About this TypologyAbout this Typology
This typology breaks down the traditional boundaries between the nonprofit and private sectors and draws definition to this new institutional animal--part business-part social--the social enterprise. In doing so, the typology explores how institutions have combined a mix of social values and goals with commercial business practices and how they have come up with ownership models, income and capitalization strategies, and unique management and service systems designed to maximize social value. The illustrative typology classifies different models of social enterprise in order to navigate readers through the currently ill-defined, diverse and dynamic landscape of this emerging field.
This typology is an outgrowth of a paper commissioned by the Inter-American Development Bank in 2003 entitled: "Social Enterprise: A Typology of the Field Contextualized in Latin America." For this reason many of the examples are from Latin America, however, social enterprise models are applicable worldwide.
The typology is a work in progress, and will be updated with new models, examples, and case studies. We invite you to send us your comments and examples of your social enterprises that we can include here.
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. Attribution should be made by providing a link to http://www.4lenses.org/setypology.
The AuthorThe Author
Kim Alter has endeavored to bring business practices to nonprofit organizations and international development agencies, encouraging their sustainability through earned income, in more than 30 countries worldwide for over a dozen years.
She is founder and Principal of Virtue Ventures, a management consulting firm specializing in social enterprise.
Kim is author of Managing the Double Bottom Line: A Business Planning Guide for Social Enterprises (Pact Publishers 2000) and contributing author of Generating and Sustaining Nonprofit Income (Jossey-Bass 2004).
Web and document designs are by Vincent Dawans from Virtue Ventures.
Kim and Vincent can be contacted via the online contact form .
Document StructureDocument Structure
The typology is organized in five main sections that can be read in any order based on the reader's interest and familiarity with the subject.
The first section introduces the subject with various definitions of social enterprise, a history in brief, an overview of the field's current state and outlook as well as a discussion on the evolution of the field toward an integrated approach.
The second section puts the social enterprise field in context. It starts by organizing practitioners on a spectrum by their philanthropic versus their commercial orientation. It then examines notion of “hybrid” or “dual purpose” entity, which creates both economic and social value, as well as the implications of a hybrid approach on an organization's financial strategy and program strategy.
The third section presents several ways of classifying social enterprises, either based on their mission orientation, based on the level of integration between social programs and business activities, or based on the nature of their target market.
The fourth section presents several common social enterprise operational models grouped into three main structural categories which cover a wide range of interplay between several variables, such as clients, market, social service programs, mission orientation, financial objectives, etc.
The Inter-American Development Bank must be recognized for commissioning the original version of this paper entitled: “Social Enterprise: A Typology of the Field Contextualized in Latin America,” (September 2003) to commemorate the 25 years of innovation through their Small Projects Fund and Social Entrepreneurship Program (SEP). Without the support provided by the Inter-American Development Bank this work simply would not have been possible.
Specific thanks are owed to Alvaro Rameriz, Division Deputy Chief and Jacqueline Bass, Senior Advisor for Micro and Small Enterprise, the Inter-American Development Bank, who provided the foresight and leadership to instigate this typology, labored over the cases, and tirelessly read and commented on the paper in its various incarnations.
I would like to thank and acknowledge the contributions of the following individuals who agreed to review and provide feedback on this paper. Each one is a respected leader and major contributor to the social enterprise and international economic development fields; their thoughts, ideas, words, and previous work laid the foundation for this piece.
- Shari Berenbach, Executive Director, Calvert Foundation
- Lee Davis, Co-Founder and CEO, NESsT
- Nicole Etchart, Co-Founder and CEO, NESsT
- Jed Emerson, Senior Fellow William and Flora Hewlett Foundation, David and Lucile Packard Foundation and Lecturer Graduate School of Business Stanford University
- Cynthia Gair, Portfolio Director, The Roberts Enterprise Development Fund
- Didier Thys, Executive Director, Microfinance Information Exchange
Additional thanks are owed Lee Davis and Nicole Etchart for sharing cases from the NESsT portfolio, and to Jed Emerson, who kindly agreed to write the foreword. Special recognition goes to Vincent Dawans from Virtue Ventures for his contributions to sections on impact measurements and graphical representations. Finally, much gratitude is due to Laura Brown, faithful editor, who willingly took this paper in its original incarnation on her vacation.
