Should You Invest In Social Enterprises?

Should you invest in Social Enterprises?

We investigate why investments with social impact are taking the limelight

The concept of social entrepreneurship and social enterprises have existed in the business world for a while now but has gained more attention worldwide in recent years due to its potential for positive social impact across communities. Heralded as a new way of doing business, social entrepreneurship can benefit and empower the underprivileged such as racial and ethnic minorities, single mothers, orphans, refugees, serving zakat-eligible communities, while still making a profit. 

You may be wondering, what is social entrepreneurship and why has it become such a buzzword these days?

In this article, we’ll cover everything you need to know about social entrepreneurship and in particular, how to invest in social enterprises to make a positive social impact while building wealth. Dig in!

What is social entrepreneurship or a social enterprise?

Social entrepreneurship is a business approach by individuals, groups, start-up companies, or entrepreneurs, in which they develop, fund, and implement solutions to social, cultural, or environmental issues. It is the process of recognising and resourcefully pursuing opportunities to create social value. This concept may be applied to a wide range of organisations, which vary in size, aims, and beliefs. Businesses or organisations that conduct social entrepreneurship are called social enterprises. The business a social entrepreneur runs is called a social enterprise.

However, to be clear, a social enterprise is NOT a non-profit organisation. Social enterprises are businesses that provide solutions to social problems in the form of products and services which create profit. The main difference between a social enterprise and a non-profit organisation is that social enterprises create profit for the organisation through their business, whereas non-profit organisations do not aim to create profit as their names suggest.

On the other hand, social enterprises are also distinct from usual business enterprises. Where regular businesses put their sole focus on creating profit, social enterprises focus on generating a profit by creating social impact via solutions to social problems.

Individuals who are involved in social enterprises are known as social entrepreneurs. Social entrepreneurs are innovative, resourceful, and results-oriented. They draw upon the best thinking in both business and nonprofit worlds to develop strategies that maximize their social impact. 

Professor Muhammad Yunus is one of the most renowned social entrepreneurs who popularised microfinance and microcredit, which serve as the cornerstones of the Grameen Bank, founded in 1983. In 2006, Yunus was awarded the Nobel Prize for creating the Grameen Bank, a community development bank founded in Bangladesh that gives small loans to the underprivileged without requiring collateral. The bank was based on the principles of trust and solidarity to empower villagers with the funding to pull themselves out of poverty. According to the Grameen Bank, as of August 2021, 97% of its 9.31 million borrowers are women, who pay their loans back at a rate of 97.35%—a recovery rate higher than any traditional banking system.

Do social enterprises make profits?

Social enterprises are not non-profit organizations

Social enterprises are, at the end of the day, businesses, hence they are required to generate profit to pay rent, operating expenses, employee salaries, etc. just as other businesses. 

In contrast to regular businesses, social enterprises are focused on maximising positive social impact through their business. But their focus is not just about establishing an immediate positive social impact but also ensuring that they can continue to do so in the long-term independently and sustainably. Rather than seeking funds and donations from external sources as non-profit organisations do, social enterprises are self-sustainable and generate their profit to continue their business.

There are many creative ways that social enterprises pursue in their quest to maximise social impact while generating profit. Some of them offer the general public their services at full price and channel a large chunk of that profit to subsidise vital services, such as food, education, and healthcare for communities who, under normal circumstances, can’t afford it. For example, PichaEats is a Malaysian social enterprise that provides food and catering services to businesses and individuals. All of their food products are cooked by refugees in Malaysia, and in this way, they provide employment to refugees who would otherwise have no jobs. 

Others employ a buy-and-give model whereby for every product you purchase, the business funds social causes or initiatives that they support or donate the same product (such as a pair of shoes, for example) to those who can’t afford it. For example, Toms Shoes, a for-profit shoe company founded in Arlington, Texas, is well-known for donating a pair of shoes to a child in need for each pair of shoes their customers buy.

Other social enterprises provide opportunities for the marginalised and disenfranchised in the form of employment, training and guidance rather than just one-off donations. In this way, they help those in need to become self-sufficient. 

Larger enterprises often employ an inclusive business model whereby brands include the well-being of the underprivileged within their value chain. They opt for this strategy as a way to positively impact the smaller stakeholders that they work with. For example, Unilever Malaysia has made a commitment to positively impact the lives of 5.5 million people by 2020. They’re working to improve the livelihoods of smallholder farmers, the income of small-scale retailers as well as increasing the participation of young entrepreneurs within their value chain.

