24 October 2016
Undersecretary for Home Affairs Florence Hui says  providing start-up funds for eligible social enterprises is a form of social investment. Photo: HKEJ
Undersecretary for Home Affairs Florence Hui says providing start-up funds for eligible social enterprises is a form of social investment. Photo: HKEJ

Social entrepreneurship: How far Hong Kong has come

Social entrepreneurship is seen as an innovative way to tackle social problems with so-called “social enterprises”.

Since 2001, the Hong Kong government has set up a range of funds to support social entrepreneurship.

Among these are programs that help the disabled, encourage self-reliance and promote social innovation.

Such enterprises have increased nearly threefold to 527 in 2015 from 187 in 2007, according to the Social Enterprise Business Center.

What remains unclear is how well these businesses will perform, especially given that some of them are backed by taxpayers.

Undersecretary for Home Affairs Florence Hui told EJ Insight that the government has invested more than HK$1 billion (US$129 million) to set up various funds to support social entrepreneurship.

“Providing start-up funds for eligible social enterprises is a form of social investment,” Hui said.

Early this year, Financial Secretary John Tsang announced a plan for an additional HK$150 million for the self-reliance program which provides seed grants to non-profit organizations to set up social enterprises.

Hui cited a research by the Fullness Social Enterprise Society (FSES) that the social return on investment of a well-run enterprise is seven times higher than comprehensive social security assistance as a means of poverty alleviation.

However, a survey by the DBS Social Enterprise Advancement Grant 2014 shows only 35 percent of such businesses are profitable while 32.5 percent achieve break-even and the remaining 32.5 percent operate at a loss.

FSES chairman Kee Chi-hing said some social enterprises should be considered successful even though their financial returns are not high enough to achieve a profit.

Charitable organization Stewards, for example, has been running a couple of sheltered workshops which provide the disabled with vocational training and allowances.

In 2009, Stewards had six social enterprises in which Kee was a coach and not all of them achieved break-even.

He cited a study by KEEP Consulting which compared the social return of investment of two sheltered workshops and five social enterprise projects run by Stewards.

The average annual funding needed for the social projects was only HK$1.70 for every HK$1 of work compared with up to HK$6.40 for the sheltered workshops.

Kee said that even though these social enterprise projects were not financially self-sustainable, their cost was significantly lower than the sheltered workshops.

“A primary social mission differentiates social enterprises from businesses, so the true value of a social enterprise lies in how effectively it tackles a social problem, not how much profit it makes,” he said.

If a social enterprise puts social impact over profit, the question is how to measure that impact.

One common practice is to calculate the social ROI by adding up financial return and social impact in monetary terms and dividing the sum by the amount of investment.

However, some doubt the accuracy of standard business measurement to assess the success of a social enterprise project.

Leong Cheung, executive director of Charities and Community of the Hong Kong Jockey Club, said the use of quasi-financial measurement tools seem to allow funders to benchmark across different social projects.

“However, putting too much emphasis on one universal measurement loses sight of some profound social impacts that are hard to quantify,” Leong said

“How do you put a dollar sign on empathy?”

Despite the lack of consensus on how to measure the success of a social enterprise project, statistics suggest Hong Kong is making progress in developing social entrepreneurship compared with its neighbors.

With more than 400 social enterprises and a population of just over seven million in 2013, Hong Kong boasts a social enterprise density higher than Singapore with roughly 170 such businesses in a population of 5.4 million, and South Korea with 950 and 49 million people.

Meanwhile, Hong Kong will host the next Social Enterprise World Forum (SEWF), an annual event attended by more than 1,200 practitioners from around the world.

SEWF chairman Peter Holbrook said Hong Kong has the resources and talent to be a global hub for social entrepreneurship.

“Given its strong entrepreneurial flair, Hong Kong is in a good position to showcase its best practices to the world.”

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