Social enterprises have been touted as the best thing that happened to the world in a long time. Many of its proponents put forward an ambitious agenda of creating jobs, providing training and developing local services in areas of serious and long-standing deprivation, while holding out the prospect of financial viability rather than grant dependency. Without doubt that the momentum in the social enterprise “industry” has accelerated significantly (I have to add here that yours truly jumped the bandwagon two years ago, and has never been happier!!). But is this growth and attention justified? Are communities and their local economies that are supposed to be the main beneficiaries of these businesses benefitting?

I think one of the issues with the term “social enterprise” is that there are inconsistencies in how people define it. And more importantly, how such organizations in the overarching context of privatization and marketization survive and operate. Are these organizations really a radical alternative model for doing business in a social and ethical way?

The present discourse and debate around the microfinance industry is a case in point. Once the poster child of the social enterprise world, the microfinance industry has come about to signify everything that’s gone wrong with the social enterprise trying to be commercially viable. Why is that? Is it because enterprises that have a social agenda can’t be seen as making profits? Or is it that they are now a force to reckon with and the rest of the market forces are just coming to terms with this new force majeure?

Having known the proponents and key players of both Grameen Bank and SKS Microfinance for a while now, I know for a fact that their intent was never in doubt. Both Prof. Yunus and Vikram Akula are visionaries who dared to dream and give a platform for their dreams to bear fruit. And they proved C K Prahalad’s theory that there is indeed a huge opportunity to do business at the base of the pyramid. So what went wrong?

I inherently believe that any enterprise, social or otherwise cannot be impactful and do justice to its stakeholders if it doesn’t become sustainable. Financially, and operationally. But its also true that this new age financially viable social enterprise is seriously altering existing consensual and sympathetic relationships between the for-profit and not-for-profit service providers. Many people, especially the NGO sector and the polity view this as an encroachment of private sector companies into services previously delivered by the voluntary and community sector.

But I also believe that its important for social enterprises delivering value to a certain community and stakeholder not to don the halo of a messiah out to eradicate all evils that are prevelant in our society in one sweep. The microfinance industry has done a lot of good in the markets they have operated. But their marketing pitch has been that of “eradicating poverty”. I do believe it was this mismatch between what they do on ground (which is significant and highly impactful in providing those with no access to any finance to become self-reliant) and what they project and are perceived. And when it comes to owning an important stakeholder, which is the “poor”, the biggest owner of them all, especially in a shaky democracy like we have in the Indian sub-continent, the politicians feel threatened. And that really has been the reason why the wings of an increasingly mature microfinance industry have been cut unceremoniously.

It’s a lesson for all social enterprises that walk this tight rope between marketization and the intent to create social impact. We need to be credible and we need to articulate what we do and position our products and services without trying to over emphasize its impact on society . It’s a classic marketing lesson that we were taught in B-schools that have acquired a new meaning in the context of social business. Also, it’s a sign that the social enterprise model is maturing. We are moving on from fledging entities led by the heroic entrepreneurial individual who performs miracles on a shoestring budget and against insurmountable odds and reaching out for an organization built with solid citizens, well-educated professionals that could run important, properly funded local enterprises efficiently.

In 20 years time, when most for-profit businesses as well as voluntary groups have a strong social enterprise subsidiary, our kids would be learning about these times in case studies of how they fuelled the paradigm change!