Key proposals unveiled to stimulate social entrepreneurship

Funding extended to 2 years, profit sharing after a specified period
Lynette Khoo,
Business Times 4 Dec 07;

(SINGAPORE) The Social Enterprise (SE) Committee chaired by Spring Singapore chairman Philip Yeo released a set of recommendations yesterday, which if adopted, will see the current government funding for social enterprises extended from one year to two years, and enable profit sharing after a specified time period.

The Comcare Enterprise Fund (CEF) under the Ministry of Community, Youth and Sports (MCYS) provides seed funding to social enterprise start-ups with up to 80 per cent of the capital spending and one year's operating costs, capped at $300,000. The average funding is between $100,000 and $150,000 for each successful application.

The SE Committee proposed an extension of the funding period to two years as it recognises that SEs need time to establish and mature as businesses.

To encourage business-savvy entrepreneurs to set up, run and invest in SEs, the SE Committee recommended that CEF-funded enterprises be allowed to take profit after four to five years, while keeping its commitment to a social purpose.

The SE Committee was formed in August last year to find ways to invigorate the local SE sector and came up with a set of recommendations which it released in a report yesterday.

Unlike charities that depend on public funds, SEs are self-reliant revenue-generating businesses that meet social needs. They could be small, medium or large businesses, privately owned cooperatives or business arms of charities.

The number of active SEs in Singapore is estimated to be 150, of which 60 per cent are set up by non-profit or voluntary welfare organisations (VWOs). Sixty-six SEs are funded by the Ministry of Community, Youth and Sports and 46 of them are still active. These are small businesses with an average annual revenue of less than $100,000.

'The underlying work is really how to create economic opportunities and jobs for the needy and disadvantaged,' Mr Yeo said at a briefing yesterday. 'It is to give the needy and disadvantaged a permanent employment for income so that they can be independent.'

Mr Yeo noted that some start-ups have the social passion but lack a viable business model. To provide business support and training to new SEs, the SE Committee proposed the formation of a Social Enterprise Association and a Social Enterprise Development Centre (SEDC).

Through the association, SEs can pool resources, network and collaborate to promote the SE sector while the SEDC increases access to services and builds capability. The proposed capability development fund is estimated to cost $500,000 a year.

A key recommendation of the SE Committee is also to encourage diversified sources of funding beyond grants, from private companies, venture capitalists and banks.

With the charity dollar harder to come by these days, VWOs and charities that set up SEs can reduce their dependency on public funds. But NKF chairman Gerald Ee noted that there has not been many success stories seen over the past few years as these organisations lack business expertise.

'While we encourage VWOs and charities to consider this path, we have to also tell them that they need to have a viable business model,' he added.

This is where the SEDC can fill up the gap for consultancy and training and Mr Ee said that he believed that over time, there will be more than one such centre set up to meet such needs.

Besides stimulating the social enterprises, the Committee is also encouraging commercial companies to become socially responsible enterprises (SRE) by employing needy and disadvantaged workers, and modifying the workplace, job or work systems to accommodate and integrate them.

To encourage SREs, the SE Committee is proposing a Caring Companies Initiative with an annual fund of $1 million to help cushion the costs of training, job redesign and integration programmes that companies incur when hiring disadvantaged workers.

The SE Committee also proposed that the Caring Companies Initiative give out high profile awards to recognise employers who have hired a significant number of disadvantaged workers and helped them to be financially independent through training.

These recommendations are being reviewed by the government and its decisions will be announced in March 2008.