What role can social enterprises play in tackling inequality?

“Every time I see a problem, I create a social business to solve it,” renowned Nobel Prize laureate Muhammad Yunus said to an overflowing room at the World Bank Group’s Headquarters in Washington, DC this summer. “Set up a social business.”

“The poor are like Bonsai trees,” the founder of Grameen Bank explained, “When you plant the best seed of the tallest tree in a six-inch-deep flower pot, you get a perfect replica of the tallest tree, but it is only inches tall. There is nothing wrong with the seed you planted; only the soil-base you provided was inadequate. Poor people are bonsai people. There is nothing wrong with their seeds. Only society never gave them a base to grow on.”

Sitting in between economists and social entrepreneurs, we all were aware of the weight of global social problems. Nearly two billion people lack access to basic medicines and healthcare. Another 750 million do not have access to safe drinking water. Access to energy, sanitation, and education is still a challenge, despite billions invested in traditional development projects.

But where do social businesses, also known as social enterprises, fit in this fight to ensure basic service delivery for all?

The Bonsai people

When Naipasie was born in a small village in southern Kenya, there was no one to fill out her paperwork. Her parents did not know how to write and did not have official identification cards. City hall and the local Sub-Chief (authorized to register newborns) were a couple of days walk away. Consequently her parents did not register her. Officially, Naipasie did not exist.

Naipasie’s region had only one school which was private, expensive, and still hours away from home. Naipasie’s father said no. Instead, “we will find her a husband,” he decided. She was 11.

Naipasie had to go through the traditional Maasai rite of womanhood – female genital mutilation. Many of her peers did not survive. She did but suffered from a severe infection. There were no doctors in her village to care for her.

When her baby came, there were still no doctors in the area. Naipasie was 13 and a baby was born disabled. Now, she is 15 and a widow, and is considered an outcast. Even her own home – built by her – has been taken away from her.

Start a social business
In 2008, with a $150,000 grant, a group of volunteers and I moved to Kenya to build a school for 600 Maasai children and a rescue center for girls who ran away from female genital mutilation. We were bright-eyed volunteers just wanting to build a school. When we arrived in Kenya we realized that in order to address problems of the community we needed cross-sectoral and sustainable models. One school would not make it happen. Our project quickly became something that would change the way I think about development and social enterprises.

Our school project was driven by and supported a local entrepreneur, Salaton – a charismatic Maasai tribal chief.

Salaton understood that in order to create a vibrant economy for his community, he would need to provide a whole spectrum of basic services to his community. He ran a number of programs in education, healthcare, livelihoods, and tourism. These included: a village for abandoned widow, such as Naipasie, healthcare and behavioral change program for girls, an eco-tourism business, and targeted classes on technical skills: all that to allow his community to escape poverty. The school sustains itself by Salaton’s eco-tourism business as well as the selling of jewelry and sanitary pads made by the women. In the end, Salaton did not just to build a school: he built a sustainable, thriving community ecosystem.

What is the potential?
Salaton’s efforts were at the heart of what Professor Yunus was describing. The problem of education, healthcare, hygiene, and jobs in Salaton’s village would not be solved by traditional development projects. It needed a cross-sectoral, sustainable business model that would keep the whole ecosystem functioning.

Around the world, social enterprises such as Salaton’s school close a delivery gap by providing effective and efficient solutions tailored to the so-called “Bottom of the Pyramid” – the poorest 20% of a population. A social enterprise is a privately owned organization – either for-profit, nonprofit, or a hybrid of the two – in which social impact is at the core of its sustainable business model. They are small and nimble and their resource scarcity often inspires new, cost-efficient models. Their understanding of the needs and cultural context that allows them to design better and more suitable services. This community trust is essential to implement their models, and their close proximity to the end user enables feedback loops for constant improvement.

Slowly we are beginning to see a change around this agenda. In the World Bank Group’s Social Enterprise Innovations portfolio, we see water ATM models delivering clean water to slums, mobile finance and health applications for rural populations, and vans bringing scientific labs to children in marginalized regions. By adopting some of these models into projects, the WBG could effectively reach the most marginalized people: the last mile.

Naipasie was one of the first widows who received support from Salaton. He provided her with shelter, training, and income generating opportunities. Today, she not only sells jewelry to tourists, but also sits on the board of the women-owned NGO which manages the widows’ village. And her baby boy is happy, healthy, and getting ready to go to school.

This post first appeared on The World Bank’s Development Blog. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Marta Milkowska is a Strategic Innovation Consultant at the World Bank Innovation Labs.

Image:A view of the Turano slum. REUTERS/Sergio Moraes.