Some businesses connect sellers, artisans, and individuals from underprivileged backgrounds with buyers and users that they wouldn’t be able to access on their own. These social enterprises connect local artists and sellers of artisanal products with a much wider consumer base. And in so doing, they play a role in financially sustaining the communities they support.

Social enterprise growth potential and investment opportunities in Malaysia

The majority of social enterprises in Malaysia are led by young people

Social entrepreneurship in Malaysia is a growing, vibrant, and exciting sector that has an enormous potential to contribute to the socio-economy of the nation. Many social enterprises have been actively delivering social values and addressing social and environmental issues in the community. 

According to a survey report on 132 social enterprises published by the British Council in partnership with the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP), the Ministry of Entrepreneur Development and Cooperative of Malaysia (MEDAC), and Yayasan Hasanah, there is an estimated total of 20,749 social enterprises in Malaysia, with the majority of them located in the state of W.P. Kuala Lumpur. 

Most of them are relatively young, with more than 50% of them being established between 2015 to 2017. They are led by relatively young and diverse groups of people – 36% of social enterprise leaders are between the ages of 31 to 40 and 54% of them are females. Their main areas of focus are education (22%), environment and sustainability, food and beverage (13%), and art, culture, and heritage (11%). Malaysian social enterprises are also viable: out of the 132 social enterprises the survey was conducted on,  37% made a profit and 32% had reached break-even. 

However, when it came to common challenges faced by social enterprises in Malaysia, 55% of the surveyed social enterprises indicated insufficient cash flow as a major challenge and 36% responded lack of awareness about social enterprises in Malaysia as another major challenge. 

On the other hand, only 38% of the social enterprises indicated attracting investments as their preferred growth strategy, while 68% indicated developing and launching new products as the primary strategy for growth. Therefore, it becomes evident that there is an untapped potential for investing in these social enterprises. Due to an apparent lack of awareness in Malaysia about their social impact, these social enterprises seem to shy away from attracting investors who would otherwise be more than happy to grow wealth while benefiting those in need. 

Investing in social enterprises is often known as impact investing. Impact investment is an investment strategy that aims to generate both social and financial benefits and usually goes towards socially responsible businesses, businesses with a social purpose, co-operatives, non-profit enterprises, and the social enterprises of charities. 

Impact investment is also at the core of what Ethis does. At Ethis, we believe that capital is entrusted to all of us to benefit humanity. We prioritise featuring ventures with social impact on our online platforms, and our global community of impact investors and donors invest in profitable projects and exciting high-growth companies and support social finance campaigns. 

Sometimes, at the initial stages of a social enterprise, financial returns may take a while to emerge, but the social impact can be observable and measurable right after the enterprise launches its product as a solution to the problem they’re trying to solve. Eventually, financial returns follow, and often in unprecedented amounts. 

A case in point is Mapan, an Indonesian social enterprise that works as a community-based savings and lending network that received investments from Patamar Capital, an early-stage venture capital firm investing in companies serving the mass market in South and Southeast Asia. Mapan was acquired by Gojek, an Indonesian tech company, in 2017, and the acquisition led to 9 times return on Patamar’s investment in the social enterprise.

This trend has been consistent globally. A 2020 study conducted by Global Impact Investment Network (GIIN) on 300 impact investors reported that 88% of the investors indicated that the investments were meeting or exceeding financial expectations. 

While the social entrepreneurship and impact investment landscape is relatively newer in Malaysia, exciting things are happening. In 2020, the Malaysian Global Innovation and Creativity Centre (MaGIC) received an RM10 million boost in Budget 2020 to aid the development of social enterprises and help disadvantaged communities in the process. In Budget 2021, however, the amount allocated to the development of social enterprises was doubled to RM20 million.

Dzuleira Abu Bakar, CEO of MaGIC, welcomed the budget allocation in a press release published on The Borneo Post: “Through this initiative, social enterprises (SES) can supply goods and services to the government in total up to RM20 million per year and this translates to social value creation in areas such as community livelihood, food security, heritage preservation, our health and social wellbeing, and environmental protection.”

