Going social

When I first heard about social entrepreneurship, my initial thought was that it was a kind of multi-level marketing scheme — honest-to-goodness.

What I know now is that this category of entrepreneurship has been gaining interest exponentially over the past two decades.

According to a study commissioned by the British Council and supported by United Nations Economic and Social Commission for Asia and the Pacific (Escap) and Yayasan Hasanah, the current estimated number of social enterprises in Malaysia is over 20,000.

‘The State of Social Enterprise in Malaysia’ also includes findings recorded as early as 1998, and charts a significant rise beginning 2014.

So why are there many Malaysians, myself included, still not familiar with this category of entrepreneurship?

Matter of classification

The British Council believes that this may relate to public awareness – or specifically, the lack of it.

It says when it comes to describing social enterprise, there is no single, universal definition.

“In Malaysia, there is also no legal definition of social enterprise.

“Based on our conversations with stakeholders in the sector, we decided on an inclusive approach in identifying social enterprises. For the purposes of our work, we classified social enterprise as business activity that is primarily motivated by social good where profits are reinvested towards a social cause,” it states in opening the study’s chapter on ‘Classifying Social Enterprises’.

In his opening remarks for the British Council’s study, Minister of Entrepreneur Development Datuk Seri Mohd Redzuan Md Yusof acknowledges social entrepreneurship as a growing sector that has the potential to contribute to the socio-economy of the nation.

He also observes that there are many social enterprises that have been actively delivering social values and addressing social and environmental issues in the community.

Still, there are challenges, he adds.

“While they (social enterprises) have delivered significant impact to the community and the environment, there are still many challenges and barriers in their journey to scale and increase their impact.

“One of the biggest hurdles that social enterprises encounter is the lack of a legal definition and recognition of this enterprise as a business entity in Malaysia. This issue has led to many social entrepreneurs operating under a variety of legal forms, which are governed by different acts and regulations,” says Mohd Redzuan.

On April 12, 2019, the Ministry of Entrepreneur Development (MED) launched the ‘Social Enterprise Accreditation Guidelines’ – a step-by-step guide to facilitate social entrepreneurs in getting their accreditation.

In this respect, Mohd Redzuan said accredited social enterprises would be able to enjoy various benefits, albeit subject to certain terms and conditions.

“Meanwhile, those who contribute to such social enterprises are eligible for the tax incentives announced by the Finance Ministry,” he told reporters at the launch.

Specifically, the guidelines cover specific details regarding social enterprises such as the scope and types of social enterprises, the various business models that it can adopt, the benefits of being registered or recognised as a social enterprise, as well as particulars of the criteria set for accreditation.

“This guideline will be reviewed from time to time to ensure that it is relevant, and responds to the needs of social enterprise practitioners,” said Mohd Redzuan then.

It is stated that once accredited, the social enterprises would be listed in a public directory to be made available on MED’s website (www.med.gov.my).

In describing social enterprise, principal consultant for Acute Precision and Studies Research Inc (APSRI), Dar Wong says this field designates to resolve the social problems in financially-sustainable ways in relevance to preserving human culture, dealing with social matters and managing environmental balance.

“A social business does not focus on maximising profits but rather, expand the positive influence to mankind and maintain self-efficient in operation.”

Still, Wong also acknowledges the challenges that come with it.

“The cost of operations has to be reduced in order to help the new start-up companies survive. The end-products and services rendered by social businesses have to be the living needs of the people, or education to be promoted by the government.

Many a time, there are a number of social enterprises operating with good intentions could not survive due to insufficient funds and, to a certain extent, ‘unwelcoming support’ from government agencies,” he points out.

Social Enterprise: Challenges and Opportunities

On challenges, I am revisiting the Minister of Entrepreneur Development’s foreword in the British Council’s study.

In it, Mohd Redzuan says the lack of a legal definition and recognition of social enterprise as a business entity in Malaysia could lead to the lack of institutional and community support available and, in turn, this could contribute to this sector facing difficulties in attracting and retaining quality talents.

