Doing aid differently: How to help social entrepreneurs and impact investors do good
Associate Professor Danielle Logue, Dr Gillian McAllister and Dr Jochen Schweitzer recently released the UTS Social Entrepreneurship and Impact Investing Report, a research collaboration with innovationXchange, Department of Foreign Affairs and Trade, Australia.
"The best people to solve the challenges of poverty are the people who have lived with those challenges," says Aaron Tait, a former Australian Naval Officer and international development worker who now works with social entrepreneurs in Africa, Australia and across the Asia Pacific.
“After years of development experience in the field it became clear to me that entrepreneurship was often a faster and more effective way to make change than ‘charity’ approaches,” says Tait.
Tait is co-founder of the Spark* International accelerator, a support program that works alongside emerging entrepreneurs in some of the world’s poorest countries.
Spark*, an arm of social change organisation YGAP, connects entrepreneurs with training, strategic guidance and investors, to help them turn their early-stage startups into businesses that ultimately change thousands of lives.
“We’ve backed about 300 entrepreneurs in Africa, Asia, the Pacific and Australia,” says Tait. “What we’ve seen is that the ones who are operating as startups, as businesses, are moving so much faster and have more reach than those who are operating as not-for-profits.”
Tait is one of the 100-plus people who took part in a recent study by University of Technology Sydney (UTS) researchers into innovation in aid and development.
Social entrepreneurs and new market-based tools could help Australia address development challenges in the Asia-Pacific region in a more effective and efficient way than traditional aid, suggests the study – a collaboration with the Department of Foreign Affairs and Trade’s innovationXchange (iXc) unit.
The iXC unit was established within DFAT in 2015 to identify new approaches that would improve the effectiveness and impact of the Australian aid program.
The UTS report looks at possible interventions ranging from government support for early-stage social enterprises through to building platforms to facilitate “impact” investing.
“We wanted to know what new mechanisms might allow Australia to do aid differently,” says lead researcher Associate Professor Danielle Logue, a Research Director of the new Centre for Business and Social Innovation (CBSI) at UTS Business School. “How can we encourage greater private sector investment – investment that seeks a social-good return alongside a financial return?”
Social enterprises make profits in order to be able to achieve social goals, while impact investors seek a social as well as a financial return when they invest. One challenge is to find better ways to connect social entrepreneurs with impact investors and other sources of capital, the report says.
YGAP, where Tait works, is a “hybrid” social enterprise and not-for-profit – with part of its funding coming from philanthropy and part from profit-making activities such as its Feast of Merit restaurant in Richmond, Victoria.
The UTS researchers investigated the viability of various mechanisms to assist social entrepreneurship and impact investment, talking to more than 110 people across the region and in the process building a database of incubators, accelerators, crowd funding platforms and microfinance organisations.
“It was important for us to talk to people in the field to try to understand what the government can do to help them,” says Associate Professor Logue. “We wanted to find examples of best practice where people are gaining traction in very resource-poor areas.”
The research found that the various mechanisms were at different stages of development and each had its pros and cons when it came to achieving the goals of aid and development.
For example, crowdfunding – where small contributions from a large number of people are collected via an online platform – is potentially useful for early-stage finance. However, its reach can be limited by a lack of online banking infrastructure.
“In this case, the government might consider matching crowdfunded amounts to support programs it identifies as likely to have high social impact,” says Associate Professor Logue.
The researchers’ analysis of over 90 incubators and accelerator programs across the region found there were limits on such programs. “It isn’t that more incubator programs are required per se, but that programs are needed in local languages as well as English, and in locations outside major cities,” says Associate Professor Logue.
There was also a question mark over the ability of entrepreneurs – and funders – to assess the quality of individual programs, she says.
“Our research suggests there’s potential to develop a network of program providers, which would allow incubator managers to learn from one another and perhaps even lead to an incubator accreditation system.”
Tait of Spark* International says he believes governments can play an effective role by allowing economic growth to come through, by backing local entrepreneurship and innovation.
For more information, contact Associate Professor Danielle Logue