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Social Business Focus

By Juliette Charrier
Intern at the Grameen Credit Agricole Foundation


When one enters a Social Impact Foundation, you do so with lots of misconceptions and idealism. At least that was my case. I would now finally discover the recipe of the qualitative and quantitative impact to find models that are meaningful, efficient to combat poverty, financially successful and that align the interests of all actors in the value chain. Cold water on my hopes! Nothing is ever all right or all wrong. It is difficult to have an impact and we have found no single recipe for success. However, gradually we realise it is possible to contribute to the economic development of emerging countries, support companies that create economic opportunities, that remunerate in an inclusive and equitable way their stakeholders.

First of all, disillusionment: have we been lied to for 10 years? Can social business companies really balance profitable growth with social impact? When we first look at our portfolio, we would be tempted to give up and ask ourselves whether we are creating a financial and social speculative bubble on the concept of social business by saying it works although the figures are not forthcoming. Despair and loss of confidence.

Then, by digging into the subjects and by understanding each social business company, we realise that there are strong and concrete improvements, sometimes operational, sometimes social, sometimes both. Except in extreme cases, there are tangible results. It is reassuring, exciting! Renewed hope towards Social Business companies.

There are certainly results, but still well below expectations. We think about the means to be employed, we realise that this is a long-term process and that we must be properly coached. We also conclude that there are as many situations in social business companies as variables to collect to ensure their success. But are we the only ones to face such situation?

Phase shift: some impact funds indicate they have real social impact and market yields: how is that possible? Two lessons emerge: 1) the concept of impact investing is very broad and ranges from "investments that do no harm, to investments that are seeking at any price to do good". 2) The Grameen Crédit Agricole Foundation funds more social start-ups than companies or social programmes. The Foundation thus belongs to the "impact investing" sector, in the "social business" section, and more specifically in the Social Impact Seed-Capital Risk subsection, due to its low average tickets and the entrepreneurial nature of the companies invested. When we realise that Venture Capital funds rely on a "unicorn" company to achieve the added value that will absorb the costs of a dozen less successful investments, while creating, when possible, returns to remunerate managers and shareholders, all this in flourishing and developed economies ... we measure the challenge faced by Seed Social Business Funds in emerging countries.

Is it a problem of financial means? Do investment funds invest too little to really enable social business companies to develop, be structured and create a business? According to the GIIN report, internal return rates (IRRs) do not vary according to the total size of the funds but may vary according to the size of the investments.

Is it a problem of extra financial means? The isolation of entrepreneurs and the lack of qualified support? How to draw lessons with investments as diverse in terms of leadership profile, market segment, socio-economic context, value added of the company, targeted beneficiaries etc?

And even if it all works, are the social business companies the best way to achieve impact? Would it not be better to try to change the methods and practices of large groups already resilient in emerging countries to have a real global impact? Integrating new stakeholders such as new customer and supplier segments could ultimately have a longer reach.

In the end, we grow up, by realising that the goal is not to have the most profitable social impact but to contribute to the economic development of emerging countries, by integrating into value chains previously excluded actors, by creating jobs and giving access to essential goods to as many people as possible. The key is that we find ourselves in a stimulating environment, where situations evolve rapidly, where we fumble in search of successful mechanisms, where we try to strengthen social business companies through fruitful partnerships, to achieve financial balance and maximize social utility, and where innovation is everywhere.

News from the front

 

The Grameen Crédit Agricole Foundation draws lessons from its investor experience: discover the White Paper on Social Business

After eight years of investing in social businesses, the Grameen Crédit Agricole Foundation wished to draw lessons from its experience and share them...! It thus sets out the challenges that these social business companies face. The Foundation puts forward proposals to strengthen this promising model.

 

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