“Significant support and resources must be given to train and develop knowledge, capability and also the skills of quality talents in social enterprises. This will help social enterprises grow their business and increase their impact,” he underlines.

The other challenge faced by social enterprises in Malaysia is the lack of access to funding, the minister points out.

He observes that many social enterprises in Malaysia are still funded through charity, foundation work and corporate social responsibility (CSR) programmes.

In this sense, Mohd Redzuan calls for a financing ecosystem that is conducive to accelerating the growth of social enterprises.

“Through the re-establishment of MED in July 2018, we aim to lead the government’s efforts in developing Malaysian social enterprises. Through the National Entrepreneurship Framework, the MED will spearhead the effort to address the challenges that exist within the social entrepreneurship sector.

“The ministry will formulate and execute the required strategies to empower social enterprises to drive and deliver long term benefits for the society and environment,” he explains.

Mohd Redzuan states that to achieve this, his ministry would be working closely with all the social entrepreneurship stakeholders and industry players to create an integrated social entrepreneurship ecosystem.

In commending British Council for coming up with the study, the minister regards the research as complementing the government’s effort in formulating a holistic social entrepreneurship development policy that is inclusive and competitive, set to drive the development of the B40 (Bottom 40 Per Cent) and M40 (Middle 40 Per Cent) communities in Malaysia.

In the British Council’s study, which publishes data collected between August and December 2018, it states that as Malaysia seems to lack a distinct and clear framework for the registration of social enterprises, it could emulate what their counterparts are doing in many other countries.

“Organisations have to be creative in the way they formally register themselves. Our findings show that most choose to register as a private company limited by shares – in local terms, as ‘Sendirian Berhads’ (Sdn Bhds) – with 43 per cent doing so.

“This is similar to past findings where 48 per cent of social enterprises were registered under this category. The second most popular form of registration would be sole proprietorship (of 19 per cent).”

The study states that these two options are seen as the ‘easiest to navigate and the least cumbersome in terms of paperwork and adherence to the law’.

It also observes a small number of organisations – about seven per cent – that have chosen not to register themselves at all.

“Of these, many are operating as informal networks or hubs for specific communities. Several are also involved in causes that may be seen as controversial in Malaysia, such as refugee and land rights; such organisations have a perception that legal registration would be a hindrance in the work that they do.”

Approximately 11 per cent of social enterprises surveyed by British Council are registered as societies – a sharp decline from the 38 per cent that were registered under this category four years ago. In this respect, the study acknowledges that the journey of registering as a society can be ‘a long and complicated one’, adding that the governing authority Registrar of Societies (RoS) would institute multiple checks on the authenticity of applicants.

“Societies are bound by more stringent rules, particularly around administrative processes, sources of funding, and distribution of profits, than other forms of incorporation.

“These relatively-strict parameters make it harder for social enterprises to reconcile their profit-making activities with serving their social causes,” it says.

One example of these parameters is that the RoS requires societies to spend 50 per cent of their revenue annually.

“Several social enterprises in Sabah expressed their difficulties of working within this frame, as this restricts them from rolling over funds towards another programme or initiative,” says the study.

“This is further amplified by unexpected delays in grants or other payments.”

Nevertheless, the study also takes note that the majority of social enterprises registered as societies are often quite well established, with almost a quarter of older social enterprises falls under this category.

“These social enterprises might have started off as NGOs (non-governmental organisations), before pivoting towards commercial activities to fund their work. This was reflected by representatives of organisations present at our workshop, who reported that they had to start thinking about earning-traded incomes in order to survive.”

RISE: Focusing on rural impact

The Rural Impact Social Enterprise (RISE) is neither a CSR body nor a NGO.

Its founder Johnny Bong regards his venture as a full-fledged business that focuses on enhancing the necessities in the rural areas across Sarawak.

“An enterprise is still an enterprise – you need to generate revenues to sustain your recipient communities or CSR objectives.

“I have seen many social enterprises ‘sinking’ because they are focusing too much on the impact, and not on their financial operations,” says the 26-year-old Kuchingite.

Bong says the core of his social entrepreneurship is derived from the Development Goals (SDGs) 2030 outlined by the United Nations.

