The Four Challenges of Running a Social Enterprise in India: Villgro’s Uniphore Explains
Caitlin Marinelli of Uniphore breaks down the challenges of running a social enterprise in India. Uniphore designs and delivers mobile solutions for businesses using Multilingual Speech Recognition and Voice Biometrics. Photographed here are two of the users of Uniphore’s platform (Photo Courtesy of Uniphore). Uniphore works under the umbrella of Villgro, a rural network of innovations for social impact in India.
By their very nature, social enterprises are destined to face a wide variety of challenges. The target customers or employees of these businesses are a group of people for whom traditional business models have not worked well in the past. As a sector, social enterprises need to work together to build a context in which including the poor in our business operations is profitable. Specifically, we need to achieve four things: (1) Creating buying power (access to credit and income generation); (2) Shaping aspirations (consumer education); (3) Tailoring local solutions (targeted product development, bottom up innovation); and (4) Improving access (distribution channels, communication links).
These four challenges all stem from the demand side of the equation. But the core belief of social enterprise is that we can, indeed, overcome these hurdles with time as the sector becomes more sophisticated.
However, it is developing this level of sophistication within the social enterprises themselves that seems to be the biggest hurdle today. Indeed, in India, many difficulties associated with running a social enterprise spawn from the lack of an enabling environment for these kinds of businesses to prosper. The three biggest challenges in this country are investment and financing, finding and retaining talent, and policy and regulation.
In developing countries in general, the investment climate is underdeveloped, due to problems of risk, market size, informal production, lack of financial guarantees, etc. In addition to these challenges, social enterprises often have funding and financing needs that are not met either by traditional grant programs or by traditional debt/equity instruments. The good news is that new areas of social philanthropy and social venture capital are emerging. Nevertheless, both traditional venture capitalists and social venture capitalists seek a degree of certainty in the rate of growth of their potential investee. Often times, social enterprises present a business plan demonstrating a huge need, given the size of the social problem they aim to solve, but they are unable to confidently establish the level of demand. The demand is hard to determine because the target market is much less studied, and the predictability of their purchasing power and patterns is limited. Furthermore, even when a product is field tested, it is not guaranteed that the same solution will be as popular in another locality in India, given the diverse cultures and preferences. Therefore, social enterprises often present a nebulous picture of their serviceable market, which limits the confidence of risk-averse investors.
The second major challenge in running a social enterprise in India is the ability to find and maintain talent. Like any young business, social enterprises often face constraints of how much they are able to pay their employees. While some people are willing to forego a higher salary in lieu of their belief in the mission of the company, this is not common, especially in a developing country like India. Especially as a social enterprise grows, they need to focus on hiring senior management for specific roles such as finance or marketing. Experts in these roles are not typically from the ‘social’ sector, and therefore are unwilling to trade away their high salary.
Maintaining quality employees is another huge challenge. For example, at Uniphore, our sales agents are expected to grow the business and meet their targets. They are not given any leniency because the ‘market is more challenging.’ Furthermore, after the sale is made, we expect them to move on and keep chasing new customers. They don’t always get the privilege of seeing the solution deployed or its impact on peoples’ lives. This pattern of extremely hard work, constant need for creativity and resourcefulness, and limited short-term rewards is common amongst many social enterprises. The combination of these factors can contribute to a high level of burnout, if not properly addressed.
Finally, social enterprises in India often face policy and regulatory challenges. For example, there are no specific legal frameworks for social enterprise, so businesses either designate themselves as SMEs or non-profits, though their income structures don’t fall neatly into either of these categories. Moreover, India, like many other developing countries, faces problems of public authority, regulation and oversight. The most flagrant of these issues is, of course, corruption. In one instance, Uniphore had created an application for a government welfare scheme in which beneficiaries used voice biometrics to authenticate their identity and approve that they received their benefits. Despite the increases in efficiency and enhanced outcomes of the welfare project, the government eliminated the use of our application, as it exposed all the fraud and corruption that was happening in the system. This story is typical of the challenges that social enterprises face, as the transparency and visibility that we try to create within poor communities is often in conflict with the vested interests of those in power.
Together, financing, talent, and policy challenges create a very difficult environment for running a social enterprise in India, and inhibit the sophistication of the sector. As we evolve, we must work together to create strategies, organizations, and forums for addressing these barriers – exchanging best practices and lobbying for favorable policies. When we define ways to systematically address these problems, the social enterprise sector will be much better equipped for taking on the enormous social problems of this country.