Since the Grameen-Jameel Microfinance Fund launched in 2003—often considered the Middle East’s first social business—thousands of social enterprises have emerged in the region, as several aspiring entrepreneurs seek to tackle everything from sanitation, to women’s empowerment, to sustainable agriculture.
And investors and private institutions are increasingly tuning into the potential of social enterprises. This, not merely in terms of profit, but also the powerful and lasting transformational change they exert in tackling poverty alleviation, public health, climate change and societal disparities due to race, gender, and education.
“A mere five years ago, we were still at awareness-building, constantly clarifying that social entrepreneurship was neither philanthropy nor charity, but something far more sustainable and impactful,” recalls Medea Nocentini, founder of Consult and Coach for a Cause (C3), billed as the region’s first social enterprise accelerator.
The numbers paint a heady picture. In the last three years, C3 alone has worked with over 300 entrepreneurs and enlisted over 500 experts as part of its homegrown curriculum.
And much like mainstream startups, MENA’s social enterprises, often dubbed as “socent” have shifted and adapted with time, in line with global trends, and in tune with local changes and developments.
Success stories run the gamut from award-winning recycled handbag manufacturer Palestyle whose creations have been worn by Hollywood starlets, to promising microinsurance startup Democrance.
“The program, which relies on the pro-bono efforts of volunteer experts and only charges referral fees for any investment or business contracts received from C3 contacts, garnered strong interest right from the get-go,” says Nocentini. “In the early days, at one point, we had 60 aspiring social enterprises enrolled, anywhere from idea through to early-stage business, which was amazing but also incredibly challenging to manage,” she adds.
In its current avatar, C3 runs short sprints focused squarely on enrolling selected early-stage social enterprises (up to two years of operation) into the accelerator program.
Many of them have already reached break-even, at a stage where they need to refine the social impact side of things.
According to Tariq Al Olaimy, co-founder of sustainability-focused strategy consultancy 3BL Associates, the increasing spotlight on social enterprises in the Middle East is not only a by-product of clear and present societal needs but also a natural offshoot of the region’s surging startup culture.
3BL, partnered with Ashoka’s ChangemakerXchange initiative to launch its debut summit in April 2017, part of what is a global movement to create a collaborative platform for social innovators.
ChangemakerXchange (CXC) is one among several recent initiatives making their MENA debut in the past few years.
These include ourMENA, an innovation platform launched by The Netherlands; MIT Arab Enterprise Forum, weMENA, an innovation challenge run by the World Bank specifically for female social innovators and Singularity University’s highly anticipated regional instalment of the Global Impact Challenge, among others.
While these programs focus on impact innovation, the approach varies. SingularityU calls for “moonshot” innovations to grand global challenges that rely on exponential technology to impact a billion people in 10 years, while CXC seeks the opposite of what Al Olaimy dubs as “hero-preneurship.”
“A lot of social impact accelerators create and reward this savior-mentality, pitting entrepreneurs against each other instead of providing tools and techniques to cultivate innovation collectively,” he explains.
Let’s Get Together
It is prudent to note that social enterprises are no longer the mainstay of a cloistered group of changemakers.
Increasingly, partnerships between NGOs, universities, governments and key players within the startup ecosystem are playing a major role in terms of increasing interest, investment demand, and overall impact of social enterprise.
Case in point: The recent partnership between UNICEF and Beirut-based accelerator AltCity to launch Elevate MENA in December 2016.
As Lebanon’s first social impact accelerator, Elevate MENA has already worked with close to 100 aspiring social innovators, hosting quarterly sprints aimed at identifying solutions to a raft of “deep and critical” problems in Lebanon.
Some especially imperative in the wake of the refugee crisis, explains David Nabti, co-founder and CEO of AltCity and GM of Elevate MENA. “A fundamental part of entrepreneurship is about identifying and understanding deep problems. It is better to build a startup around a deep problem, because these challenges are inherently market opportunities that can be addressed by social innovation,” says Nabti.
