from Development Channel

Navigating Tensions in Social Enterprise

February 27, 2014

Artisan entrepreneur Therese Iribagiza at Indego Africa's partner cooperative, Cocoki, in Kigali, Rwanda, 2011 (Courtesy Benjamin D. Stone, copyright Indego Africa).
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Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Benjamin D. Stonedirector of strategy and general counsel at MicroCredit Enterprises and vice chairman of Indego Africa. Here he discusses Indego Africa’s experiences grappling with the tension between a social enterprise’s social mission and commercial goals. 

Social enterprises enable people in the developing world to chart their own courses out of poverty by combining effective aspects of public and private sector ventures and harnessing market-driven forces. Yet, as I have learned through my work at the nonprofit social enterprise Indego Africa (IA), appropriately balancing a social enterprise’s social mission and commercial aspirations is immensely challenging. Based on my experience, when these prerogatives conflict, a social enterprise must ground decisions in a consistent long-term vision.

Launched in 2007, IA partners with over 500 female entrepreneurs who operate within small for-profit businesses in Rwanda called cooperatives. IA connects these women with global markets by selling their jewelry, accessories, and home décor on IA’s online store, to boutiques and stores worldwide, and to major brands in the United States. The revenue covers IA’s operational costs, including raw materials, shipping, fair-trade wages for the artisans, and employee salaries. The remaining money is pooled with donations and grants to fund training programs for the artisans in business, literacy, and technology. IA has helped artisan partners put more of their kids in school, increase the number of meals their families eat per day, access running water, and more. But its mission goes beyond achieving temporary impact: IA aims to equip female artisans with the skills and confidence they need to compete in the global markets long term, without assistance.

To achieve this ambitious goal, and balance commercial and social objectives, IA started out with two rules for choosing artisan partnerships. First, IA only partnered with women who were already members of a registered cooperative, so that these women would view IA as a business partner rather than co-founder. Second, IA only partnered with women who already knew basic artisan skills to ensure that, with minimal training, they would be capable of producing complex orders on tight timetables.

These rules remained sacrosanct until 2010 when two NGOs, Survivor’s Fund and Foundation Rwanda, asked IA to help twenty-five remarkable women from the Kayonza district of Rwanda start an artisan cooperative. The women were all mothers of children conceived by rape that occurred during the 1994 Rwandan Genocide. Most were poor, illiterate, HIV positive, and did not know how to sew or weave. Even in the face of such difficult circumstances, these women were determined to give themselves and their children a better life.

Despite its two rules, IA agreed to take on the challenge. IA helped the women build a cooperative, named Abasangiye, and conducted business and literacy training. IA also went beyond normal practice by subsidizing the cost of Abasangiye’s rent and transportation, and hiring women from another cooperative partner to teach Abasangiye artisans how to sew. The extra investment paid off: the women completed a stream of profitable orders for several major brands, including Nicole Miller, J.Crew, DANNIJO, and Anthropologie. Many started to learn English. Two of Abasangiye’s members were selected to attend the Goldman Sachs 10,000 Women program at Rwanda’s School of Finance and Banking and later joined seventeen other IA artisan partners as graduates of the school’s expedited MBA program.

Out of the twelve cooperatives IA works with, Abasangiye remains the only one formed by IA because the financial cost and time required to launch it are too high to replicate. But making this exception to IA’s partnership rules reinforced the organization’s long-term vision. Although the women of Abasangiye still have many challenges ahead, they are increasingly engaging the global markets on their own terms as confident, empowered businesswomen.

In other instances, IA has found it more sensible to uphold its self-imposed rules. In 2011, a prominent international retailer offered to make a large order that would have required IA to take a significant financial loss, but that would have allowed one cooperative partner to earn more money in one month then they might normally make in six. It was an enticing offer: great income for the artisans and terrific brand exposure for IA. Accepting the offer, however, would have damaged IA’s balance sheet and undermined its core vision by settling for a one-time profit for the women instead of taking a sustainable business approach to empowering entrepreneurs. IA declined the order, and its savvy artisan partners supported the choice. And the decision paid off. IA is now a renowned lifestyle brand facilitating profitable and consistent orders that give artisans the revenue and experience to achieve long-term success.

Tension between a social enterprise’s social mission and commercial goals is a healthy byproduct of the public-private hybrid approach. During these times of ambiguity, social enterprises must rely on a consistent long-term vision for guidance. It is this approach that I hope will allow IA to have lasting impact that endures for generations.