The best countries to be a social entrepreneur 2019

OPINION: Pakistan's social enterprise sector would benefit from legal status

by Faraz Khan

* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

Faraz Khan is the CEO of Seed Ventures.

Ten years ago, I spoke to a friend who wanted to set up a social enterprise. The model itself was fair and made sense to me.

But we couldn't quite determine how to register the initiative - as non-profit or for-profit? Neither of those truly capture the ethos of a social enterprise. Today, this problem still stands in Pakistan - but with a difference.

Pakistan is the world's sixth most populous country with a range of social-economic challenges. In recent years the country has witnessed new horizons from multiple dimensions.

As a country that has philanthropy and giving in its DNA, the concept of social enterprise and impact investment is taking solid roots, with the newly-elected government backing these initiatives in recent times.

This government has human development at the core of its philosophy and policies.

For example the new Ehsaas policy for social development - which means "empathy" in Urdu - though far from perfect, demonstrates the intent and will of the government towards sustainable socio-economic solutions. 

The establishment of the Centre for Social Enterprises (CSE) at the Planning Commission, which oversees many initiatives including social development planning, is further illustrative of the government's efforts towards this sector.

At the same time, there is a collaborative movement towards creating social enterprise legislation in Pakistan. 

The Sustainable Development Policy Institute (SDPI), the British Council, the local impact investment community, intermediaries and advocates are regularly are meeting with the Securities and Exchange Commission of Pakistan (SECP), the Federal Board of Revenue - the country's tax and revenue department - and the State Bank of Pakistan to discuss deliberations, concerns and remedies.

The corporate and social responsibility mandate and approach in the private sector has also started evolving towards practices that provide platforms for measurable social investment and impact, while the development sector has started moving towards outcome-based social financing schemes and mechanisms.

The Scottish Government's launch of Impact Link for Pakistan is further testament to encouraging efforts being introduced in this space.

While there is a rise in local impact investment and intermediaries, incubation, acceleration programmes in the country, there is more importantly a growing sense of community-led models spearheaded by youth.

There is also a demonstrated growth in women-led social enterprises that is truly at the fulcrum of the social enterprise sector's growth trajectory in Pakistan.

What is happening here is a reflection of the global movement towards the social enterprise and impact investment sector.

The demise of classic capitalism, coupled with the cusp of the fourth industrial revolution, is propelling youth to explore social enterprise models of sustainable business and entrepreneurship to solve the socio-economic challenges which governments have been unable to solve unilaterally.

Community-led models appearing through the country are slowly being recognized as potential contributors to national-level solutions.

However there is an immense need for capacity building of stakeholders, to adequately recognize and efficiently understand the mechanisms of a successful and accommodating social enterprise ecosystem.

The government and relevant financial institutions especially need to fast track their understanding of social enterprise sector and its potential impact on the poorest communities, as they are not only beneficiaries but could be converted into partners over the coming years.

While there are few examples of large private sector entities focusing on creating social enterprises across their supply chain and distribution verticals over the past few years, there is a need for greater recognition of benefits including and beyond the conventional bottom line.

In addition, if local stakeholders are able to successfully lobby legislation in this area, it would greatly encourage the global impact investment community to not only explore, but it would also benefit from Pakistan's energized social enterprise sector, as access to patient capital continues to be an impediment and challenge.

In short, while the past three years have demonstrated a greater understanding of the social enterprise sector in Pakistan and spearheaded its overall momentum, there is a long way to go before we are able to capture the potential of the youth and create sustainable, collaborative and shared value impact to sustain this wave. 

So my friend hopefully will be able to register a social enterprise in coming years and that would be a great win for the sector, country and global movement.

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