Social entrepreneurship increases in popularity

Updated: 2012-09-20 07:50

By He Dan (China Daily)

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Social entrepreneurship increases in popularity

People with osteogenesis imperfecta, also known as brittle bone disease, receive customer service training from Alibaba Group's, an e-commerce website. Wu Jiang / for China Daily

But as interest rises, sector faces concerns over financing, profitability

To set up a social enterprise is becoming a popular career choice on the mainland, although lack of funding and enterprise management skills remain major challenges for people who want to devote themselves to this fledging sector.

"Social enterprise is something new for China, but we are seeing more young people show enthusiasm to give it a try and become social entrepreneurs," said Xu Yongguang, vice-president of Narada Foundation, which is based in Beijing and has provided 1 million yuan ($158,385) a year to support social projects since 2008.

Social enterprises are organizations that use business approaches to meet social and environmental needs and make a positive difference in their communities, according to a definition by the British Council's Beijing office.

"Social enterprises employ sustainable commercial techniques and may generate profits, but unlike traditional businesses, their primary objective is to benefit society rather than enrich owners or shareholders," according to a statement from the council team in charge of its Skills for Social Entrepreneurs program.

According to a report by the Foundation for Youth Social Entrepreneurship, an organization dedicated to providing support to social entrepreneurs in Asia, social entrepreneurs are mostly aged 31 to 40, are highly educated and have international exposure.

As there is no specific legislation for social enterprises on the mainland, social enterprises face challenges but are given the freedom to choose their legal status, the report said.

Of the 52 social enterprises that took part in the study, 34 were registered with authorities as companies, 10 as NGOs, while the rest were not registered at all.

The report also discovered that most social enterprises make little profit, with roughly 70 percent generating less than 500,000 yuan in annual revenue.

However, without a consensus on the definition, there is no reliable data about the number, size and scale of social enterprises on the mainland.

Xu said, based on his observation, successful social enterprises remain "rare" in China and most are heavily tested by market conditions.

Finding funding

Yu Jia quit her job at an institute in Beijing and set up a company to make lampshades using old subway posters last year.

She estimated that each year the dumped advertisement posters in subways and bus stops could cover an area of 2 million square meters, five times the size of Tian'anmen Square.

Yu, 33, and her business partner, who specializes in design, has persuaded an ad company that has cooperation with Beijing Subway Line 4 to provide old posters, which can be cut or reshaped and then folded into lampshades.

"Financing is the toughest part for us. As a micro enterprise, it's difficult to get a bank loan, and most venture capital companies show little interest to invest because it usually takes four to five years to get a return on their investment," she said.

Yu's project, ReLight Design, is largely still relying on the 30,000 yuan she was given in seed funding by the British Council, after her project finished in the top six out of 100 in a contest on ecological innovation.

Yu plans to organize exhibitions in Beijing 798 Art Zone and Line 4 this month to attract more attention and funding.

According to the British Council, its office has been training people who plan to or have already started social enterprises since 2009, providing more than 7 million yuan in startup funds.

Apart from the British Council, some charitable foundations, including Youcheng Social Entrepreneur Foundation and Narada Foundation, provide funding for people who want to start social enterprises.

As a tutor for British Council's social enterprise training programs, Steve Koon, a consultant for social entrepreneurs from Hong Kong, said he has coached about 800 people who want to become social entrepreneurs.

"There are mismatches in the current funding channels, as charitable foundations usually provide only a small sum of money to support startups, which is far from enough for businesses to grow, and venture capital is inaccessible for most as they can't meet their rigid requirements," he said.

Profit potential

College students make up a large proportion of those looking to start social enterprises.

Gao Bingchen, a sophomore majoring in rural development at China Agricultural University, said he and seven classmates have a business plan to recycle old jeans to make products such as book covers.

"We did a survey at universities in Beijing and found out each student had at least one old pair of jeans, which they kept either in a closet forever or throw in the trash," he said during a training social entrepreneur program held by the British Council in Beijing on Sunday.

Gao and his partners came up with the idea of reusing the denim to reduce waste and pollution. The 19-year-old has made 80 book covers from 40 recycled jeans with his partners since July.

"The problem is where to sell these products and how to persuade customers to buy them. That's what we are trying to figure out right now," he said.

Xiao Han, founder of Lanshan Social Investment, a venture capital fund in Beijing, said investors are unlikely to give money to people with little business experience.

"You need a strong will and innovative ideas, but that's not enough. Social enterprises should have a feasible business model, strong problem-solving capabilities and profit potential," said Xiao, who has provided funds for social enterprises since 2009.

He said he receives about 30 to 100 project proposals a month but at present can only sponsor four social-enterprise projects, which on average receive 1 million yuan.

Huang Xiaorong has spent 20 million yuan in the last five years to establish Gold Sun Elderly Integrated Services Center in Fuzhou in Southeast China's Fujian province.

Relying on 13 community-based service stations, whenever the members dial the center's 24-hour hotline, services including domestic chores, family doctors, helpers for shopping, and companions for going to the hospital will be sent out from the nearest station, she said, adding that the center charges 50 yuan for half a day.

"It's a huge and complicated project as I have to persuade the telecom company and the civil affairs bureau for cooperation, and build a private hospital and a nursing home for the elderly," said Huang, who used to run a housekeeping company.

"Now our center has about 12,000 registered members. I have not made money yet, but I can see more people are willing to pay for our services," she said.

Government support

Authorities have shown increased awareness and support for social enterprises in recent years.

Promoting the development of social enterprises was included in Beijing Municipal Government's 12th Five-Year Plan (2011-15) for social construction.

Liu Qi, then-Party chief, said Beijing will financially support the growth of social enterprises as a way to meet its residents' diverse needs when he delivered the keynote speech at the Beijing's 11th Party Congress in June. However, he did not elaborate on the specific measures.

Zheng Weining, the founder of Canyou, a business group that offers job opportunities in software development, animation design, and e-commerce to more than 3,700 disabled people nationwide, said he is grateful for the help he has received from the government in Shenzhen, Guangdong province.

His group spent 30 million yuan to bid for land covering almost 10,000 square meters in the city's downtown, which has a market value of about 100 million yuan.

The government also provides tax benefits for companies that employ people with disabilities, with tax deductions of 35,000 yuan for each disabled person hired, he added.

"The fact that authorities sold the land at a much lower price shows official support for social enterprises," Zheng added.

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