Catalyzing Business for Social Good in the Philippines

Speech | 2 October 2013

Speech by ADB Vice-President Stephen P. Groff on 2 October 2013 at the Social Business Summit in the Philippines in Angat, Bulacan, Philippines.

Magandang umaga po sa inyong lahat. Gusto kong pasalamatan unang si Tito Tony para sa pagbibigay sa akin ang pagkakataong ito upang bisitahin ang Gawad Kalinga Enchanted Farm. Ito ay tunay na isang magandang lugar at ang isang hindi kapani-paniwalang hakbangin. Pero, ang dapat kong nagsasalita ng Ingles ngayon dahil sa ating mga kaibigan ay mga international at hindi nila naintintihan sa akin. [Good morning, Ladies and Gentlemen. At the outset, I wish to thank Tito Tony Meloto for providing me with this wonderful opportunity to visit the Gawad Kalinga Enchanted Farm.] Enchanted Farm - what an appropriate name for this beautiful place, as there truly is something magical here--something that has attracted thousands of people, including visitors and volunteers from distant places across the globe.

The Enchanted Farm is a place that recognizes the dignity and potential in all of us, and presents an enticing proposition to change the way we live and do business. It is a place that welcomes those who aspire to create a more socially just and environmentally sustainable world in which everyone is given an opportunity to contribute and benefit. I salute the organizers of this landmark summit, which will stimulate ideas and action around strengthening social entrepreneurship in this country--and beyond.

As vice president of a regional development bank for Asia and the Pacific, I travel extensively to countries hundreds and thousands of miles from our Manila headquarters. It thus gives me particular delight to be able to experience first-hand a dynamic and internationally-recognized social enterprise hub just 50 kilometers from my office. The Enchanted Farm has tapped into a rich vein of energy flowing through the country and is an important incubator for the emerging social enterprise sector in the Philippines.

I’d like to share with you a few thoughts on why I believe that social enterprise has a bright future in the Philippines as well as across Asia, and why it must play a key role in tackling the poverty and deprivation that remain all too prevalent in this archipelagic nation. As the sector further develops in the Philippines, much can be learned from a growing global body of experience and knowledge. Furthermore, we must also recognize the critical contributions to be made by various social actors in order for social enterprise to reach its full and powerful potential.

New optimism in the Philippines

Up until recently, it sometimes seemed to me that the only international media attention accorded to the Philippines centered on unhappy or unfortunate events, including natural disasters, scandals, and human misery. I think that we can all take heart from the fact that a very different story line has emerged from these islands, one that is much more balanced and reflects some of the very positive developments taking place in the country. For example, the achievements of extraordinarily talented Filipino sportsmen and musicians have been hailed on the global stage. [One of these is the internationally renowned rapper apl.de.ap, whose charitable foundation is collaborating with the Asian Development Bank’s Staff Community Fund on anti-poverty initiatives]. The country’s striking natural beauty and rich wildlife--both above and below the water line--have begun to receive the wider recognition they are due, in part because of the colorful tourism campaign that highlights how it really is more fun in the Philippines. And then there is the economy.

While some other countries in developing Asia have seen their economic growth slow, the Philippine economy has topped its neighbors, boasting growth rates of more than 7%, driven by robust consumer spending, increased public expenditures, and fixed capital outlays. Indicators of competiveness and investor confidence have risen, and sovereign ratings have improved as a result of fiscal consolidation, a strong external position, and macroeconomic stability.

The search for inclusive growth

As we hail the improved economic indicators and improved profile of the country, we must remain cognizant that not everything has changed for the better. Surging economic growth has failed to reach all corners of society. It is premature to celebrate when, according to UNICEF, close to one-third of children under age five suffer from moderate to severe stunting due to malnutrition, and the incidence of poverty during the first half of last year showed no statistical improvement since 2006 [per NSCB]. A large share of the labor force toils in the informal sector, enduring long work hours without basic social protection, jobs benefits, and a reliable income. Clearly there is much to be done--and done more urgently--to tackle inequality and make Philippine growth more inclusive.

In terms of achieving the Millennium Development Goals, the Philippines’ record has been mixed, according to government statistics. The country is making good MDG progress as measured by indicators connected with malaria prevalence, under-five and infant mortality, and access to sanitary toilet facilities. However, there is a low probability that the country will meet indicators for maternal mortality, primary school completion, tuberculosis death rate, and immunization of one year-olds against measles. It should also be noted that the country’s average annual improvement on the Human Development Index, 2000-2012, was lower than other middle-income countries in Southeast Asia.

