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Can Social Enterprise Play a Role in Community Development

  • 12 Pages
  • Published On: 24-11-2023
Introduction

Introduction

In the most traditional sense, social enterprises are understood as a business which is not primarily motivated by profit but by fulfilling a social objective. Making profits is not the central aim of the organization, as is the case with commercial enterprises. However, it recognises that in order for the organization to be sustainable and continue in the long-term, it needs to make a profit (Investopedia, October 27 2020). The phenomenon has emerged in the last few decades, emphasising on the community part of social work but also adopting a more sustainable model of operations which the private organizations usually operationalise. Most fo the times, the group that this endeavour mostly tries to profit are economically and socially disadvantaged groups and the purpose of this organization is to empower them and uplift them from their disadvantages (Harvard Business Review, May 2015). The purpose of this document is to critically examine if social enterprises and their operations do indeed affect positive community development and help the community they are operating in, in the long run. Doing so will allow this inquiry to categorically look into the effectiveness of social enterprises in general and understand where their principles need improvement.

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2. Community Development

Over the years, the objective of community development has seen several changes in definition and understanding. In 1989, Baker categorised three major elements in the idea of community development; the socio-economic and health development of the members of the community, the improvement of the resource base of the community that the members are residing in and the development and organization of the structure of the community, namely the social, cultural and economic structures which the community members might use for their respective developmental schemes for the overall community or for individual members. In any community, the key concern is building a model of development which could be sustained in long term. Another important factor to consider while measuring the development of a community is the sustainability of the community. The idea of sustainable development of the community and its implications will be discussed further in the coming sections. Bridger and Luloff (2001), taking into context the social capital that is required for building community, elucidate that the idea of development in a community is intimately linked to management of resources and sustainability of the models. A key hindrance to this is trust, and whether or not the members of the same community have trust in each other. The solution to this is what is also elucidated by Putnam (1993), which is the involvement of a third party. Usually, this third party is the state. Hence, from these two discoveries made by Bridger and Luloff and by Putnam, it is clear that community development is an exercise which cannot just be understood in tangible terms, rather it is also dependent on intangible things like trust and belief in the justice system of the society and the state. An important aspect of community development is capacity building, which ensures long and sustainable development of the community members. The key element to having a sustainable developmental programme in any community is the principle of interest by the community members. The starting point of this perspective is the empowerment of people, whereby it is assumed that every individual in the community has some talent which they can use to better their community. A problem which might arise when one is evaluating the effectiveness of a model of development in a community is that there is not hard-and-fast indicator towards what exactly is it that counts for a developed community. There are certain indicators, the development of which can be understood as the development of a community. These indicators are knowledge, attitudes, skills and practices. The development of these qualities in the individual who make up the community, constitute the development of the community (Sail and Abu-Samah, 2010).

3. The Role of Social Enterprise

The role of social enterprise in the development of the community falls squarely between the road of a completely non-profit organisation and a private enterprise motivated by profit. They are a part of the country’s economy directly, but they are also concerned with improving specific or a few parts of the community (Lyne, 2017). The following section will elucidate on the role that social enterprises may play in the development of communities and what are the factors that aid these enterprises in fulfilling their objectives. Doing so would allow the inquiry to delve critically into the measures which social enterprises take now and where are the areas of improvement they can work on. Additionally, it will also look at the factors which internally and externally make for a sustainably functioning social enterprise, one which can gainfully contribute to the development of a community, for long-term and sustained change.

3.1 Social Enterprises and Capacity Building

As discussed earlier, an important aspect of empowerment of the community is capacity building. The idea of capacity building became an important concept for community development, and was subsequently adopted by social enterprises since the mid-1980s. It was mostly popular in the UK and US, and later adopted by the Asian countries. Community Development Corporations (CDCs) are one of the enterprises which exist for community development purposes. These CDCs work in partnership with Community Development Partnerships, and they initiate projects like building of schools and community health centres. Nye and Glickham (2000) elucidate that in areas where the level of professional ability is not very high, CDPs usually concentrate on enhancing the professional skills of the individuals, a lot of them who work for their own organization. The purpose of CDPs is to work with the individuals in the community in order to enhance the skills of the people in the particular community, supporting the CDCs and changing their structure in order to make the employees more worthy of a higher salary.

