Will Social Enterprise Survive The Credit Crunch?

I was just watching an interview with Muhammad Yunus, who founded the Grameen Bank, and it got me thinking. Amidst all this fear about our economies going bust with our commercial and investment banks, what's going to happen to Social Enterprise?

As Yunus says, food prices have doubled, oil prices have gone up, and the financial crisis is affecting people's purchasing power everywhere. But not all financial institutions are suffering. Microfinance institutions for example, have stronger portfolios because their loans are much more transparent. There may be no collateral and no guarantees, but it's based on trust and still has a much better quality of return. They are reaping the rewards of robustness and relevance, underpinned by ethically focusing on people's needs rather than making careless short-term profits.

Social businesses, in the same way, are about working with people and not exploiting them. They are collaborative more often than not, and held together by people who aren't simply working for a wage. This makes their offerings more relevant to their audience, their financial decisions less risky, and their audience more likely to support them in times of difficulty.

Many also rely on philanthropic funding, government grants or SROI based loans, and won't be quite as badly affected by the credit crunch because the financial instruments they depend on are not quite as compromised. It will be tighter of course, but how is that going to be much different from the normal state of affairs for most social enterprises? At the more commercial end too, they are also more likely to be given leeway around defaulted payments due to the nature of their work.

Finally, if this really turns into crippling economic crisis, I believe it will only help drive social innovation faster. It will embed the recognition that we have to be able to help each other, and create not just environmentally sustainable businesses, but also financially sustainable ones.

We can only do this collaboratively, so I believe the future is bright for social enterprise and social innovation. Watch out for new disruptions to commercial models that rival Grameen Bank, and keep your fingers crossed for a future with less money-mindedness and more taking care of each other!

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