“I have always known that being a good entrepreneur means more than just making profits, but the SDGs really show me the viable way to incorporate social enterprise in business.”

However, his inspiration was triggered during an event in 2013 when he received the Chief Minister’s Special Award from Sarawak’s fifth chief minister, Pehin Sri Adenan Satem, for achieving excellence in the Sijil Tinggi Persekolahan Malaysia (STPM) examinations.

“Back then, ‘Tok Nan’ (Adenan’s popular moniker) was not yet the chief minister. I still remember what he said: ‘When you’re successful, it’s not about how much money you make; it’s about how much impact you can make in society’.

“He told me that Sarawak needed this kind of youth. His words moved me.”

RISE signifies Bong’s purpose in social entrepreneurship – to make impact in the rural areas.

“As social entrepreneurs, we must first identify our purpose, but we must operate it as businessmen.”

Established in early March 2019, RISE runs a typical ‘Sdn Bhd’ business module where it offers products and services, but half of its profit is channelled to rural community projects.

In mid-2019, RISE was approached by Yayasan Petronas and they negotiated over the proposal for the social enterprise to handle the foundation’s rural CSR projects.

“The CSR projects cover the management of solar farms for rural power supply and also the provision of entrepreneurial skills-training to rural youths.

“RISE has a strong team – we have engineers, educators and other professionals among us. These are our resources in doing CSR,” says Bong.

Speaking of CSR, he admits that when RISE took off, it was run like a CSR body, raising funds from donations and contributions from other parties to operate its cause.

“But after a while, we began to see that this module was not going to be sustainable in the long term. Then we embarked on the water filter business, but eventually, we could see that this venture was a ‘one-off thing’ – it could not guarantee returning customers.

“It was then when we put on our businessmen’s hats; that’s when we initiate our online services business. Now, we have a healthy list of clients, whose businesses allow us to re-focus on the social part of our enterprise. Our online services cover digital marketing, websites, apps and systems,” he elaborates, adding that RISE rakes in monthly revenue of around RM100,000.

Bong also says the rural community programmes are being jointly-run with Junior Chamber International Padawan Chapter, where he is the incoming 2020 president.

“Manpower-wise, we’re good,” he says, adding that RISE has covered many rural areas around Kuching, Sri Aman and Betong.

In advising aspiring social entrepreneurs, Bong encourages them to identify problems that need solutions and strive to solve them.

“But in doing this, you must always think like a businessman,” he reiterates.

Changgih Designs: Empowering women artisans

Just like RISE, Changgih Designs is a result from a desire to not only help communities, but to empower them as well. Business-wise, this enterprise captures pieces of the native culture and blends them with contemporary fashion in designing wearable art-pieces that celebrate the heritage of Borneo.

“Changgih is the result of two sleepless, passionate mums, who dreamed of making cute crafts for their children during nap time. This thought of ‘mom’s craft-time’ later turned into an idea.

“As Changgih was founded by two new moms – we wanted to give other moms the opportunity to support their families without having to leave their homes, so we decided to produce our items in villages around the area, paying fair wages each time,” says co-founder Joanna Moss.

Born to Singaporean parents but has been in Sabah all her life, the 31-year-old says Changgih Designs’ culturally-inspired collections of handbags, wallets, accessories, scarves and wearable arts are all made with the utmost attention to details by artisans in villages all over Sabah.

“We work with our artisans to come up with styles that are beautiful and durable, and at the same time, we provide training to new artisans as we expand our team. These artisans aren’t just people who make Changgih’s products – they’re our family.”

Moss and her best friend Bethany Dawson, 34, set up Changgih Designs in 2015, when they both had just become mothers.

“Our initial investment was RM2,800. Can you believe it?

“We wanted to create social impact and it was important to be able to do that in a financially sustainable way. We wanted to ensure that the goals to be achieved would be for the long-term – and to be in the long-term, we must be viable. Along the way towards realising this dream, we also realised that our passion to help Sabahans could be fulfilled. With that, we kicked off our ‘Give10toSabah’ programme, where every time you got to buy a Changgih Designs item, you’re automatically giving back.”

