The democratization of social entrepreneurship in Nepal

Twenty year has passed since liberalization of the Nepali economy. Breaking barriers for private sector have supported thousands of household to graduate to the middle class, but at the same time socio-economic inequality have increased and millions of citizen fighting for day to day basic necessities of life has been  largely ignored. Judging by social and economic challenges faced by our country in the past twenty years, it is certain that the time has come for `the democratization of social entrepreneurship in Nepal. Social entrepreneurship is defined as- an innovative entrepreneurial approaches to tackle most pressing social and environmental challenges of the society. Rather than waiting for the government to meet its mandate and fix the problem. Social entrepreneur find out the unmet need, address the need by reinventing the existing system, scale the solution and help catalyze the solution in a different geographic settings. They generate social values as well as equitable financial returns.

In Nepal, approximately 55 percent of the population lives less the $1.25 dollar a day.
 Majority of the Nepali citizens are deprived of basic necessities like adequate access to finance, healthcare, education, alternative energy, drinking water, and food security. Nepal provides enormous opportunity for social entrepreneurs to use their intellectual capital, business acumen, and a passion to make a difference to tackle these challenges, at the same time making marginal profit. Addressing the challenges using economically self-sustaining business models will not just deliver durable solutions but will also support job creation and income generation.

Despite Nepal’s untapped entrepreneurial potential enlistment in the social entrepreneurship space has been very discouraging. Nepal has also failed to capitalize on business tools and technology proven and test by our southern neighbor, which has emerged as a hotbed for sustainable, scalable and frugal innovation. Cumbersome regulations and never ending political bickering has created an environment where rent seeking entrepreneurism (those that fuel consumerisms) are much more appealing then social and productive entrepreneurism (those that supports economic growth) for aspiring and existing entrepreneurs. Great extent of work is needed to democratize social entrepreneurship in Nepal and cross sector collaborative effort will be instrumental to kindle the   momentum. Private sector and Non-government organization (NGOs) needs to synergize to build social entrepreneurship supporting eco-system. The objective of this cross section collaboration should be to actually build capacity and generate income among the deprived population, not simply extract wealth in the form of increasing consumer spending.

Private sectors should not treat social entrepreneurship merely as a corporate social responsibility stint or a deprived sector lending obligation. Serving the low income communities should not be seen as burden but rather as an economic opportunity. Private sector needs to embed inclusive capitalism as a part their core business strategy. Serving the customers in the uncharted areas will require businesses to reinvent their existing model around new product, distribution channels and pricing mechanism. Currently, private sector are reluctant to foray in the rural areas, primary because of high sunk cost ,lack of  relevant human resources and various local level political risk .There is a possibilities for the private sector to hedge the   cost and risks associated by leveraging  the existing  relationship  with local partners and communities of a NGOs operating in the area . For example, If a commercial bank headquartered in Kathmandu wants to increase the outreach of its services in the semi urban and rural in the far west, but is apprehensive of the about the capital expenditure cost it will incur, then the bank could partner with a local NGO working in the area of financial inclusion to deliver its product and services. The local NGO will act as a business correspondent for the commercial bank. Business Correspondents,  will be the intermediary equipped with “mini ATMs”   helping customers in rural areas to access formal  banking services such as cash deposits, withdrawals, remittances and balance enquiries from anywhere in the far flung  areas, similar to the services provided by  ATM facilities available to customers in urban areas. The partnership between the commercial bank and the financial inclusion focused NGO generate mutual competitive advantage. Commercial bank gets access to potentially profitable enterprise opportunities where as the NGOs increases socially benefited outcome of improving financial inclusiveness. More than 50000 NGOs and 50 % mobile phone penetration in the country gives a huge opportunity for the private sector to leverage NGOs and technology as a cost effective platform to deliver essential services like education, healthcare, and banking to the underserved population .NGOs and technology platform can also serve as an intermediary for rural entrepreneur and farmers to find access to market to less there produce.

To their credit, in recent years some NGOs, working in the area of sustainable private sector  development  have worked hard to adapt social entrepreneurships as their operating model and have explore the opportunity to partner with private sector to  develop self-sustaining but yet scalable business  model  to fulfill their organization objective. However, many NGOs has limited the democratization of social entrepreneurships to churning out glossy report and expense workshops often with a title like Value Chain Analysis of a certain product or/ and Role of inclusiveness business in the economic development of Nepal. One thing is for certain if the “business as usual” continues in the NGOs then many will run out of donors funding. In the wake of the global financial crisis, many large donor countries are facing fiscal austerity and are rethinking their approaches to foreign aid. Increasing number of donor countries like US, UK and Germany have started pilot programs that pivot their assistant to developing countries from grants/aid to Impact investments in social enterprises. Also in recent years, many social impact measuring tools like Randomize Control Trial and Global Impact Investing Reporting Standards has been materialized, these tools have the capacity and capability to penetrate well written annual reports and spreadsheets to separate facts from fiction.

 For NGOs to be compatible and synchronize with the continuously changing foreign aid and global capitalism landscape, they need to play a vital role as a bridge that combine best of markets with best of traditional aid. They need to build a strong eco-system that encourages entrepreneurial culture by leveraging their local embeddness, social infrastructure and expertise. NGOs’ source of capital is primary philanthropy; they have little or no obligation to return their capital to the donor. This nature   of its capital allow NGO’s to have  more risk appetite to experiment with social entrepreneurialism in high capital expenditure remote areas compared to commercial investors. NGOs should support market development and seed stage innovation, which could later be scaled using private sector capital and business skills.

For the social entrepreneurship to democratize in Nepal, synergy needs to create between the private sector and the non-for profit sector. Leader of both the sector needs to move beyond the obsolete argument of Market vs.  Aid. Converge between these two sectors in the coming years could help support inclusive economic development of the country.