+ Fostering Social Entrepreneurship – an Imperative for Inclusive Growth - CII Blog

Economic empowerment and inclusive growth are at the core of all nation building efforts. In the Indian context, the social entrepreneurship ecosystem is diverse and offers a plethora of opportunities. 

Social entrepreneurship refers to business ventures that aim to fulfill societal needs and contribute directly to solutions addressing specific weaker sections of the community or sustainability requirements. Identifying needs and requirements and then devising appropriate goods and services through business models requires innovative thinking and can deliver high social and business returns.

 About 65% of India’s population lives in rural areas. Amid such a scenario, social entrepreneurship is the key for transforming the economic landscape of India by directly touching the grassroots. Government agencies, the corporate sector and non-profits are working to bridge the urban-rural divide in the country based on the concepts of social entrepreneurship. 

The untapped low-income markets, such as microfinance, technological interventions in agriculture and commerce, basic education, skill education, digital connectivity and healthcare, can be effectively explored as a part of this endeavour. 

However, social entrepreneurship comes with its own set of challenges. According to a CII-KPMG survey, lack of access to public facilities and services, gaps in availability of grant funding, taxation complexity, lack of recognition of social enterprises by financial institutions, issues with capital (debt/equity), and lack of skilled human resources are some of the roadblocks encountered by social entrepreneurs

The proposed solutions and interventions to mitigate these challenges have also been highlighted in the survey report: 

Capacity Building

Government institutions and philanthropic organizations can consider contributing to overhead costs, and providing basic infrastructure and a cohesive environment for social startups to thrive. This way, social entrepreneurs will be able to focus more on the strategic needs of the business, such as hiring skilled human resources.

Raising Funds

Social stock exchanges can be used for raising equity efficiently. This will also ensure a better visibility for entrepreneurs among potential investors. 

Access to Public Facilities and Services 

This challenge can be viewed through the prism of three main issues- lack of access to government database, lack of a uniform platform or portal from where the services can be accessed and stringent prerequisites for bidding on Government tenders.

The first two issues can be addressed by the creation of a dedicated (online) portal, meant exclusively for social entrepreneurs and other key stakeholders, on the lines of the GeM portal and the Startup India Hub. 

Also, there is a need to further develop and deploy single-source open data policy. This will enable social entrepreneurs to gain easy access to open data for use in social projects. 

The third bottleneck could be tackled by making amendments in the bidding rules for Government tenders to ensure a greater participation by social enterprises. 

Grant Funding

Foreign Contribution Regulation Act (FCRA): 

Experts believe foreign funding could play a crucial role in boosting the Indian social entrepreneurship landscape. Amendments in this law would allow other FCRA-approved non-profit organizations to continue to have a greater access to international funding. 

Social Venture Funds

Experts emphasize upon the need to lower the minimum amount of investment, from INR 1 crore to INR 1 lakh. This would allow people from a range of financial backgrounds to invest in such funds. 

CSR

The report suggests a modification in the existing CSR laws so that CSR funds can be deployed for profit-making by social enterprises. 

Taxation

Regarding Section 12 A, the report suggests an increase in the percentage of exceeding income, from 20% to 30 – 40%, as it would free up funds for further investments 

Building awareness for financial institutions 

The report further suggests holding awareness sessions for big financial institutions, informing them about social enterprises and their life-cycles. 

A special low-interest loan category in banks for providing financial assistance to social enterprises, especially for those who are in the nascent stage of their growth cycle, was another key recommendation. 

Building a strong social entrepreneurial ecosystem would be a stepping stone towards creating a truly ‘Aatmanirbhar Bharat’ and a socio-economically empowered India. This will go a long way in empowering communities in the hinterlands, as well as urban areas, by the means of skill-building and job creation, and thereby enabling them to achieve financial independence. A sound policy ecosystem and effective partnerships of all key stakeholders can help to realise the true potential of an inclusive nation. 

Click here to read the full report on ‘The Social Entrepreneurship Landscape in India and the Way Ahead’