The Social Enterprise

Business Model
 What is a Social Enterprise?

A social enterprise refers to a business with

certain social objectives as its primary goal while
using a commercial structure to run the
organization.

Social enterprises usually attempt to make a

strong societal impact while maximizing their
profit as well, which is then used to fund their
social programs.
 What is a social enterprise?

• A social enterprise is defined as a

business model with the objective of
solving social issues and problems
while providing goods and services.
• A social enterprise is driven by a
cause or purpose as well as the need to
address an issue or problem.
• Some categories of social enterprises
include trading enterprises, financial
institutions, community
organizations, and NGOs and
charities.
Understanding Social Enterprises

Social enterprises can be both non-profit

or for-profit organizations and may take
the forms of many different types of
organizations.
Two main goals – the first is to
generate profits, while the second
is to reach its social, cultural,
economic, or environmental
outcomes outlined in the
company’s mission.
Profit generation is still extremely
important to social enterprises, as
earnings are important to sustain the
livelihood of the venture but the important
difference is that instead of using its profit
to distribute among shareholders, the
profits are used to reinvest in the
enterprise to help it achieve its social
mission.
 Social Enterprise and Employment
An important differentiator of social enterprises is the fact
that they often employ individuals coming from at-risk
backgrounds and those from disadvantaged
communities, such as visible minorities or indigenous
groups. Often, such groups face discrimination and
prejudice in society historically.
The goal of training and
employing such individuals is to
allow them to earn a living wage
while enabling them to create
self-sufficiency and rely less on
government payouts and the
social safety net.
 Types of Social Enterprises

Social enterprises are usually categorized into

four main categories, although they are
constantly evolving and may change over time
as new areas are created.
 1. Trading Enterprises

Trading enterprises refer to cooperatives,

collectives, and other organizations that are
worker- or employee-owned.

They vary significantly in terms of size and

organizational structure, but their joint ownership
structure allows a higher degree of economic
resiliency in comparison with other forms of
enterprises.
2. Financial Institutions
Some types of financial institutions also
fall into the social enterprise category,
including organizations such as credit
unions, cooperative banks, and revolving
loan funds, which are membership-owned.
Credit unions, for example, are
structured so that members
automatically become owners
when they deposit money into the
union as a customer and the credit
union uses the deposited money to
help other members.
Credit unions offer higher savings rates, low
interest rates, and focus less on making
profits and more on helping its respective
members.

Cooperative banks are another institution –

which, similar to traditional banks – takes
deposits and provides loans to its customers
but operates on a cooperative basis meaning
that they are owned by their customers.
3. Community Organizations
Community organizations refer to
registered social enterprises, which
may include community enterprises,
community centers, housing
cooperatives, community interest
organizations, certain smaller shops,
and sports clubs.
4. Non-Governmental Organizations (NGOs) and
Charities

NGOs and charities operate on both a large and

small scales and are usually established to support
a specific social, environmental, or political goal.

The profits are used to social or environmental

aims of the organization or to provide salaries for
people who provide free services to specific groups
of people.
7 Principles of Social
Enterprise
• Motivated by a cause

A social enterprise does not aim to

maximize profit but rather solve or
overcome certain issues on health,
education, technology access,
environment or poverty.
• Financial and economic sustainability in the
long term.
Since the purpose is to solve problem, the
enterprise has to ensure that it can attain financial
stability in the long term.

It should be financially stable to sustain its

worthwile projects.
• No dividend for inventors

Since a social enterprise do not seek to

maximize profit, inventors expect a return only
on the actual amount they have put in.
• Profits generated remain

When investments are returned to the

investors, whatever profits generated remain
in the company for expansion and
improvement of operations.
• Sensitive to gender and environmental
issues
The social enterprise operates ethically by
ensuring no gender discrimination and
providing eco-friendly products and services.
• Employees are treated fairly

The workforce is well-taken care of through

fair wages and benefits and better working
conditions.
• Joy in every task

A social enterprise that strives to work for a cause

does it with pleasure.
Social Business Models

A social business model is a framework that a

social enterprise follows to fulfil its mission and
maintain its financial stability.
9 Types of Social Business
Models
• Entrepreneur Support Model

