What is a social enterprise?

A social enterprise uses market-based strategies to achieve a social purpose. The main goal of these organizations is not maximizing shareholder value. Instead, they use retained earnings (profits) to further their social aims.

There are a variety of ways they can accomplish this. The generated profits can be applied to meeting the targeted social need. Alternatively, the commercial operation of the business may directly further the organization’s aims.

A key advantage of a social enterprise is that the owners are not allowed a financial return on their investments. For most commercial enterprises, the investors are looking for receiving up to 20% of the profits. By eliminating this cost of generating monetary shareholder value social enterprises can provide services at a price point that can meet otherwise unreachable social goals.

Social Enterprise, Social Capital, and Co-operative Businesses

Very intriguing ideas…

Particularly if the "social capital" or "social business" concepts are not exclusively tied to a co-operative business structure. To take a local example, a private business such as Flatlander Chocolate is very much a social enterprise, from Dan Schreiber's commitment to buying fair trade and organic cacao beans, to his ideas for setting up a community garden at his chocolate factory etc. And there are other models too, such as not-for-profits, "community-supported" enterprises, and even "private clubs" that have explicit social missions and are dedicated to contributing to a healthy, local food system (the nub of our social capital).

Financial capital is critical to growing operations like this that are committed to defining and growing our social capital. So if the objective could be defined more broadly than providing capital "to expand the co-operative economy," I think it could be a much stronger and more flexible force for change. I certainly think that we could use many more co-operative businesses than we have, but I also think that we should be open to supporting alternative business models or structures that can also be made to work to grow our social capital in central Illinois.

Credit Unions Start Advertising...

Article in the New York Times about why public outrage against the banks makes this a good time for the credit unions to start promoting their unique ownership structure.

Illinois Institute for Rural Affairs

http://www.iira.org/

They are doing great work with rural development. They are now moving into cooperative development in both ag, foods and energy. They might be a great information and resource broker for all the things we are looking to do.

Another cooperative financing arm

Ok... what?! The rural electric coops have a cooperative bank!

http://www.nrucfc.org/

That is really interesting to know.

So Jacqueline knows of the bank out of Minnesota that is attempting to grow, there are credit unions nationwide in virtually every county of the US, and the capital intensive rural electric coops have a bank (that I only just heard about).

It is, to me at least, becoming abundantly clear that the only thing holding cooperative businesses back is... run-dun-dunnnnnn! COOPERATION! Though cooperation across sectors, but nonetheless!

Ideas for a Social Capital Market

A credit union could create a series of funds where investors could place capital.

An investment committee would oversee the deployment of these funds according to established criteria:

• Business case for the entity to judge repayment risk
• Entity's expressed ends. What sort of social mission does the organization have. Do they fit in with the investor's wishes?
• Organization's social business plan - How do they intend to fulfill their mission. What is the risk of not achieving their aims

To receive capital from the fund, an organization would have to commit to reporting social returns on investment.

Organization A has a mission to provide housing for low-income residents. They received $20,000 from the fund. How many people did they house using that investment?