How can the barriers to growth for Chinese Social Enterprise be overcome?

Many Chinese social enterprises struggle to survive and to grow due to an the current legislative framework, inadequate business and market expertise, an unclear business model and inefficient income generating strategies.

The ‘2012 China Social Enterprise Report’ contains 15 recommendations on how social enterprise growth can be stimulated and the barriers to growth overcome.  Just like facilitating the growth of other key sectors in China, the entrepreneurial ecosystem can be purposely supported by the government and facilitated by a growing support network of incubators, nonprofits, universities and investors.

Four key recommendations include:
Provide capacity-building to whole organizations.

A small and emerging support network of incubators, nonprofits and university centers such as NPI, Narada Foundation and the British Council are providing training and technical assistance to social entrepreneurs, yet the majority of support programs in China are currently founder-centric, the focus is on developing and supporting the founder or CEO of social enterprises. Yet, the enterprises will be unable to scale if functional and other management staff lack development and learning opportunities and access to training, mentorship and networks to actually make things happen. Enablers should therefore provide more programs to build the capacity of whole organizations and not only the leaders. In a recently working group convened by FYSE social entrepreneurs especially highlighted the need for programs targeting middle management level – staff members who are in between strategic management and implementation.

Provide more programs to support early stage social enterprises.

A large number of potential entrepreneurs who have ideas for social enterprises need to be incubated and supported to transition into the next phase of growth in order to be able to benefit from a large pool of social enterprises with a proven business model who can effectively and sustainably solve some of our most pressing social and environmental issues.

Yet, on of the key findings in FYSE’s ‘2012 China Social Enterprises Report’ has been that the flip-side the pipeline of early–state social enterprises is drying up, with a decreasing number of enterprises up to five years of age. Our research indicates that a large proportion of social enterprises are not able to mature from initial start-ups into established organizations.

Beyond business plan competitions, programs supporting social entrepreneurs at the idea stage and at the early stage need to be launched and scaled up to expand the pool of start-ups which can grow into sustainable social enterprises. More enablers should come forward to focus on initially inspire more people to become social entrepreneurs and to incubate their social enterprises.

In addition to inspiring and incubating more social entrepreneurs, more funders need to fill the niche and focus on financially supporting early-stage social enterprises, including providing grant funding where necessary. Sustainable social enterprises will only emerge if more early-stage ventures are financially supported to pilot and prove their models.

Consider funding social enterprises and not only NGOs registered with the Ministry of Civil Affairs.

Much focus has been spent on the discussion about the legal status of social enterprises, not only in China but around the world. Yet social entrepreneurs are much more pragmatic and run social enterprises in various legal forms. Instead of continuing the discussion, funders including the government, foundations and impact investors should focus on impact and change/innovation and less on the form/approach/status of the organization being funded. This also includes considering providing funding to organizations that have the capacity and history to deliver results, regardless whether they are registered with the Ministry of Civil Affairs or the Ministry of Commerce. Funders and the government could consider piloting payment-based-on-results not based on organization type – funding only NGOs registered with the Ministry of Civil Affairs – to achieve impact with limited funding available.

Adjust the curriculum to meet the need of the market.

China’s education system is at a crossroad, with tens of millions of Chinese graduates entering the job market annually. Yet students few of them are exposed to entrepreneurship education that could turn them from job seekers into job creators. Llisteri et al (2006) found that the main motivation for young people to become an entrepreneur were self- realization (79%) to be independent (63%) and to contribute to society (55%). In order for universities to support students to consider (social) entrepreneurship as a career choice, educators could develop partnerships with practitioners to provide real-life case studies, study tours and lectures, as well as adjust the curriculum to provide specialist courses, electives or internships to train students and to provide a talent pipeline for the sector.

What does the future hold?

Despite the various challenges social entrepreneurs face in China, an increasing number of social enterprises such as Shokay, Miaolosophy, Beijing LangLang Learning Potential Development Center and Canyou to name just a few, are emerging and growing.

With a further focus on these recommendations , we are confident that social enterprises in China have the potential to contribute to developing a harmonious society by solving social and environmental disparities our society faces while creating economic value through job creation.
Download the full “2012 China Social Enterprise Report” here