About the Inter-American Development Bank’s Social Entrepreneurship Program (SEP)About the Inter-American Development Bank’s Social Entrepreneurship Program (SEP)
The Inter-American Development Bank began supporting income generating nonprofit organizations and cooperatives in 1978 through its Small Projects Fund long before there was a field dubbed social enterprises. In 1998, the Social Entrepreneurship Program (SEP), which replaced the Small Projects Fund, was created to promote social equity and the economic development of poor and marginal groups. The Social Entrepreneurship Program promotes business operations that generate social benefits and help community organizations encourage microenterprise development. Thus, in its 25-year history, the Bank has supported numerous projects that fall under the rubric of social enterprise through this program.
The SEP grants low interest loans of up to US$1 million; in addition, it offers technical assistance grants of up to US$250,000, which are allocated to the development and strengthening of innovative institutions. SEP uses its resources strategically and funds a limited number of representative projects; such operations must be capable of promoting learning between countries or of being emulated in other parts of the region.
IBD Social Entrepreneurship Program (SEP) Support to Social Enterprise
- Invests US$10 million annually to develop and strengthen innovative institutions.
- Provides low interest loans of up to US$1 million and grants of up to US$250,000 for technical cooperation.
- Supports financial services and business development projects with a special emphasis on poor and marginalized groups.
- Provides average long-term loans of US$500,000.
SEP is a highly competitive program, providing US$10 million annually to finance projects in 26 Latin American and Caribbean countries. Government agencies, bilateral funds, and multilateral donors have joined forces with IDB and the Social Entrepreneurship Program to strengthen that assistance. Several trust funds, such as the European Union Special Fund for the Financing of Small Projects in Latin America, the European Union Special Fund for Financing Microenterprise in Latin America, the Swedish Trust Fund for the Financing of Small projects, the Norwegian Fund for Small Projects, the Norwegian Fund for Microenterprise Development, the Japan Special Fund, the Swiss Technical Cooperation and Small Project Fund, and more recently the Italian Trust Fund have contributed, channeling support to rural and minority groups, and providing technical assistance to strengthen nonprofit organizations. The IDB Group is committed to contributing to the success of this new type of social enterprise and supporting projects that offer financial and business development services as well as social and community services in a sound, efficient, and sustainable way to benefit low-income people, indigenous groups, women, youth, and other marginalized groups.
Foreword to the original version, by Jed EmersonForeword to the original version, by Jed Emerson
The ability to create, to break the mold, to engage in enterprise is perhaps one of the greatest attributes of humanity.
Our capacity for shortsightedness, bias, and provincialism is perhaps our greatest weakness.
This document gives evidence of the first, and foreshadows the coming of the second.
While its roots are deep in our past, over the last three decades we have witnessed an explosion of innovation as a growing international community of individuals has experimented with a great variety of approaches to fulfilling one basic idea:
Markets and business, capital and commerce can be harnessed not simply for the creation of individual wealth, but rather the creation of value in its fullest.
These innovators have sought to create value consisting of equal parts equity, ecology, and economic development. They have broken with the beliefs of traditionalists to practice a form of social enterprise that seeks to engage in the community application of business skill and acumen. These social entrepreneurs have created a rich diversity of approaches and strategies, all of which are now coming together within a unified, global parade.
It is, however, a parade of many marchers, bands, and different colored banners. Having spent years on various side streets, the diverse parts of the parade are now flooding the grand avenue and approaching the town square, which is filled by glorious music and pageantry--and yet in the midst of the celebration we are suddenly aware we have a problem.
Too much creativity? Never!!
But too many words clashing in meaning; too many ideas promoted before having stood the test of time; and too many parts moving in a blur of confusion.
What is needed is a way to rise above the fracas, a tool to help us transcend the music of our own band in order to see the breadth of the musical parade in motion before us. What we need is a single, clear assessment of who "we" are and "what it is we are doing."
Kim Alter has presented us with such a tool.
Building on the nearly three decades of funding experience of the Social Enterprise Program of the Inter-American Development Bank, drawing upon the writings of practitioners and thought leaders from around the world, Kim has done an excellent job presenting us--social entrepreneur, investor, academic, and practitioner--with a set of frameworks and definitions to assist each of us in understanding how our own work fits with that of others and how together these various parts are unavoidably becoming interwoven into a singular whole.
By presenting us with a host of social enterprise models, this typology lets us see how our own approach to enterprise can be consistently defined and compared with that of others. By focusing upon the Bank's portfolio of investments in Latin and South America for examples, Kim has reminded us that the drive to enterprise is not a U.S., European or First World phenomenon, but rather one that speaks to the essence of human experience and ambition regardless of border, language, or level of literacy.
