Need for social entrepreneurship and impact investment!

Published: March 19, 2012

Growth happens when policy and management at every level in the economy turns entrepreneurial, according to Easterly. PHOTO: CREATIVE COMMONS

KARACHI: As we are all aware, Pakistan is lagging behind other countries on economic growth. GDP of countries like China and India is growing two to three times our current growth rates respectively. For the standard of living of any nation to improve, GDP must grow significantly higher than population growth which currently is not the case in Pakistan.

In all emerging economies, it is the private sector which has driven economic growth and entrepreneurship is a fundamental building block coupled with favourable government regulations and support.

Entrepreneurship is an act of individuals who utilise their innovation, finance and business acumen to transform a new idea into a value added venture. New ideas coupled with management and leadership skills, gives birth to new businesses which drive employment, capital formation and creation of wealth in the country. This in turn helps reduce unemployment, eradicates poverty and is a hope for a better life for millions of young and aspiring professionals.

One type of entrepreneurship, which has taken root over the last few decade especially in under-developed and developing countries is ‘Social Entrepreneurship” and is playing a very critical role in Pakistan today.

Social entrepreneurs are driven by a desire to aid, improve and transform the social sector. This could be in the area of education, health, rural development, environment or help in improving economic conditions for the needy via microfinance or access to funding.

This is diametrically different than charity where the practice is focused more towards benevolent giving and caring and then the person walks away.

In ‘Social Entrepreneurship’ the focus is not only on helping the poor and needy, but teaching them some competency, some skill, using which they can later, even without your help improve their lives and economic conditions on a sustainable basis. These are predominantly run as non-profit ventures.

A new twist to this concept gaining popularity is called ‘Impact Investment’, which is focused not only on the financial return of investment but also on its social and environmental impacts. An impact investor seeks to enhance social structure as well as achieve financial returns. This reduces the burden on philanthropists and makes the project sustainable.

The advent of impact investment has significantly broadened the scope of social development by attracting ‘investors’ with a philanthropist mindset.

To attract impact investors to Pakistan, help is needed on three fronts:

Government must support such impact investments by giving preferential taxation and financing options.

Private sector corporate leaders must broaden their circle of influence by utilising their contacts, experience and knowledge to help impact investors.

If properly pursued, these efforts will have significant impact on poverty alleviation until the government systems and improved governance are capable and ready to drive social sector initiatives on health, education and job creation.

The writer works in the corporate sector and is active on various business forums and trade bodies.

Published in The Express Tribune, March 19th, 2012.

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Reader Comments (2)

  • Mar 19, 2012 - 3:06PM

    Unemployment will remain a major challenge in the third world countries. South Asia, particularly Pakistan is no exception! According to a World Bank report titled “Challenges for Youth Employment in Pakistan: Are They Youth-Specific?” globally about 23 percent of the total young work force are “young working poor,” with earnings of less than $1 a day.

    Social Entrepreneurship is the only way to progress!

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  • Yasir
    Mar 20, 2012 - 1:18PM

    Good article. Also we need to give more focus on teaching Entrepreneurship in education at Universities. The mindset of most of our graduates is to do a job after graduation and that is what taught at our Universities. In our Universities, courses on Entrepreneurship should be introduced and graduates should be encouraged to start their own business. This may not be possible for some during earlier stages of career, but later on one can start his/her own venture once he can finance and manage.

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