social enterprises

Advantaged of microfinance

Accessibility: Microfinance helps those in poverty to become financially independent, whereas banks do not usually lend such small amounts to this particular market segment. Job creation: the effective use of microfinance can help create new job opportunities, with beneficial effects on society as a whole. Social wellbeing: Successful applicants who receive microfinance are less likely to take their children out of school. It also allows recipients better access to health-care services for their families.

non-profit social enterprises

businesses run in a commercial-like manner but without profit being the main goal as they use their surplus revenues to achieve their social goals rather than distributing the surplus as profits or dividends.

Producer cooperatives:

cooperatives that join and support each other to process or market their products. E.g. farmer cooperatives which might unite to buy equipment, seeds etc by pooling their funds.

Disadvantages of cooperatives

disincentive effects: employees in cooperatives do not pay high salaries and bonuses as incentives which may decrease productivity. limited sources of finance: banks are reluctant to loan money and sources of finance can be limited to the amount contributed by each partner. most cannot raise funds trough the stock exchange. slower decision making: democratic system limited promotional oppurtunities.

Cooperatives

for-profit social enterprises owned and run by their members such as employees or customers with a goal of aiding the community or creating value for their members in a socially responsible way.

advantages of cooperatives

incentive to work: employees have key stake in cooperative so are more interested in how it performs. This is an advantage because it enhances staff motivation and labour productivity. decision making power: democratic system improves commitment and motivation and allows for diverse. opinions to arise which may increase productivity. social benefits: other members of society (besides owners) gain from the cooperative. public support

Charities

non-profit social enterprise that provides voluntary support for good causes (from society's point of view).

Public private partnerships

occur when government works together with the private sector to jointly provide goods or services for a social objective.

Consumer cooperatives:

owned by the customers who buy the goods and/or services for personal use. e.g. childcare, healthcare cooperatives.

Social enterprises

revenue generating businesses with social objectives at the core of their operations. They can be for profit or non-profit but all profits or surpluses are re-invested for that social purpose rather than being distributed to shareholders and owners.

Worker cooperatives:

set up, owned and organized by employee members. e.g. artist cafes, printers. members are provided with work.

Advocacy NGOs:

take a more aggressive approach to promote or defend a cause striving to raise awareness through direct action (such as mass demonstrations, public relations). E.g. Greenpeace.

Microfinance provider

A for-profit type of financial service aimed at entrepreneurs of small businesses, especially females, minorities and those on low incomes.

limitations of charities

Bureaucracy: As the charity grows, there are more complexities involved. The operational costs increase therefore percentage of money donated to cause declines. Disincentive effects: lack of profit motive can demotivate volunteers or cannot offer their services for extended periods of time. Even salaried workers are likely to paid less than if they worked in a profit-based organization. Charity fraud: Financial activities must be recorded and reported to a governing body. This is to protect the interest of donors and to prevent charity fraud. Inefficiencies: Although limited liability charities offer protection to the owners, it also means that those who run the charity are not personally held liable for any debts incurred. Limited sources of finance: Most charities survive solely on one source of finance and there is a huge number of rival charities ad limited funds from donors, especially during an economic downturn.

Disadvantages

Immorality: The concept of making money off the backs of poor people. Critics claim that microfinance is an unethical operation of lenders as the providers are for profit organizations and so profit from the poor and the unemployed. High interest rates: micro finances could spend years paying back loan without receiving the chance of making profit that can be used by the microfinance owner. Limited finance: Microfinance schemes only offer small amounts of money to borrowers given the high risk of default (failure to repay loans) Limited eligibility: Not all poor individuals qualify for microfinance. Microfinance providers must minimize risks in order to ensure that loans are payed back.

Operational NGO's:

Involved in relief-based and community projects.

NGO's

Non-profit social enterprises that operate exclusively in the private sector.

Advantages of charities

Social benefits: charities provide financial support for the welfare of society. Tax exemptions for NPO's: exempt from corporate tax. There are also concession for other taxes such as business rates Tax incentive for donors: Donors, be it private individuals or organizations, can get income tax allowance on the funds that are donated to charity. This raises incentive for donors to give money to charities.

Difference between profit based organizations and social enterprises

The clear difference between them and profit based organizations is that commercial for-profit businesses strive to return a profit for their owners yet social enterprises strive to return a surplus for social gain.