Social Entrepreneurship Investment: From Financial Fluctuation to Changing Lifestyle

The Indonesian Youth Conference delegation wore a variety of traditional clothing from the area on the stage (Doc: IYC)

For some, this story may sound remarkable. My interest in social entrepreneurship first came about in 2010, when I organized the Indonesian Youth Conference (IYC) with my friends at Sinergi Muda for the first time. Two weeks before the conference is set to be held, we – with 30 committee members – had not received any fund from sponsors.

At the time, we only relied on ticket sales, which was 400 tickets and at IDR 100,000 each. In this event, we were supposed to invite not only a large number of speakers but also many youth delegations across all provinces in Indonesia.

One week after the event, we realized the revenue received by IYC achieved a surplus! Not just from ticket sales, but also from sponsors coming in at the last minutes. For us, this is a real portrait of the lives of social activists: fluctuating and unpredictable finance, which often adversely affects program sustainability and desired impact.

This challenge is normal for social entrepreneur activists. Those who organize similar events or establish foundations often witness firsthand the phenomenon of fluctuating cash and revenue. Since this is a major issue for me, I decided to further learn and examine the concept of social entrepreneurship.

I believe this concept may be the key to sustainable development. Not only sustainable individual and organisational development, but also the nation’s development. Before we dig deeper, we should examine social entrepreneurship first.

Until today, the definition of social entrepreneurship is still very general. GO-JEK, which is heralded to be the first decacorn in Indonesia, claimed they are a social enterprise because they created jobs and empowered their partners, including people with disabilities.

Ruma, which has been bought by GO-JEK as a part of GO-PAY, had also declared themselves as a social enterprise, although the label was slowly detached. It counts as no surprise as to how easy it is to label yourself as a social enterprise, considering how wide the definition of social enterprise is.

The simplest definition of social entrepreneurship comes from Austin, Stevenson, & Wei-Skillern (2006), who dismissed that social entrepreneurship is basically entrepreneurship activities with a social objective. Many practitioners (Shaw, 2004; Dees, 1998; Plaskoff, 2012; Martin & Osberg, 2007) argue that what differentiates social enterprise from the commercial business is how it focuses on attaining social goals as opposed to amassing personal wealth.

According to Martin and Osberg (2007), social entrepreneurship must contain 3 elements:

1.    Identifying the equilibrium that is constantly unfair, causing exclusion, marginalization, or the loss of financial or political capacity of a human segment to change their own lives;

2.    Identifying opportunities within the said equilibrium, developing social value proportion, bringing inspiration, creativity, action, courage, and challenging the nation’s hegemony; and

3.    Developing a new equilibrium that frees potential and eradicates the targeted groups’ problems. Establishing a stable ecosystem within this new equilibrium ensures a better future for the targeted beneficiary groups and people in general.

Furthermore, Defourny (2004) states that social enterprise usually has a number of special characteristics, such as large autonomy, organizing activities – including paid work, has explicit objective to provide positive impact to the people, decision making does not rely on shareholders, a relatively high economic risk due to revenue fluctuation, and its establishment is initiated by the community. Following this definition, the number of organisations that can call themselves social entrepreneurs becomes more limited.
 

In Indonesia, the concept of social entrepreneurship was introduced by Ashoka when the institution first set foot in Indonesia in 1983. However, during the National Awakening era of 1899-1942, Indonesia had a number of organisations and networks that can be called social entrepreneurs, for example, Sekolah Kartini, Sarekat Dagang Islam, Muhammadiyah, Nahdhatul Tujar, Himpunan Saudagar Indonesia, and also Taman Siswa (Hati & Idris, 2011). Although these organisations have different business models, they share the same characteristics making them eligible to be grouped into social enterprise category.



Building data, strengthening the ecosystem

Limited literature and researches in social entrepreneurship in Indonesia restrict information on this sector. There are some domestic and international organisations that are active in developing social entrepreneurship sector, namely Platform Usaha Sosial (PLUS), Asosiasi Kewirausahaan Sosial Indonesia (AKSI), British Council Indonesia, and Bina Swadaya.

When I conducted research on social entrepreneurship in 2009, the statistics and data on social entrepreneurship in Indonesia were not sufficient. Consequently, social entrepreneurship has yet to become a noteworthy sector for the government in developing policies.

The cooperative business model can be categorized as a social business model that can be exempted because Indonesia has a law regulating cooperatives. However, a large number of parties working to foster social entrepreneurship sector for the last ten years has yielded much progress in the sector. PLUS, for example, has established a database containing social enterprises across Indonesia in an online form.

