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TOPIC 1: An Introduction to

Social Entrepreneurship
Case Study 1
GRAMEEN BANK:
Muhammad Yunus’ Story
In 1974, Bangladeshi economics professor named Muhammad
Yunus visited a rural village in Bangladesh in an effort to
connect the economic theories he was teaching with the
real-world poverty of his native country.

Based in his observations he saw craftspeople were skilled and


hardworking, but returns to those skills were limited by credit
availability.

The opportunity he saw was to offer Micro-loans, with no


collateral and low interest. This would boost the return to
craftspeople.
The venture was launched in 1976, making a small number of
loans to the inhabitants of one local village.

In 1983, under the Bangladeshi Charter the project was


named Grameen Bank- a legal banking institution.

By 2005, the project had more than 1,500 branches in nearly


50,000 villages covering 70 percent of the country.

To include loans for housing, education, and basic subsistence


for beggars.
In 2006, Professor Yunus won
recognized for his and Grameen
Bank’s work with Nobel Peace Prize.

Grameen is a famous model of


Social Entrepreneurship.

Professor Yunus
WHAT IS SOCIAL ENTREPRENEURSHIP?

The word derived from the French entreprendre or “to


undertake”, and its importance in the process of production
was described by economists 200 years ago.

Production processes required labor (mental and physical


human effort), physical capital (plant and equipment), human
capital (knowledge and expertise) and land (natural
resources).
Joseph Schumpeter, economist at Harvard described:

Entrepreneurship Economic activity Success comes


is dream and will is competitive from creation
to succeed and innovation

In other words: Entrepreneurs recognize opportunity, innovate,


and seek results.
The Entrepreneurship Process

• Overall: Pursuing opportunities without limitation by resources


currently in hand
• Stages in the entrepreneurship process:
• Opportunity recognition
• Concept development
• Resource determination and acquisition
• Launch and venture growth
• Harvest the venture
Persistent SE concepts

• SE addresses social problems or needs not met by private


markets or government
• Innovative solutions, unmet needs, private action
• SE is motivated primarily by social benefit
• Social mission + entrepreneurial behavior
• SE generally works with market forces
• Combining social purpose with financial sustainability
Process steps in entrepreneurship (1)
• Social entrepreneurs recognize opportunities to create
social value
• Seeing opportunity where others see only threats and tragedies
• Addressing present or latent demand
• Opportunity leads an enterprise concept
• Identify new products or markets
• Identify and define desired social rewards and how they are to be
measured
Process steps in entrepreneurship (2)
• Resource needs are determined and necessary resources
acquired
• Financial resources, human resources (labor), and human
capital (expertise)
• Launch and grow the social venture
• Follow a strategy tied to metrics of success
• Goal attainment and beyond
• What to do after success is attained
• Shut down, redefine service, continue, or merge
• Figure 1.1 portrays this process
Figure 1.1 The process of Social
Entrepreneurship
Opportunity recognition
• Social problems
• Unmet needs

Concept development
• Identification of social
rewards
• New products or markets

Resource determination and acquisition


• Financial resources
• Human resources
• Human capital

Launch and venture growth


• Measurement of returns
• Expansion and change

Goal attainment
• Succeed in mission and shut down
• Succeed in mission and find new
opportunity
• Attain a stable service equilibrium
• Integrate into another venture
Categories of social venture/SE
1. Start a new product or service
2. Expand an existing product or service
3. Expand an existing activity for a new group of people
4. Expand an existing activity to a new geographic area
5. Acquire an existing business
6. Partner or merge with an existing business

Source: Brinckerhoff, Peter C. (2000). Social Entrepreneurship: The Arts of Mission-Based Venture Development. New York: Wiley, pp. 16-21
Explaining entrepreneurship (1)

• Environment
• Entrepreneurship is stimulated by a conducive environment
• Resources
• Resource availability (financial, human resources, human
capital) stimulates entrepreneurship
• Perturbation
• Entrepreneurship occurs when people are displaced from
their routines
Explaining entrepreneurship (2)

• Personal traits
• Entrepreneurship occurs because of entrepreneurial personalities
and types
• Preparation
• Entrepreneurship can be taught and learned through education
and experience
Applying entrepreneurship theory to SE
• These theories apply very well to SE
• Environment, resources and perturbation are primarily
external forces
• Personal traits and preparation are primarily internal forces
• This theory helps to explain SE, predict where it will occur,
and suggest how to increase it
• Figure 1.3 portrays these forces
Figure 1.3 The forces on social
entrepreneurship
External forces
Environmental factors Perturbation of the environment
• Social climate conducive to social
entrepreneurship
Availability of financial and • Political change
nonfinancial resources • Cultural change
• Political climate that facilitates
• Economic change
social innovation

Social entrepreneurship
process begins

Entrepreneurial Preparation to exploit


personality traits opportunities
• Education
• Experience

Internal forces
WHO ARE SOCIAL ENTREPRENEURS?

• Dees (2001):
“Change agents Adopting to create and sustain social value
in the social
sector,” Recognizing and relentlessly pursuing new
characterized opportunities to serve the mission
by….
Engaging in the process of continuous innovation,
adaptation and learning.

Acting boldly without being limited by resources


currently at hand.

Exhibiting a heightened sense of accountability to the


constituencies served and for the outcomes created.
Psychological characteristics of
entrepreneurs
• Innovativeness
• Achievement orientation
• Independence
• Sense of control over destiny
• Low aversion to risk (i.e., willing to accept risk)
• Tolerance for ambiguity
• For social entrepreneurs, community orientation and social
concern are important psychological characteristics
Figure 1.4 The characteristics of a social
entrepreneur
Innate characteristics

Education and experience

Innovativeness

Entrepreneurial
Achievement orientation
orientation
Socially-entrepreneurial
Independence
orientation

Sense of control over destiny Community awareness


And social concern

Low risk aversion

Tolerance for ambiguity


Social entrepreneurs as:
• Leaders
• Shape a vision that change public attitudes
• Have significant personal credibility
• Generate commitment in terms of values to achieve
collective purpose
• Personalities
• Achievers
• Super-salesman
• Real Manager
• Expert idea generator
Case Study 2
BENJAMIN FRANKLIN
Benjamin Franklin He created the first fire department
(1706-1790) and introduced the idea of fire
insurance.

He founded philosophical societies,


hospitals, and colleges.

He invented many devices out of


community concern, such as the
street lamp, flexible catheter, and the
lighting rod.

In 1732, he created the first public


library in Philadelphia, doing so out of
clear interest for the public good.
Myths about SE (1)

• Social entrepreneurs are against business


• Many social entrepreneurs come from business and have
succeeded in business
• The difference between commercial and social
entrepreneurship is greed
• Assumes that all commercial entrepreneurs are greedy, and that
none are philanthropic
Myths about SE (2)
• Social entrepreneurs run nonprofits.
• Some do, some don’t – many legal forms support SE
• Social entrepreneurs are born, not made
• Implies no role at all for nurture, that only innate traits
determine who does what
• Myths for which there is no evidence
• Social entrepreneurs are misfits
• Social entrepreneurs usually fail
• Social entrepreneurs love risk
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