Social Enterprise and Inclusive Business in ACP Countries: variety and access to finance
SOCIAL ENTERPRISE AND INCLUSIVE BUSINESS IN ACP COUNTRIES: VARIETY AND ACCESS TO FINANCE
The purpose of this report is to highlight the variety of social enterprises and inclusive businesses operating across Africa, Caribbean and Pacific (ACP) countries, and to explore the barriers they face in accessing finance. Placing positive social impact at the forefront of their work sets these businesses aside from mainstream, or ‘profit-first’ businesses, and can give rise to additional challenges, including financial, that need to be addressed. Yet, there is no one common form of social enterprise or inclusive business around which to formulate a response. A supportive ecosystem must take account of how the financing challenges and needs of socially-oriented businesses differ both in relation to their profit-first counterparts and within their own broad category. After outlining five key dimensions of business variety, the report distinguishes between those barriers that are shared with profit-first businesses, especially SMEs; those that are faced more frequently or severely by social enterprises and inclusive businesses due to their profile (e.g. leadership characteristics); and those barriers that are specific to these sorts of businesses due to their legal forms and governance, business models, legal forms and target communities. This report includes recommendations for actions that can support social enterprises and inclusive businesses overcome these barriers and demonstrates how the ICR Facility can support such actions. While this report explores the issue from the perspective of social enterprises and inclusive businesses, a subsequent report will revisit the topic from the perspective of social finance providers.
- Businesses set up with a primary purpose to make a positive social impact are commonly known as social enterprises, often with certain organisational checks to ensure ongoing commitment to the social mission and appropriate management of surplus income. Inclusive businesses are similar but rather than social impact per se, are driven by the commercial viability of integrating low-income populations in their value chains (as suppliers, distributors, retailers and/or customers).
- Socially-oriented businesses differ in their features and needs both in relation to the two extremes of the profit-impact spectrum and in relation to each other. A social orientation can present particular challenges and barriers to businesses, which cross-cut with other factors that do not relate to their social mission. One such challenge relates to the access to finance for socially-oriented businesses.
- Five important dimensions of variety of social enterprise and inclusive business, that help to highlight the range of organisations and the barriers they face, are 1) legal forms and governance; 2) income and mission alignment; 3) size, age and growth; 4) impact sought and target communities; and 5) leadership.