Social enterprises and the future of Russia
Despite the intensive economic development of certain regions like USA, Western Europe, Russia and Asia according to their GDPs for the last 5 years, most of them suffer certain social problems (uneven distribution of income, poverty, and criminal). Russia is one of them with big number of people living under the minimum level of income, for example 50 million surviving at rate of $4.30 a day, 10 million - $2.15 .
Poverty is still one of the biggest problems of humanity despite of the technological innovations, knowledge domination, globalization and different types of resources available for achieving most demanding goals. 94% of world income is concentrated in hands of 40% of world population while the other 60% has to cope with only 6%. A half of the world population has to live on $2 a day and almost a billion of people earn less than $1 a day. One sixth of the population in USA is medically non-insured . According to human poverty index (University of Sheffield) Central and South-Eastern Africa is at the scale of about 400 (out of 1000), Russian Federation – 150, Western Europe – 10.
On the one hand, the presence of states, help organizations and multilateral institutions (IFC, OECD, DAC, IBRD) influences the poverty level positively. But according to Muhammad Yunus, winner of the Nobel Peace Prize 2006, the effectiveness of these institutions in solving the problem is below expectations. Apart from that, he mentions the reasons for it and arguments why the situation is as it is. Therefore he suggests that a new form of enterprises is developed for social purposes, one of them is fighting poverty.
The social enterprise is different from an enterprise functioning in the world with dominating neoclassical theory of markets and the concept of their self-regulation (A. Smith, D. Ricardo, J. S. Mill and others). The main and the most important difference lies in the goal of every enterprise’s activity. According to the neoclassic theory and the Betriebwirtschaftlehre (BWL – Business Administration Studies: E. Schmalenbach, E. Gutenberg, E. Heinen, H. Ulrich, H. Albach) the main goal of every enterprise is its profit maximization. But the goal of every social enterprise is social well-being (for example, increasing the income of people leaving under the level of $1 a day in region X in one year, providing milk products to poor children in region Y, decreasing the number of abortions by 30% in region Z). This goal gives an opportunity for price to be highly competitive and available to those most in need for certain products (price covers only the production costs). Financial means stay in the enterprise without any dividends being paid to stakeholders but being used for achieving social goals and for the development of the company. Such values create a completely new personnel motivation system. Apart from that the enterprise has the same organizational structure and administration style as a profit-oriented company and performs the same kind of activity producing goods or offering services. And it is also subject to competition, however competition for a new kind of goal.
The difference between a social enterprise and a social organization lies in the price of a product or service, mainly a social enterprise expects a payment for its products or services in order to cover the costs of its production. A social organization or a non-governmental organization, on the contrary, depends on the financial support from government or charity funds and in this way is limited in its independency and is inefficient in achieving its goal. Concentration on the coverage of its own costs in the long run makes a social organization to an enterprise.
Social enterprises have already been popular. Bill Dayton with his Ashoka Foundation, Jeff Skoll – Skoll Foundation, Klaus Schwab – Schwab Foundation and most certainly Muhammad Yunus and Grameen Bank with the concept of microcredits are all examples of social enterprises.
The Grameen Bank is the most representative example of a social enterprise. It is based on the reversal of the question “whether the poor are creditworthy” into the question of “whether banks are peopleworthy”. Muhammad Yunus examines this issue in order to find out the real reason for poverty starting with a small village of Jobra in Bangladesh. He finds the exploitation of the poorest of the poor by money lenders and unwillingness of banks to give them credits due to their non-creditworthiness as the main factors preventing the poor from changing their condition. With the help of microcredits, credits of small amount of money under no or very small interest rates given to the poorest and mainly to women with children, the Grameen Bank has achieved tremendous results in having given out since 1983 USD 6 billion of credit, 98,6% of which have been paid back to the bank in the complete amount. Since its opening the bank has been achieving profits almost every year except for 1983, 1991 and 1992. And according to the internal research of the bank, the 64% of borrowers that have been using the services of Grameen Bank for 5 years have left the poverty level.
Do social enterprises have future in Russia? Most certainly if certain aspects of life of Russian society are to be developed. Any kind of social problems that could not be treated in conventional ways by means of the governmental funds or aid organizations can be seen as activity field of a social enterprise. As a matter of fact, including concretely defined social goals into mission of any company, the profit oriented one or not, would give shareholders of those companies, employees and managers an opportunity to take part in a philanthropical activity of an enterprise, which is able to sustain itself on its own.
Influencing immigration and the employment of immigrants on the territory of the Russian Federation, improvement of health conditions with new better medical facilities offering medical services of high quality, healthy lifestyle, life activities and better food quality, balancing the demographical picture of big cities are some of the possible goals of a social enterprise. The field for creativity is endless.