Social Enterprise: Put your money where your mouth is

Challenges Worldwide believe that social enterprise is the most effective vehicle for poverty alleviation in developing nations. This is a complex and difficult argument to make, but yesterday our guest speaker Martin Muganzi made it thoroughly convincingly by recounting his experiences of working in development.

Martin started from humble beginnings, raised with 6 siblings by a single mother, often relying on neighbors for support. For Martin, community support has been vital to his way of life from an early age, and he quickly became involved in giving back to the community through work with the missionaries at his secondary school. This continued throughout his university education in biomedical science, as part of the scholarship programme through which he had enrolled.

A Passion for community work

After a brief career as a lecturer, Martin realised that community work was his passion, and decided to pursue it full-time. Martin’s first foray into full-time community work was through the Youth at Work Initiative. This project relied upon funding to reduce youth unemployment by skills training, mentoring and job creation.

While YAWI was a great success, reaching over 1000 young people, Martin was somewhat disillusioned by his experience working with foreign NGOs. It seemed that the availability of funding could change quickly, dependent on the current development priorities. What this meant in practice was a lack of commitment to real change, which has to be followed up and supported in the long term. Martin had similarly questioned the approach of NGOs while trying to educate people on the dangers of HIV/aids. He cites events which rely on “per diem” handouts as particularly ineffective. While it is a great way to encourage participation, when your mind is on the food which you came to eat, it is difficult to focus on the bigger picture.

Commitment issues

What Martin has realised through these experiences is the importance of true commitment. A team’s commitment to a cause is far more important than their qualifications or resources. And how is commitment commonly displayed? Money. Martin has taken this vital observation and applied it to community work. The result is social enterprise or “social entrepreneurship.”

The mentoring scheme at YAWI had been plagued by the problem of lack of commitment. Mentors would sign up with enthusiasm and promises and then fail to show up in the longer term. Martin now uses a fee-based model where both mentors and mentees pay, thus demonstrating their commitment. The resulting enterprise, All Stars Mentoring Academy(link) is a testament to the success of this approach, with 30 mentees successfully completing the comprehensive 3-month programme this year.


Look at the market

Martin’s approach to social entrepreneurship is deceptively simple:

  • Identify a community with a shared problem
  • Look at the markets they are participating in and identify exactly where the market is failing that community.
  • Two great examples of where Martin has done this are his businesses Essential Home Services and the Calabash Collection.

Both examples are illustrative of the power of social enterprise. The Calabash Collection sell beautiful bags and accessories made from recycled marketing materials. This came about simply through Martin’s personal investigations in the Katwe Slum. He asked how much the workers were paid to make bags, and then followed the supply chain to see how much they were sold for. He thought that a 1000% markup was extractive and simply went into competition, providing a much fairer cut to the workers.

Essential Home Services is a similarly simple model. Martin was aware of a large influx of young workers into Kampala, unemployed and eager to find work. Essential Home Services provides a platform to link domestic helpers to homes who need them. They provide security and background checks for a delayed payment and take a small cut of workers earnings.

Both of these businesses provide a fantastic service to consumers. However, of more interest to us in the creation of decent work, in contrast to the exploitative alternatives. As Martin argued,  the power of decent pay and new opportunities for those living in poverty cannot be overstated. The incentives to save and work towards a better and healthier future become far more real once you have something to lose. A more convincing discussion of this can be found in the fantastic book Poor Economics.

The truth about social enterprise

For me, Martin’s argument was a very powerful one. His personal experiences seem to resonate with what I have heard during meetings with the business owners we are currently working with. The deciding factor in any venture is the commitment of the people pursuing it. And the investment of your money is a display of that commitment.

These two truths come together in a powerful way through social enterprise: be that by providing decent work, fair pay throughout a supply chain or an affordable and advantageous service. This is what we hope to support at Challenges Worldwide.