3.2 What Social Enterprise Can Do

It has already been established that the sector of social enterprise, the purpose is twofold; to engage in projects will contribute to the development of the community and to turn a profit in order to self-sustain. Often times, the organization also gets grants from the government. A good example of such an initiative would be The Grameen Bank, which was initiated by Muhammad Yunus. In 2011, it was discovered that the bank has 8.34 million borrowers and about 97% of those borrowers are women (Yunus, 2017). This bodes well for the community development guidelines, as more female borrowers means a greater level of female empowerment. This is profitable in two distinct senses; firstly, the actors who are getting financed are individually profiting from the system and are getting empowered, empowering a few more after that and the few more are empowering even more below them and so on. This creates a chain or a hierarchy of empowerment, which is only created when capital is invested directly into the community, instead of just investing the capital in the location of the capital and only employing the community members as employees. Secondly, it also empowers the community in general as financial backing to a family could mean better education for their children and a subsequent generation of more skilled individuals and so on. Additionally, financing for projects like the opening up of health centres and hospitals ensure that the general population of the community is healthy and their well-being is ensured. Hence, social entrepreneurs are an essential part of the development of the community. A form of social enterprise which would ensure fair and even participation by all and equitable distribution is the collective. Szarleta (2017) elucidates that a collective social enterprise is one where the members of the community come together to form an initiative where the stakeholders are all the participants equally and the operations all take place keeping in mind the equitable distribution of profit, for the benefit of the whole community. She argues that a collective has the capability to successfully transform the structure ad the education system of the community and transform the entire community from just a collection of people with similar experiences, in close proximity to a group of individuals who work as a collective. A glaring problem with this kind of approach would be that the social mindset that is required to form such a collective is something which needs to not exist in the community itself. In initiatives which derive some form of financial profit, it is very easy for some of the stakeholders to become more financially invested than the others. It is also possible that their end goals with regards to the initiative might evolve over the time. Additionally, the skills of the stakeholders may be different. An individual with a more relevant set of skills could think of himself or herself as more entitled to the profits that emerge out of the initiative. Kania (2011) elucidates that a collective social enterprise is something that is used in order to tackle the deeply entrenched problems that exist in the community. This is because, in the collective, the individual interest is represented in the truest form possible; by the individual themselves. Unlike a completely profit-oriented enterprise, which works on a completely strict and scientific principles of organization and management, the management is self-evolutionary and is characterised by the collectivised action and uniform stake holding by all the actors involved equally accountable for the profits as well as the losses. Hence, the results of a particular initiative are not known beforehand; the results are uncovered later on when one gets to know how effective the strategy is. This is also the model that collective social enterprises use when the objective is not just to make profit but also to discover dormant resources that may be used for further development in the area. The next section will elucidate a little more on the one such collective social enterprise and the impact it has had on the economy of the community it functions in; the Grameen Bank.

3.3 Grameen Bank

The Grameen Bank is a rural based bank, based in Bangladesh, which was started by Prof. Muhammad Yunus in 1976, upon looking at the economic devastation which was caused due to the Bangladeshi Famine of 1974. It provides people with micro-finance, in a bid to melt the middle layer of predatory loan sharks who prey upon poor people with no other means of financing themselves. The central motivator to Yunus was that the amount which people needed to finance themselves was in reality a small amount compared to what loans usually consist of in traditional banks. In spite of that, the villagers were not considered credit-worthy, which is why banks were not willing to give them loans. The bank was born when Yunus realised that even though there were no loan defaulters among these economically disadvantaged people, the banks were still unwilling to extend loans. The bank is a prime example of a social enterprise which works to both economically and socio-culturally empower people. The loan takers in the bank are accountable to the payment process and they are required to finish one year of membership with the bank before they can be considered to become shareholders in the bank. However, membership with the bank entails that the members also follow 16 points which direct the member to adopt hygienic methods of living, drinking clean water and eating healthy foods, sanitary hygiene and so on (Yunus, 1999). This is a good example of a bank where the individual becomes not just a borrower, but also a stakeholder in the bank when they invest enough and prove themselves to be worthy investors. The membership to this bank is not just a financial investment, rather it is also a institution which encourages borrowing by the members of the community and also encourages people to adopt healthy habits in their life so that not only do they become financially more well-off, but they also adopt techniques in their life which help them lead a better quality life. Yunus (1999) recalls the life experience of a woman who became a loan receiver from the bank to start her own business. He recalls that the woman was a victim of domestic abuse at the hands of her husband and upon taking a loan from the bank and turning a profit, she was successfully able to put a stop at the domestic abuse which was being inflicted on her. This is one of the examples of the economic pervasiveness of the bank which was successfully able to mitigate the societal problems of the community.

4. Factors for Community Development

Community Development, which is headed by Social Entrepreneurship, is not something which is outside the purview of institutional rules. The role of the public sector is essential in the development of social entrepreneurial initiatives, the Global Competitiveness Report elucidates 12 points of competitiveness in the society, upon which an enterprise must operate. There are different stages on which the enterprise depends, the first stage depends on the resource base of the community and the infrastructure. Infrastructure means the labour power of the individuals residing in the community as well. As previously discussed, the interest of people in the community is a vital aspect of forming a successful enterprise. An important factor which contributes towards the success of any social enterprise organization is the leadership of the individual(s) who are leading the organisation. The most important quality that the leader needs to possess is the quality of trustworthiness. The enterprise must work on a set rules and ethics which the leader must adhere to as well. The leader must inspire in the workers a sense of independence and empowerment, which the worker can then translate into a pre-determined set of goals. Another important aspect which the enterprise must take into account is the existence of a good Human Resources department. Like any other organization, a good HR department is the key to managing the employees better and meeting their expectations as closely as is possible while also making sure that the company goals are being fulfilled. However, it is important, in a social enterprise which is geared towards community development, to have within itself a department which not only fulfils these functions, but also works towards keeping the employees in sync with the overall ethical goals of the organization (Heinecke et al, 2014). Previously, it was mentioned that one of the problems the social entrepreneurial initiative can encounter is the tunnel-vision of goals that individuals can develop. The presence of a good HR team can ensure that people do not move away from the larger and overarching goals that the organization started with, especially when the organization starts turning a profit.

