Government's role to breed Social entrepreneurs

[Disclaimer: The Goal of this blog it to empower the policy maker with an idea on which the policies can be framed. This blog does not provide a set of policies because every state has economic and cultural differences and hence, different set of needs. This blog, although can provide some case snippets to ponder upon.]

Let us start with a basic background of why a state needs entrepreneurs and why is there an alarming need to breed social entrepreneurs.

Why entrepreneurs?

With increasing population and education, while the society is creating job seekers, it is important to create job providers. If everybody becomes job seekers, a society becomes increasingly dependent on foreign investments. To encourage a self-sustenance model, the efficient solution is to breed entrepreneurs in society. When you have entrepreneurs, you have people who can contribute economically.

Why social entrepreneurs? - We need people who can contribute socially as well.

Government's job is to make sure that all social issues are addressed.

In any country, a centralized Government cannot do everything. It is important to decentralize governance. Hence, Government should recognize individuals to provide benefits and take its programs forward. Through this recognition process, the individual gets a job. Such individuals are very important as they work together and come up with innovative solutions at ground level. They create a sustainable model where they provide jobs to pull in other people. Therefore, it is important for Government to consider Social enterprises as its extended arm.

Challenges

According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. Decisions to fund social enterprises are difficult, as profits need to be measured based on social impact and sustainability rather than capital returns. Hence, Governments face a huge challenge to efficiently spend taxpayers' money here.

Let us take an example: An entrepreneur starts a university for under-privileged children and aims to create 200 quality students and another entrepreneur introduces a clinic that aims to provide healthcare solutions to treat 1000 patients every year. Can you judge who creates a better impact to society?

Government cannot measure social impact using a single set of parameters. A  Triple Bottom Line model can be a recommended solution:

[Image: Adopted from the 2002 University of Michigan Sustainability assessment]

The Government should filter out ideas that are in line with its agenda. For example, In a country like India, a social venture that comes up with a solution that addresses water sanitation problems will have a much bigger impact than a venture that aims to revolutionize car parking through  automated car parking detection system, because water sanitation is on the top of the list of agendas by the Government.

When the Government creates a hard coded policy from a monetary and social impact standpoint, it may create a room for people to misuse the fund (by concentrating more on numbers to present than to fruitfully utilize towards society).  The Government should come up with an algorithm to derive a score based on the following economic-social correlation:

1. The sector of society (education, healthcare, transport etc.)

2. Initial investment required(seed money)

3. Other supplements (like land, resources)

4. Number of employment opportunities that the venture can create.

and so on.

The final score should be used as a basis for budget allocation.

Additionally, Government should also allocate a loss margin of 5-10% so that the venture can cover up for short term losses.

The Government should have an unbiased panel that must be responsible to overlook all the activities to fund social ventures.

The panel should have the following features:

1. Should have a credible representative from each social sector.

2. The panel should perform frequent audits to ensure the funds are used efficiently.

3. The rating decisions for a venture of a particular state should not be done by a panel member belonging to the same state (to ensure that the rating is not biased).

4. The panel must be updated with the latest trends and Government's roles and priorities (through frequent workshops).

5. Any infringement of integrity should lead to immediate removal of the representative from the panel.