And by approaching her analysis from the perspective of a reflective practitioner, she tells us yet again that each of us can and must learn from each other. The best lessons and experiences are in the streets, the barrios, and the rural hillsides as theory meets practice and intense labor comes to be informed by thought. This document gathers the work of the whole and infuses it with thought in order for others to learn and understand more deeply the significance of the international efforts currently in motion.
Of course, the "problem" with assisting us in achieving greater understanding of the connections between our various labors is that we can no longer pretend that what we are engaged in is an "experiment" or a "demonstration project" or "proof of concept." Many questions remain and must be answered, but the notion that social entrepreneurship is a fad or thin intellectual fancy of those who couldn't make it in mainstream business is proved wrong not only by the work presented in the following pages, but by the continuing personal witness of literally tens of hundreds of social entrepreneurs the world over who now, via the Internet and the gathering storm of intellectual awareness, are proving themselves worthy of not grants, but investments; of not initiatives, but permanent program areas of major foundations and governmental funding bodies.
The "problem" with documenting an area of work so well is that we are now faced with at least two questions. First, now that the demonstration grants have demonstrated that fad is now trend and inquiry both emerging knowledge and expertise, we must ask:
Where is the serious money?
Where are the international field-building initiatives? Where is the "second tranche" of investment to take these ideas and organizations to real, meaningful scale and, thus, broader social and environmental impact? The challenge to the funding community, both private and public, is stark:
Are you in or are you out?
The practitioners have demonstrated both skill and informed practice. Now the funding community must follow through with strategic and significant amounts of capital (market-rate, concessionary, and philanthropic) to assure these efforts fulfill their obvious potential. In the words of one of my foundation colleagues, "It is time we move from our practice of 'let a thousand flowers wither' to let the best flowers bloom."
This document, and the many organizations whose work it draws upon, demonstrates the reality that the willing stand ready and waiting. Let us pray they do not stand waiting as long as it may take this report to begin gathering dust upon the shelf…
But the evidence presented in this document raises another question, and this one is directed at the practitioners of social enterprise. The second question is, quite simply:
What is it that you are really trying to do?
Over the past years, we have, each of us, contributed to a cacophony of concepts, terms, and ideas. We are all quite impressed with our disparate visions and intellectual approaches. And, yes, we are all quite cute and brilliant and revolutionary in our work. To be quite frank, there is a part of us (dare I say a large part?) that likes to be different and enjoys engaging our colleagues in nauseatingly long discussions of the social enterprise equivalent of how many angels can dance on the head of a pin.
We might pause for a moment and think:
If all we are trying to do is prove we can be communists in capitalists' clothing, fine. This paper demonstrates that we have proved our point. Those who were waiting for the definitive proof may now go home…
But, what if what we are really trying to do is change the world and what is really driving us to rise up early in the morning and fall into our dreams late at night is the vision of a genuinely transformed planet? If that is the case, then we need to see how our diversity consists only of divisions if one is face to face, nose to nose, and cheek to jowl with the notion of social enterprise--but as we step back a bit, as we take time to ponder what we really want to see around us in 30 years time, something else becomes quite clear:
The work of social entrepreneurship and the creation of social enterprise is also the work of a for-profit manager striving to drive the practice of corporate social responsibility into her firm; and, in truth, the approach of a venture philanthropist is not six degrees removed from that of a socially responsible investor or manager of a community loan fund.
What becomes clear is that it is all the same and we are all part of a common effort to create more effective tools to maximize total value for our entire global community.
The particular worth of the document presently in your hands is in some ways its simple contribution to helping us all see the parts that we are…
But the true potential of this document, for practitioners and investors alike, is the fact that it points toward the inherent truth that all of us are engaged in giving birth to ideas and skills that hold the promise of creating meaningful, full, and integrated value for investors, managers, entrepreneurs, and the future children of our world.
We must understand that defining the parts is just the first step toward embracing the whole. With this contribution by Kim Alter and the Inter-American Development Bank now in place, we must think long and hard about how we can best bring these parts together into a focused drive toward the real, ultimate goal:
the creation of sustainable economies, ecology, and equity that will be of benefit to all beings within communities and regions around the world.
Do we have what it takes to build our global communities at the same time we labor to expand our own organizations and pursue our individual strategies?
We could do a lot worse than try…
Celebrate the Struggle!
Grand Lake, CO
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