How Social Entrepreneurship Beats Charity Work

Charities and social enterprises have helped improve lives of millions of people. Both are anchored on humanity and compassion, but when it comes to sustainability and practicality, the latter trumps the former. Here is a list of reasons why.

Charities rely on donations, social enterprises don’t.

According to startup expert and entrepreneur Joe Jonson, continuous donations are the lifeblood of charities. Without the help of thousands of individuals or the generous help of wealthy persons, charities are unable to help anybody.

On the other hand, social enterprises are built on a business model where profit is essential while keeping a strong commitment to its raison d'être of uplifting communities.

Social enterprises bank on continuity.

Because profit is not always the main goal of social entrepreneurs, they make sure that when they exit the scene, their beneficiaries will still continue to improve their lives because of what had been laid down by the social enterprise.

For example, Rags2Riches, a prominent social enterprise in the Philippines, enabled women in Payatas to sustain their livelihood by eliminating the middlemen suppliers who rack up fabric prices, and then connecting the women directly to retailers, giving them direct ownership of the production. The same goes for popular social enterprises like Human Nature and the GK Enchanted Farm.

A charity simply redistributes wealth. A social enterprise creates it.

According to Jonson, charities are structured in such a way that they funnel wealth from those who have to those who have less. On the other hand, social enterprises avoid being dependent on donations by relying on self-generated funds to produce social impact that is sustainable.

A social enterprise treats the underprivileged as partners.  

Commonly, a social enterprise partners with the underprivileged to arm them with the connections and knowledge to create their goods. These partners are able to help the social enterprise in return because of the profit they deliver for the enterprise. This creates a sense of ownership and responsibility within the organization. 

In contrast to this, charities usually see the underprivileged as beneficiaries. There is more of a client-patron relationship at play between the benefactors and beneficiaries.

People prefer to support businesses that give back.

If you buy a shampoo bar because it reduces plastic pollution, or purchase extra room sprays for you and your friends because they're organic and have a positive impact on the environment, you are probably among the millions of people who are more willing to spend on products that give back to the people or the environment.

According to a 2013 Nielsen study, there is a growing number of global consumers who are more willing to reward companies that give back to society.

Relying on donors can be restrictive. 

Charitable institutions can sometimes be put in a position where upholding a tenet of their organization could upset a very generous donor. This is why sometimes, the integrity of charity work is compromised.

According to a report by the British Council in the Philippines, social entrepreneurs can avoid this situation by availing of funding from foundations, social impact investors, and microfinance lenders. Prominent among these are the Asian Development Bank, LGT Venture Philanthropy, and Impact Investment Exchange Asia.