At the beginning of 2019, PLUS successfully collected information on 832 social enterprises across Indonesia. They are mostly concentrated in Java, with around 735 social enterprises in Java Island, while 97 others are spread across Western, Central, and Eastern Indonesia.

British Council reported that there are around 342,025 social enterprises in Indonesia. This number is still under 2% of the total number of SMEs in Indonesia. In addition, PLUS also introduced a curriculum on social entrepreneurship accessible by anyone wanting to learn about the sector or build their own social enterprise.

In 2016, the House of Representatives declared the Draft Law on National Entrepreneurship. Social entrepreneurship received a special highlight in this discussion, even though a more detailed arrangement will be provided via Government Regulation. In short, as a country upholding the principles of people’s economy, there is still potential and very spacious room for the social entrepreneurship sector and its actors to grow.

The government has even slowly paid attention to this sector, which can be the nation’s economic backbone in the future. However, we still have plenty of work to do to make this sector a force to be reckoned with and develop this sector rapidly according to its potential.

For them to grow, besides through innovation and creativity from its actors from within, social enterprises also need sufficient supporting ecosystem. This can be developed with good policies and regulation as a foundation to attain social enterprise progress.

If all this time the government focuses its activities on SMEs through various lines, it can add special elements that can help social enterprises. For example, providing regressive tax incentive on social impacts created by these enterprises, or accommodating and facilitating social enterprises to export their goods to various international cities, at least to cities housing Indonesian promotion office coordinated by BKPM.

In addition, the government can also facilitate the establishment of special businesses that accommodate the needs of social enterprise, considering that currently, a number of social enterprises must still establish two legal entities to achieve their expected business model. Sinergi Muda, for example, must have two entities – a foundation to conduct all of its social activities, and a limited liability company to conduct commercial activities, which will ultimately fund social activities implemented by foundations like IYC.

Besides the government, support for this sector can come from other parties, because social enterprises do not only improve the wellbeing of people involved in them, but also people in general. Currently, many international organisations have injected funds and other resources through various workshops and programs to develop social enterprises in Indonesia.

It is time for other industrial actors, including commercial businesses, to participate in developing a social enterprise ecosystem. For instance, if all this time e-commerce platforms have been competing to hold workshops for SME industry actors in general, perhaps a similar workshop can be given specifically to social enterprises.

As an example, e-commerce platforms and their partners can offer “free or delivery charge discount” if their users order products of social enterprises located in the Eastern parts of Indonesia – which may yet to have a large number of online buyers due to location and expensive delivery cost. In addition, besides doing CSR activities, large corporations can also start to conduct purchases from various social enterprises for their official merchandise or other procurement needs.

Moreover, we also need to explore ways to develop the impact investing sector in Indonesia as an innovative funding option to promote the development of social entrepreneurship. With the emergence of various startups in Indonesia, more people are joining the investment world by opening venture capital firms, private equity, or becoming an angel investor.

It would be great if we can enhance the spirit of impact investing, where investors and investment facilitating parties also measure not only financial return on investment, but also the social return of investment. In addition, startups in Indonesia can be requested to design theory of change they think can be generated from their business.

Every day I am exposed with various increasingly advanced social enterprises. Every month I invest in microscale through Amartha, a peer-to-peer lending platform enabling me to invest and receive profit sharing from micro businesses across Indonesia. I am writing notes through a book from Tenoon, a social enterprise producing goods from woven materials and empowering the disabled community in the Eastern part of Indonesia.

I also regularly donate and pay my zakat through Dompet Dhuafa, which has been adopting the social enterprise business model for a while to ensure the sustainability of its programs and activities. Without us realizing it, social entrepreneurship is around us and creating a positive impact.

We have to move forward together to make sure this sector can fulfil its potential to the fullest so that it can create an even bigger positive impact and contribute to the development of Indonesia.

Alanda Kariza is the idea trigger for Sub-Theme 6 of IDF 2019: Fostering Social Enterprises

 

Have ideas for social enterprises in Indonesia? Please write your response in the comment section or send us your ideas using blog/article, vlog, or infographic format through IDF Proposal Submission 2019. The ideas will be published on IDF’s website, and some will be selected to be presented at the Idea and Innovation Market.



Selected comment and the most popular idea will receive a souvenir from Du’anyam. Send your ideas now! 

Alanda Kariza is an author and Community Manager for Quora in Bahasa Indonesia. She founded Sinergi Muda and initiated the Indonesian Youth Conference program, which until today has impacted 500,000 youth across Indonesia. She has also published 11 books and has a special interest in the behavioural economy and social entrepreneurship.