5. Limitations

Despite the potential that social enterprises have, there are some limitations any organisation will need to contend with. As mentioned earlier, Bridger and Luloff (2001) posits that trust is a vital ingredient in the success of any social enterprise. This includes the trust that individuals of the society repose in the organisation, and trust between the members of the organisation. Bogren and Friedrihs (2016) found that for social enterprises to succeed, it requires extensive trust building exercises within the community, and these exercises need to be especially directed towards the target group, such as women or underprivileged groups. Very often, a social enterprises need to work closely with other organisations, often on the basis of trust. Sydow (2018) argues that although inter-organisational trust is desirable in most cases, albeit difficult to establish, sometimes it becomes hard to abandon, essentially locking organisations with each other, sometimes to deleterious effects. For example a food distribution charity may be entirely dependent on a non profit food bank, based on a relation on trust and shared goals and often doesn’t establish multiple supply lines, and is vulnerable to having its services disrupted by a disruption in services of the other organization. The other aspect where an enterprise might encounter potential limitations is balancing its philanthropic goals with its commercial identity. What a lot of social enterprises turn to in order to resolve the dichotomy is to attempt to place the onus of development on the individuals themselves. The major limitation with this approach is that often, individuals who are very poor often lack the education and necessary skills required to take advantage of new opportunities, technology and further, they may lack the margin of wealth necessary to take on financial risks. Unfortunately social enterprises may paradoxically further marginalise the poor by fetishising certain education pathways or technologies or encouraging individuals to take on too much financial credit risk (Sari and Sundiman, 2019).

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6. Conclusion

The purpose of this document was to critically look at the sector of social enterprise and to critically understand if it leads to significant economic development. It was clearly established that while social enterprises are essential to community development, there are a lot of factors which may negatively or positively effect the effective functioning of these socially based enterprises. A recurring quality that came up in research, both during understanding the role of leadership in the social enterprise and the limitations that such an enterprise must face in a community is trust. Trust between the members of the community is essential and it is an intangible commodity which translates into tangible profit by the social enterprise and the participants in the enterprise. The presence of a strong set of moral standards and work ethics is essential for the functioning of any successful social enterprise which operates in a community. Hence, community ethics influences the working of the social enterprise working within itself and vice versa. Total words (excluding references): 2999

References
  1. Investopedia. 2021. The Aims Of Social Enterprises. [online] Available at: [Accessed 6 January 2021].
  2. Harvard Business Review. 2021. Two Keys To Sustainable Social Enterprise. [online] Available at: [Accessed 6 January 2021].
  3. Baker, H.R., 1989. Extension's linkages with community development. Foundations and changing practices in Extension, pp.47-57.
  4. Sail, R.M. and Abu-Samah, A., 2010. Community development through community capacity building: A Social Science Perspective. Journal of American Science, 6(2), pp.68-76.
  5. Lyne, I., 2017. Social enterprise and community development: Theory into practice in two Cambodian villages (Doctoral dissertation, Western Sydney University (Australia)).
  6. Nye, N. and Glickman, N.J., 2000. Working together: Building capacity for community development. Housing Policy Debate, 11(1), pp.163-198.
  7. Investopedia. 2021. The Aims Of Social Enterprises. [online] Available at: [Accessed 6 January 2021].Yunus, M. (2007). Banker to the Poor. Penguin Books India
  8. Szarleta, E., 2017. Capacity Building for Social Innovation: A Collective Impact Approach. Metropolitan Universities, 28(4), pp.81-100.
  9. Kania, J. and Kramer, M., 2011. Collective impact (pp. 36-41). FSG.
  10. Yunus, M., 1999. The Grameen Bank. Scientific American, 281(5), pp.114-119.
  11. Heinecke, A., Kloibhofer, M. and Krzeminska, A., 2014, May. Leadership in social enterprise: how to manage yourself and the team. World Economic Forum.
  1. Sari, M., & Sundiman, D. (2019). Risk Management Framework for Social Enterprise: A Case of Vegetarian Restaurant. Binus Business Review, 10(2), 139-146. doi: 10.21512/bbr.v10i2.5760.
  2. Trust Trap? Self-Reinforcing Processes in the Constitution of Inter-organizational Trust. (2019). Trust In Contemporary Society, 141-160. doi: 10.1163/9789004390430_009
  3. Maria Bogren & Yvonne von Friedrichs, 2016. "Trust-building processes in women’s entrepreneurship," Journal of Enterprising Communities: People and Places in the Global Economy, Emerald Group Publishing, vol. 10(1), pages 70-100, March.
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