The social enterprise provides support services to

entrepreneurs who would like to embark on their
own endeavors. Support services like like
consulting, training and other technical services are
provided to help clients grow their business.
• Market Intermediary Model
The social enterprise using this model generally
guides those struggling to gain markets to sell their
products. It buys the products of the clients and
sells them in other markets at a mark up.
• Employment Model

Social enterprise that adopts this model help clients

look for jobs and provide them with training for
these jobs.
• Fee-for-service Model

This is the most common business model used by

social enterprises. They charge clients with a
certain fee for services rendered like hospitals,
schools and museums.
• Low-income Client Model

In this particular models, social enterprises charge

fees but they concentrate on low-income
customers.
• Cooperative Model
This is also a very popular social business model. The
cooperative charges a membership fee and provides a
number of services to members, who also run its
operations. The members combine their resources,
incuding revenue, to purchase goods and services,
provide credit (loan), and others.
• Market Linkage Model
This model connects their clients to markets where
they can sell their products. The social enterprise
acts as a broker to help a small producer access a
bigger market. Thus, the social enterprise facilitates
the producer-customer relationship.
• Service Subsidization Model

Social enterprises using this model sells products and

services and use the proceeds to subsidize their
social services.
• Organizational Support Model
In this model, a social enterprise sells products and
services and the revenue generated is used to fund an
organization which runs the program that the social
enterprise supports.
The main goal of a social entrepreneur is to
implement widespread improvements in the society.
However, a social entrepreneur must still be
financially capable to succeed in his or her cause. A
social enterprise can achieve its goals through
different methods of income generation.
Methods of Income Generation
• Fee-for-service

Social enterprises charge fees to clients for services

rendered such as museums, rural clinics and
microfinance services.
• Products

Social enterprises sells products and earn income

through mark up or commission from reselling of
product.
• Services

Skills or expertise can be offered by social

enterprises in exchange for a fee.
• Membership dues

Social enterprises which operate through

membership collect fees in exchange for newsletters,
discounts, insurance, and subsidized trainings,
among other services.
• Tangible Assets

Social enterprises can generate income by renting or

leasing their idle offices and vehicles to other
nonprofit organizations.
• Intangible Assets

Income is generated by leveraging intangible assets

like reputation, relationships or brand.
• Investment

Income can be taken from interests on savings

deposits, bonds, etc.
I. EXERCISES

Exercise 1.
A. I. SIMPLE RECALL: Identify the following terms.
_____________________ 1. It is a business model with the objective of solving social
issues and problems, while providing goods and services.
_____________________ 2. These are social enterprises which provide loans and other
investment facilities to small businesses and start up social enterprises.
_____________________ 3. This social enterprise helps struggling business to access
markets to sell their products.

_____________________ 4. This is the most common business model wherein social

enterprises charge clients a certain fee for service like hospitals, schools and museums.

_____________________ 5. It is defined as a framework that a social enterprise follows to

fulfill its mission and maintain its financial stability.
_____________________ 6. This is a social business model wherein a
social enterprise charges membership fees and provides a number of
services to its members, who also run its operation.

_____________________ 7. Microfinance is an example of this model.

_____________________ 8. This is a method of generating income by

renting or leasing idle offices or vehicles to other nonprofit organization.
_____________________ 9. This model connects customers to markets
where they can sell their products.

_____________________ 10. They are financial institutions that assist in

providing a savings and loan facility to the inhabitants of a community.
Exercise 2. Answer the following question(s) comprehensively.

1. Should the government support the advocacy of social enterprise here in the Philippines? Explain.
2. Give at least 5 examples of Social Enterprise in the Philippines

Exercise 3. What I can do.

1. Prepare a proposed personal action plan to assist an existing small business enterprise
to practice ethics and social responsibility in their business operation.

2. Read about Gawad Kalinga Foundation. What impact do the social enterprise of Gawad Kalinga have on Filipino communities?
THANK YOU