The Government of the Philippines has responded by making poverty reduction a national priority, and introducing and expanding programs to improve the living standards of millions of poor people. ADB has been a strong supporter of scaling up the country’s conditional cash transfer program, and is working with national authorities to develop a far-reaching community-driven development program that provides targeted resources to poor geographic areas to finance development projects identified as priorities by the local population.

These and other public sector programs will make a difference on a large scale. But they will not be enough to break down barriers that hold back a sustainable progression out of poverty. As in other countries, the private sector in the Philippines occupies a critical role in creating employment opportunities and delivering basic services. And within the private sector, social enterprises have the potential to play a particularly important role given their very focused commitment to directly addressing social problems.

Emergence of a new breed of entrepreneurs

It’s been estimated that there are some 30,000 social enterprises in the Philippines, including a broad range of cooperatives, NGOs pursuing profit-making initiatives, microfinance providers, and fair trade groups. Many have been around long before use of the term “social enterprise” became widespread. Most are small with a localized focus, lacking the capacity, resources, or desire to scale up operations to reach much larger numbers of beneficiaries.

As I learn more about developments in this area, I am very impressed with the wide range of social enterprise making a difference to Filipinos in need. There are, for example, social enterprise producers of coco coir, muscovado sugar, organic rice, essential oils, bamboo, educational toys, clothing and accessories made from recycled materials, coffee, health and wellness goods, and renewable energy -- many of these incubated here in Bulacan. Others are building job-relevant skills among young adults.

Let me just mention a handful of examples:

(i) Ricefield Collective, which generates supplemental income for women farmers by helping them produce and distribute handmade knit goods from sustainably-sourced organic wool. (ii) Kalibrr and Bagosphere, two social enterprises helping to train and then place jobless and under-employed youth into the booming business process outsourcing industry. (iii) Hamlet, a social enterprise based right here at the Enchanted Farm selling dumplings, patties and sausages through stalls called Hamon. (iv) Another enterprise based right here is Red Carpet, which engages out-of-work mothers to produce hand-crafted bags, home furnishings, and other sewn textile products; and (v) Human Nature, which produces natural personal care products from locally sourced inputs. Some of its products can be purchased at a shop conveniently situated at the Enchanted Farm.

Social Enterprise: A good fit for the Philippines

It is no surprise that Philippine social enterprises, including CARD MRI, Rags2Riches and Hapinoy, are achieving international acclaim. This country is very well-situated to nurture a thriving social enterprise sector. The Philippines has a vibrant civil society, including people’s organizations, community-based organizations, and other nongovernment organizations that serve disadvantaged groups. Social enterprises often emerge from civil society roots when those accustomed to operating on a grant-dependent-model seek a more sustainable way of achieving their mission.

The Philippines also boasts a robust community of business and family foundations that finance charitable causes. For example, the League of Corporate Foundations boasts a network of more than 70 corporate foundations and corporations that promote corporate social responsibility. Philippine Business for Social Progress (PBSP) is a corporate-led social development foundation that brings together some 240 companies to fight poverty.

Civil society and corporate philanthropy provide a potentially powerful source of support for the development of social enterprise. Several leading business persons have become active in the social enterprise space, and many people with NGO experience are now working to build up social enterprises. Many Philippine social enterprises have formed productive partnerships with NGOs and leading businesses in order to capitalize on natural synergies.

Growing social enterprise in the Philippines

But for social enterprises to become an influential force in the Philippine economy, an ecosystem of support needs to take shape around them. While social entrepreneurs bring the innovation, business acumen, and appetite for risk, other actors introduce additional vital ingredients to the mix.

For example, if we view social enterprises as being situated on one side of a coin, impact investors appear on the other. They provide the financial resources in the form of grants, loans, equity and guarantees. Impact investors come in many shapes and sizes, such as social venture capital funds, pension funds, socially responsible investment funds, endowments and family foundations, high net-worth individuals, and development finance institutions. Young social enterprises are also securing start-up capital from other sources, including angel investors, who may be family and close friends, and increasingly popular crowdfunding mechanisms, like Kickstarter.