Coupling increased government funding and support with a growing interest in impact investing, an acceleration of the industry in the years to come can be easily foreseen. For those who wish to earn a few (or a lot!) bucks while also helping the poor and the needy, it’s never been a better time to kill two birds with one stone. 

Who is Accelerate Global and why do they matter?

Among this growing landscape of social entrepreneurship in Malaysia, one new start-up has been working relentlessly for a noble cause. Founded in 2019, Accelerate Global is a social enterprise aimed at tackling youth unemployment issues worldwide through upskilling programs developing youths into becoming entrepreneurs of their own as well as providing them with career-ready skills. Until today, Accelerated Global has impacted 600 youths who have become successful entrepreneurs and skilled professionals after graduating from their skills development programs.

Though based in Malaysia, their programs are accessible globally, anytime, anywhere. Their work in upskilling youths, building tangible and meaningful change into their lives,  is recognised by not just the media outlets such as The Vulcan Post and The Star, but also by the Polytechnic and College Community Department under the Ministry of Higher Education Malaysia as they were called during the Movement Control Order to present the success of their 14-Day Virtual Entrepreneurship Boot Camp with B40 polytechnic youths. 

Their recent success includes securing funding from the American Chambers of Commerce Malaysia and Micron Malaysia allowing Accelerate Global to develop 43 stateless youths in Sabah into becoming micro-entrepreneurs who are now running their own pineapple jam business called The Nanas Lab. More to that, 19 refugee youths from Yayasan Chow Kit have just recently graduated and now are running their own businesses! 

What does Accelerate Global do?

Accelerate Global Social Enterprises
Accelerate Global aims to eradicate youth unemployment

More than 33% of the world’s population is dominated by youths, yet the youth unemployment rate is three times higher than adult unemployment in itself. This is due to a lack of practical knowledge and skills among the youth caused by a broken education system that doesn’t adequately prepare them to tackle real-world challenges.

However, quality upskilling programs and courses are either expensive, unattractive or both. In the context of the COVID-19 pandemic, there is a gap in the market for interesting, inexpensive, and useful online educational content that can help the youth develop real-life skills. Particularly, underprivileged and marginalised youths are often excluded from access to online educational content due to the advancement of technology and language barriers.    

Accelerate Global’s solution to these problems is a back-to-basics simple solution that is to provide quality market-related upskilling programs that work. . Their upskilling programs are developed in-house and are centred around building independent, self-sustaining youths.

Currently, Accelerate Global is developing its e-platform to provide entrepreneurship and skills training to the youth. For each paid subscriber to their courses, Accelerate Global will give access to their courses to one underprivileged or marginalised youth for free. Using this innovative 1:1 ratio business model, they hope to empower underprivileged youths to develop sustainable businesses and careers for themselves.

In the next five years, Accelerate Global hopes to penetrate the Southeast Asia market. By 2031, they hope to empower and improve the lives of 1 million youths within the larger Asia region.

With a market size of 53.2 million people, Accelerate Global’s business strategy is to operate on steady growth with an average subscription of six months on their offered products for all subscribers. To grow their business, the team plans to add 50% new subscribers every year from year 1 to year 5. Part of their growth strategy is to also focus on ecosystem building. From year 1 to year 5, the goal is to build an ecosystem of connected subscribers. They also aim to build a community of accelerated champions before their rapid expansion from year 5 onwards.

Invest now in Accelerate Global

To develop their operations, human resources, and e-platform, Accelerate Global is looking for investments starting from ONLY RM 1,000. Accelerate Global targets to offer dividends of up to 25% per annum (every year) out of net profit for the year to investors depending on whether the company reaches its projected net profit based on its projected financials for the year.

If you have always wanted to leave a positive impact on the world while building wealth, now is the time to take action. With your investment in Accelerate Global, not only do you get equity in the business and build wealth, but you also get the opportunity to shape the future of Malaysia by empowering the youth of tomorrow. 

We encourage you to join Accelerate Global on their journey to tackle unemployment, one youth at a time. Invest now, starting from ONLY RM 1,000!

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We operate ethical investment platforms approved by regulators in Indonesia, Malaysia, and Dubai, and also run a charity platform Global Sadaqah serving ordinary people, high-net-worth individuals, corporates and government entities. Best known for crowdfunding impact investments for Indonesian social housing development projects we adhere to the United Nations Global Compact ethical standards and are based on Islamic finance.