Social Enterprise challenges the assumption that creating a positive social impact and fulfilling a social mission are inherently incompatible with generating profit. These hybrid businesses borrow certain practices and principles from both the non-profit and for-profit sectors and then add complementary innovations. While the most talked about innovations are often the products and services themselves, the business models and financial mechanisms that allow those products to succeed in their respective markets–often with small profit margins and in underdeveloped environments–are equally ingenious. Simpa Networks provides one example of this. Simpa created a low-cost solar home energy system that has a potential worldwide market of 1.6 billion people who lack access to electricity. Still, cost-effectiveness in the long term (relative to the cost of kerosene over the 10 year life of the product) does not always indicate affordability, particularly when your core customers make less than $10/day. The solution? Simpa sells its product through a Progressive Purchase model that allows households to “make a series of payments, each of which unlocks the solar home system for a paid amount of energy consumption.” Then, “once the consumer has fully paid the total purchase price of the product, full functionality is restored and the product is permanently unlocked.”
The impact of access to electricity is far reaching and, as you read this on your computer, it is probably not difficult comprehend. Its effects touch almost every aspect of life, from health, to education and gender equality [HDR ’07/’08 Access to Energy and Human Development]. Still, when Carolyn and I started our scouting efforts in Istanbul, we were immediately reminded that the life cycle of a social business–from idea, to implementation, scale and exit–and the existence of a social enterprise sector, more generally, (even if nascent in its development) is inseparable from its predecessors. It was too early to focus on the impact of individual businesses. We needed to trace back, not only to those practices and principles that were borrowed from the for-profit and non-profit sectors in Turkey, but also to the government policies, public participation, and cultural norms, or “ways of doing business,” that shaped these two sectors. By understanding the non-profit and commercial environments in Istanbul we have begun to understand the potential and challenges for social enterprises in Turkey. We have also gained a better understanding of some of the factors motivating the social enterprises we have come across thus far.
My next two posts will comment on some of the defining aspects of Istanbul’s social and commercial sectors. As a lead up to those posts, here are some interesting facts and figures:
The Social Sector in Turkey…
- Non-profit foundations, associations and for-profit companies are taxed the same way.
- Individual donations account for 18% of the total financial resources for civil society organizations.
- 4.5% of citizens are active members of social organizations.
- 2.5% of citizens volunteer for social organizations.
- Two organizations (that we know of so far) are challenging the way that Turkish citizens engage with one another and volunteer. More to come on Zumbara‘s time banking concept and the Lean Start-Up‘s ongoing research.
Entrepreneurship in Turkey…
- Roughly 9 out of every 100 adults are entrepreneurs.
- The business start-up rate is 3.69%, relative to an average 6.7% in comparable economies.
- 75% of the Turkish adults feel that starting a business is a good career choice.
- Roughly 60% of Turkish entrepreneurs are opportunity driven, while 40% are necessity driven.
[These figures were obtained from the 2010 Global Entrepreneurship Monitor’s “Entrepreneurship in Turkey” report]
Commercial businesses, non-profit organizations, and social enterprises in Turkey all face some critical challenges. Still, perhaps by understanding the non-profit and commercial contexts (and how those entities work around challenges) we will better understand the full potential for social enterprise in Istanbul and around the country.