Many leading social enterprises in the Philippines look to impact investors and other potential financiers abroad. However, for the sector to thrive in the Philippines, domestic sources of capital must grow. If large Philippine businesses, and foundations run by corporations and families, directed more of their budgets to promising social enterprise ventures in the form of capacity building grants, loans, or equity, the sector would quickly see further expansion.

In addition to capital, social enterprises require a range of expertise to strengthen their capacity to compete in the market. Small and emerging social enterprises--particularly those that have emerged out of a non-profit background--require education, training, mentoring, access to investors, and business skills development. There are a growing number of “impact accelerators” who offer such services, as well as early-stage capital. These accelerators are often backed by philanthropic support.

The ecosystem supporting social enterprise development has to include professionals with a range of expertise: accountants, brand experts and marketers, communications practitioners, lawyers, and finance specialists. Some of this support can be provided by impact accelerators, but one also sees seasoned business persons and leading corporations providing pro bono services to social enterprises.

The Government, at both the national and subnational level, has a large role to play in nurturing the sector. First and foremost, it can serve as advocate and champion, while raising awareness of the unique nature of social enterprises as “hybrid models” combining the social logic of a nonprofit with the commercial logic of a for-profit business. Government can also provide financing for innovative approaches to addressing social challenges.

The Singapore Government’s ComCare Enterprise Fund provides grants to start up social enterprises that help disadvantaged people become self-reliant. In 2011, the Government of Thailand set up a Social Enterprise Office to encourage social enterprise development. The Office is now planning a 1-billion-baht ($32 million) fund to mobilize money from the public to finance social enterprise operations.

In 2007, the Republic of Korea became the first Asian country to pass a Social Enterprise Act to support the role of social enterprsies in delivering social services. The Act spells out specific criteria for the types of entities that can benefit from government funding to carry out their work. The Australian Government has established Social Enterprise Development and Investment Funds to improve access to finance and support for social enterprises to help them grow their business, and increase the impact of their work in their communities.

Governments can also lead by example through the procurement of quality goods and services from social enterprises.

Commercial banks can also make an important contribution to the development of the social enterprise space. Several banks in the United Kingdom offer special accounts with more flexible conditions and discounted fees for small business and social enterprises. Some banks in that country have also launched award schemes for social enterprises, or made staff available on a volunteer basis to advise social enterprises on finance aspects of their operations.

Closer to home, in Singapore, the private bank DBS teamed up with educational and nonprofit partners to organize a three-day “boot camp” in July. The workshop helped participants to identify social problems, define change, construct business models, develop a volunteer management system, and measure social impact. There is no reason why a similar bootcamp could not be organized in the Philippines with the support of local partners.

Educational and research institutions also can help spur development of social enterprises by conducting sector analysis and studying best practices. Ateneo de Manila University has been a leader in this regard in the Philippines.

Universities can also incorporate social entrepreneurship into their curricula, and support student clubs that focus on the topic. Social enterpreneurship has become a major area of interest at MBA programs in the United States and elsewhere.

Bilateral and international development agencies can also play a role. Over the past three years, ADB has supported analysis of social enterprise and inclusive business in developing Asia, developed tools to assess the social impact of businesses, and brought together interested actors at workshops and seminars to share learning, ideas, and possibilities for collaboration. Last month--together with Philippine Business for Social Progress and the Manila-based Asian Social Enterprises Incubator--we hosted the Second Inclusive Business Forum for the Philippines. The program assembled more than 100 representatives of social enterprises, inclusive businesses, investors, government, and donor agencies for lively exchanges and brainstorming on future collaboration.

The scale of most social enterprises is generally too small for a large institution like ours to play a direct financing role. However, ADB intends to continue exploring opportunities to work with larger private enterprises that generate strong and direct social benefits. In addition, ADB and PBSP are developing a partnership to promote the domestic environment for inclusive businesses.

Conclusion

The explosion in interest in social enterprise in the Philippines makes it an ideal time to take more bold steps to boost the sector. Such growth must rely primarily on local ingenuity, resources, and commitment to substantially reduce poverty and deprivation. Gains can also be made by forging closer collaboration with international partners who can offer promising approaches, voluntary support, technical expertise, and financial resources. I am confident that the Philippines has what it takes to become a regional leader and a bright example for others in the development of social enterprise and inclusive business.

Thank you for giving me the opportunity to share these thoughts with you this morning. I wish Tito Tony, Gawad Kalinga and the organizers of this inspiring event a highly successful program.

Maraming salamat po sa inyong lahat.