendations: • 1. Addressing policy gaps: • the report will provide policy-makers with recommendations on needed policies introductions or policy changes, etc. These will also inform other sectors, such as Civil Society Organizations (CSOs) that could create mechanisms for follow-up on the adoption of these recommendations by policymakers. • 2. Addressing institutional and organizational gaps: • the report will identify institutional and organizational needs, highlight areas that require capacity building or development. These recommendations would primarily be addressed to social investors, in addition to social entrepreneurs, international donors and CSOs.

5. Testimonies from specific social enterprise areas (social impact and sustainable profitable entities) • Eco-tourism/eco-lodge in Jordan: • Tax incentives needed from government or grace period to encourage management of natural protectorates • Organic food/farmers’ empowerment company/NGO in Lebanon: • Access to financescale-up • A fair trade company in Egypt • Held in tough situation between restrictions if an NGO on exporting, etc and as a company charged large taxes hence little left to producers, minimum capital for start-up • Set-up hybrid model: company and foundation • A youth self-expression/blogging in Jordan • Non-profit company status abolished with new law brings difficulties on start-up funds, access to grants, etc

6. General challenges • Challenge of finding one common definition for social enterprise/social entrepreneurship • Common impact assessment (SROI?) • NGO law vs. corporate law • Hybrid models missing or other models that need further study like cooperatives, etc.

7. Lack of consistency in applying laws/regulations (esp. with NGO laws) • Several reasons: corruption, lack of knowledge of law, etc. • Some countries discussing having an Ombudsmanالمفوض العام • Example: • Reduced running costs for NGOs • Or ability to manage a for-profit or revenue-generating component • or ability to employ a Board member or give financial stipend

8. Regulations on access to funds • Access to foreign funding to NGOs • Access to innovative means of financing such as loans • as social enterprise/businesses inability to get commercial loans due to high interest rate • as NGOs can’t access a loan • Nationalization/state intervention on regulations on traditionally citizen-initiated and managed philanthropy: • such as Awqaf, Zakat, etc that could potentially be excellent sources of social investment.

9. Regulations on funding • Restrictions on philanthropic foundations to invest/expand their endowments • Example: in the stock market • Lack of incentives to corporate sector to give to community/invest with social enterprises • In some countries, incentives totally non-existent (ex. Lebanon) • Even when they exist most don’t offer tax incentives on in-kind support, pro-bono support, etc

10. Social investment funds trends • Increased interest • Global Alliance for Improved Nutrition (GAIM) • Off shoot of existing private equity such as Citadel with Tanmeya micro-finance fund/company • Lack of legal framework: • Difficulty for set-ups such as Acumen to find a good legal framework in Egypt or other countries

11. Recommendations • Hybrid models conducive to social entrepreneurship with better tax incentives, social impact into account, etc • Might need to look at other more specific entities such as micro-finance, fair trade types, etc • Create policy dialogue forums for government to learn from and adopt social innovations/best practices on national policy level • Funding: • Corporate giving tax incentives (financial, in-kind and investment) • Traditional means of philanthropy/social investment incentivized

12. Thank you www.shababinclusion.org