Under ‘Give10toSabah’, 10 per cent of proceeds from the sales are set aside for community-building programmes that include provision of disaster relief aid in nearby towns, teaching of English classes, arrangement of English camps, as well as the running of job-training courses and skills-based vocational training.

These projects would be identified and carried out through engagements with the leaders of the communities, in order to fully understand their needs and fulfilling them.

According to Moss, Changgih Designs really started ‘getting into the groove of things’ between 2016 and 2017 – a period when she and Dawson were learning ‘all the ways of the business world’.

“(There were) some amazing lessons, but some were very challenging as well. We’re still learning now, but I think that’s the beauty about being a social enterprise – we’re focusing on the cause and putting our artisans first.”

Elaborating on the cause, Moss stresses that she and Dawson are ‘moms first, entrepreneurs second’.

“(Upon setting up) we saw the need for other women to be empowered and for them to have that opportunity – one that we could give them. Doing something like this is a ‘heart-and-people’ business, not a ‘money-and-machine’ business.

“We allow women like ourselves work from home, while looking after their children and other household matters. Sabah is home to such amazing people and for a place that has been giving us so much, it’s our turn to give back,” she underlines.

Such cause has turned Changgih Designs from being an operation with just one artisan, to an enterprise that houses 15 to 20 artisans, with more still in training.

The Moss-Dawson team also engages many supply and manufacturing partners, and connects with up to nine different communities in areas such Telipok Ria, Kota Belud, Penampang and Putatan.

“All these women work from home. So, weekly or bi-weekly as the orders come in, our artisans are given the raw material quantities and they operate from home,” says Moss.

Nevertheless, she does not deny that in business, opportunities also come together with challenges.

“Time — everything is handmade. So, when orders come in, sometimes we struggle to keep up, but the important thing that we always stress is that we are a people-first company and therefore, our artisans’ families come first. So if there’s a huge order but halfway through, they (artisans) are required to take a pause and put their family situation first, then we always understand and take that into account. Thankfully, all of our clients and supporters have been so understanding.”

Moss also lists raw materials as one of the challenges, in that they must strike a balance between sourcing items that are sustainable to the environment and handling the manufacturing of products.

Moreover, she says while Dawson and herself do not have any fashion background, everything that they have been learning and doing ‘come from scratch’.

“Market trends, design trends, style trends – they’re constantly changing. Buyer’s tastes and likes are so volatile. Even the current economy comes into play and so is spending power. It’s challenging for us ‘non-conventional entrepreneurs’ to be able to stay ahead – but, we have fared well so far.

“You know what Bethany and I like to say in describing how we work? If the plan doesn’t work, change the plan but never the goal.”

 

Social Enterprise: Key Figures

The study on ‘The State of Social Enterprise in Malaysia’ signifies British Council’s aim to contribute to
inclusive economic rowth in Malaysia through its social enterprise programme.

The council promotes the development of social enterprise as a means of addressing entrenched social and environmental problems, and delivering positive change to communities and societies.

This study represents the 10th in a series of surveys undertaken by the British Council around the world (https://www.britishcouncil.org/society/social-enterprise/reports).

It builds and expands upon the ‘State of Social Enterprise in Malaysia Survey 2014/2015’ produced by the Malaysian Global Innovation and Creativity Centre (MaGIC).

“The objective of this survey is to provide a summary of the current size, scale and scope of the social enterprise sector in Malaysia.

“In addition, this study aims to contribute to the development of social enterprise globally by allowing other actors to assess the sector’s progress, and identify possible entry points for supporting growth, or for participating in social enterprise.

This survey of 132 social enterprises across Malaysia presents a picture of a vibrant space with a promising future, with respondents being optimistic about their reach and impact.

The key things learnt are:

Based on the criteria and assumptions above, it is possible to make a provisional estimate of the total number of social enterprises in Malaysia. This would give us a figure of around 20,749 enterprises. This calculation is the first attempt of its kind and is far from statistically robust, hence it should not be interpreted as an accurate estimate, but merely the basis for further research.