Following years of ideation and conversation with prospective collaborators about creating a dedicated program for social entrepreneurs, Nabti believes that AltCity has found an ideal partner in UNICEF.
“They’ve (UNICEF) dealt with some of these challenges for decades, everything from nutrition to children’s rights to education. Marrying this kind of rich expertise with our innovation-focussed programs will help expand and enrich impact on-the-ground.”
The Spectrum of Need
While social and community issues vary across the region, not all countries have to deal with the collateral effects of the Syrian refugee crisis.
For instance, issues about low-income expat workers and lifestyle/health behaviors appear to have more prevalence in the Arab Gulf countries versus Lebanon or Jordan.
Former bankers, Katharine Budd and Ian Dillon, saw an opportunity to disrupt the traditional financial services space with a user-friendly take on a remittance product.
Remittances from the Arab Gulf nations amount to over $100 billion annually.
According to the founders, there is still a vast proportion of “unbanked” individuals in the region, many of whom represent a viable market for “branchless, online solutions.”
“Virtually every one of these people has a smartphone and is relatively savvy with using a variety of applications on it,” shares Dillon.
“Yet, while most of us rely on on-demand solutions for everything from taxis to take-out, no one was catering to their need for a safe, secure and swift way to send money back to their home countries,” he explains.
“It was almost as if, there was an inherent assumption that this is a consumer segment that didn’t require too much thought or technology to allow for convenience, and that these customers exclusively prefer a brick and mortar set-up.”
According to Dillon, none of the exchange houses they talked to had an app or thought that this clientele needed an app.
“In fact, they were not given the same amount of importance as a mainstream consumer just because their time isn’t valued and no one has taken the effort to understand them as a consumer,” he adds. “One of them told us, why do you want to bother creating an app for illiterate people? Here’s a fact though…these people are literate when it comes to smartphones and when it comes to understanding an exchange rate and getting the most value for their money. Never underestimate a consumer.”
Despite the lack of a tech background and heavy skepticism from some of the existing players, the duo launched their startup NOWMoney in 2016.
The fintech startup is aimed squarely at offering low-income expatriate workers a cutting-edge mobile banking solution for their banking and remittance requirements.
The young social enterprise has been scooping a series of awards in the past few months, including the Financial Inclusion award at the Innovate Finance Global Summit in April 2017.
Currently running pilot versions for workers at five organizations in the UAE, NOWMoney plans to expand across the GCC in the coming year.
In Search of Patient Capital
Global figures for impact investing paint a promising picture of this fast-growing asset class.
The 2017 Impact Investor Survey conducted by the Global Impact Investing Network (GIIN) revealed that more than 208 impact investing organizations currently manage $114 billion in assets.
The largest sectors with commitments to increased capital allocations are housing, financial services, food and agriculture, energy and healthcare.
Although impact investing has gone mainstream worldwide, welcoming an expanding range of actors and advocates from niche investment funds to traditional finance institutions, in the region, it is still the mainstay of a select few “savvy investors.” NOWMoney, for example, sourced their initial $500,000 investment from a private donor in June 2016, versus a venture capital firm or a bank.
“In the region, there are some very enlightened investors, including a growing cadre of younger and first-time investors who are looking to be a part of shaping a more responsible economy and inclusive society,” observes Shainoor Khoja, founder of Thrive, a brand new social enterprise catering to the “silver economy” i.e. senior citizens.
“They want to put their money to good use, not just in terms of realizing individual returns but also creating societal change,” adds Khoja, who is also the former MD of Roshan’s award-winning CSR program.
Khoja notes that the growing interest in impact investing can be attributed to the efforts of many investment education groups and platforms such as Women’s Angel Investing Network (WAIN), WOMENA, and VentureSouq.
“In the past, such groups were able to raise probably around $100,000. Today, they can easily secure at least a million, which shows that both investor appetite and confidence is growing.”
The exponential growth of social enterprise, of the likes witnessed by on-demand darlings like AirBnB and Uber, necessitates the exponential growth of impact investing.
More players from the private sector need to step up and put money on the table towards social enterprises, recognizing that there is a market demand and a higher purpose.