Enhancing Social Enterprises and Microfinance Institutions in Ontario

1. Revenue Generating Social Enterprises (NPRGEs) and NGOs transforming to Social Enterprise Micro finance Institutions Incorporation (MFIs) Issues and Acts in Ontario Dr. KaziAbdurRouf Visiting Scholar, University of Toronto Paper presented 15th Dean Conference OISE, Toronto. March 29-30, 2013

2. Objectives of the Presentation To explore issues of existing NPRGSEs Incorporation Acts To look at possibility to have a separate Incorporation Acts for NPGRSEs and MFIs To develop alternative strategies for their internal fund mobilization process

3. Research Question Why are there no separate Incorporation Acts for NPRGSEs and for MFIs in Ontario?

4. Context NPRGSEs have been increasing in Ontario in last two decades MFIs have limited activities Two Incorporate Acts- either Charity Act or For-profit Business Act The Government of Ontario and foundations have encouraged flourish NPRGSEs To reduce their dependencies on public resources in Ontario

5. Issues No Legal Acts for NPRGSEs and no legal framework for social enterprise MFIs No provision transforming NGOs to social enterprise micro financing organizations Charity laws do not allow them to collect public deposits and saving use these money for disbursing loans to micro-entrepreneurs Screaming for public funding Public cutback policy era has compressed public funding to NPRGSEs Legal issues in regards to their operations, maintaining records, measuring their servicers, dealing with the Revenue Canada Limited outreach services (scaling up program) Micro-financing is not priority in Canada Micro loan interest 18%, high interest for micro-borrowers Micro-financing services (except Desjardin) are not priority by credit unions in Ontario No-one-stop services for marginalized people

6. Personal working experience with Community Organizations in Toronto Immigrated to Canada with a hope use social enterprise micro financing transferable professional skills and knowledge in Canada To promote green small enterprises in Canada Canadian COs are mainly for job searching counseling, immigration settlement counseling services, English as a Second Languages (ESL) services, senior services, youth counseling services, victims rehabilitation services, HIV counseling services, and child care services Few agencies are involved in environmental education COs activities overlapping in the same neighborhoods Few SEs have been trying to generate revenues by charging fees for their services Immigrants are isolated-no neighborhood cooperatives Many SEs are using volunteers in free to run their programs Many COs have started philanthropic fund raising Some COs run their programs by receiving sub-contract from other COs

7. Social Enterprise concepts Combination of social and economic missions and visions “ nonloss, nondividened company with a social objective Mainly serve to marginalized people

8. Transforming NGOs to social enterprises Overseas many local community organizations felt they might ‘transform’ or convert to MFIs owned and governed by their shareholders Example: ASA Bangladesh, BRAC- micro credit program Bancosol, Caja Los Andes and Prodem in Bolivia; and Bank of Rakat Indonesia from non-regulated microfinance NGOs into regulated microfinance institutions Mibanco, Bancosol, Caja, and Prodem Bolivia is collecting deposits and buying and selling bonds to public Grameen America USA This transformation process experiences have been very positive in Bangladesh, Indonesia, Latin America, Caribbean and USA Growth has accelerated; increased operational efficiency and reducing costs

9. Personal experience in incorporating ‘Public Wellbeing Integrated Services’ in Ontario First applied for incorporation of `Neighborhood Mini-Club`-a social enterprise agency To develop and facilitate cooperative among marginalized neighborhoods To engage people to social enterprise activities initiate coaching centers, childcare centers, wastage recycling, community kitchen, community gardening, satellite fresh vegetables and fruits selling The examiner of the Office of the Public Guardian and Trustee, Charitable Property Program advised change vocabularies related to social economy of the proposed organization The examiner comments “… a corporation that has some charitable objects and some non-charitable objects will not qualify as a charity…Consequently; every object is required to be charitable. `` Then changed the name to ‘Public Well-being Integrated Services’

10. Post-incorporated Experience with Public Wellbeing Integrated Services (PWIS) Public Wellbeing Integrated Services (PWIS) facilitated four workshops Public health education Self-care management Environmental education, and Conflict resolution Collaboration with ISSRA, NIEP, and Interchange Community Toronto in October, November, and December 2012 However how far and how long PWIS can continue to run it without funding from donors Fund raising for PWIS very tough because the organization is new

11. Are there possible alternative ways to develop internal fund raising for social enterprises? Philippines, Pakistan, Nepal, Uganda, Mexico, and Venezuela have developed laws for MFIs-they could collect public savings, deposits and issue bonds. These laws can serve as examples for microcredit laws in other countries too (Yunus, 2011). Urgent need to develop separate legal laws for NPRGSEs for their legal space for operating their outreach programs Can Ontario develop such kind of laws/ Acts? Need to allow MFIs and NPRGSEs accepting public deposit, buy and selling bonds This strategy could solve their funding problems for scaling up their programs. This strategy exists in Grameen Bank (GB) GB new branches have been taking public deposits since 2002 GB branches achieving financially independent within 3-4 years

12. Grameen Bank Special Audience Incorporation Act (1983) in Bangladesh GB Audience Act (1983) different from Banking Audience Acts and Charity Acts Palli Karma Shuaok Foundation (PKSF), a wholesale refinances to MFIs MFIs have pioneered in socio-economic positive contribution all over the world Grameen other agencies formed under different Incorporation Acts Some are incorporated social business Acts Grameen Shakti (energy) Many incorporated under Charity Acts (GrameenKrishi (agricultural) Foundation (GKF) but allowed GFK generate revenue from its services Grameen some agencies have partnerships with international private companies-GrameenDanone, Grameen Autos

13. Grameen America USA Grameen America, a MFI, has been working in US since 2008. It has 12,500 borrowers, disbursed $55 million loans to its micro borrowers Every month it disbursed 3 million dollars Clients total savings $1 million Expand its activities to different provinces-New York, California, Portland and Florida US Federal and Provincial Government Acts have supported its legal framework

14. Could Ontario make separate Acts for social enterprise organizations? MFIs incorporated under Bangladesh Microcredit Regulatory Authority (MCRA) The MCRA has developed its own Act MCRA allows MFIs collect savings from its clients, buy bonds, sale bonds Provide loans to clients and charge fees for services These Acts can be found on Internet http://www.mra.gov.bd under the following headings: The Societies Registration Act, 1860 (Act XXI of 1860); The Trust Act, 1882 (Act II of 1882); The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (Ordinance No. XLVI of 1961); The Companies Act, 1994 (Act XVIII of 1994)  Ontario could develop such policies and Acts for NPRGSEs and social enterprise MFIs for their internal fund mobilization.

15. Recommendations Needs to explore and develop separate Acts/legal framework for NPRGSEs and for MFIs Develop transfer mechanism from charity to NPRSEs legal entity High cautious for community bond/social bond buying and selling without providing securities or permission from the Securities Commission in Canada Develop clear NPRGSEs Acts for NPRGSEs and for MFIs Legal Acts for NPRGSEs could be done by Social Enterprise Commission (SEC) The SEC Ontario would the portfolio for developing social enterprise Act, NPRGSEs incorporations and govern the Acts Intensive public policies for MFIs for saving collections, bonds selling and buying To avoid risk, government should develop mechanism that protects the savings of the savers and depositors.

16. Thank You Questions/Comments