Policy Dialogue in Nairobi, Kenya ©

British Council

The British Council in Kenya hosted policy makers from national and county governments in a policy dialogue event. The event focussed on access to finances for social enterprises and how this challenge impedes social and economic growth in developing countries. For the past two years, the British Council, in collaboration with the European Union, have been running a pilot project called Support for Social Enterprises in Eastern Africa. This is currently underway in Ethiopia and Kenya. 

In 2016, a British Council survey was conducted with 183 social enterprises in Kenya. The results showed that 54% considered lack of access to capital as the biggest barrier to growth. For another 45%, access to grant-funding is the largest impediment. During the Nairobi meeting, policy makers focussed on how the challenge in accessing finances has impacted on the growth of the social enterprise sector. Wubet Girma, British Council Social Enterprise Lead for East Africa, explains what the training was meant to achieve.

“The role social enterprises can play in supporting economic growth, in driving sustainable and inclusive development and in tackling inequality is receiving increasing recognition globally. The aim of our session in Nairobi is thus to enable policymakers to better understand the nature and potential of social enterprise, and the way in which public policy can help support its development in a country context. This training was organised by the British Council in collaboration with Social Enterprise UK, a membership network of social enterprises in the UK with funding from the European Union.” 

Over the last five years, there has been an upsurge in the number of social enterprises established around the world. In Kenya, for example, 64% of social enterprises established since1980. This underlies the rising importance of social enterprises: they can be vehicles for addressing the growing consciousness of business to deliver social and environmental outcomes, beyond its commercial intentions. Social enterprises are like any other business. To deliver profit and impact, they require funding. This may come in many forms, from charging for their trade, internal sources within the entity and from external sources.

Samuel Ndonga, an investment manager with Deutsche Bank AG and co-founder and director of BlueInventure, said that the concept of social enterprise is still maturing in Kenya and many entrepreneurs still struggle to even define what they do.

“If, as an entrepreneur, you struggle to describe what you do, then how do you attract funding? A lender is interested in how you apply their funds and how you translate them into repaying both the principal amount and the interest. Funders are sometimes limited by the scope or lack of knowledge of the enterprise they are trying to fund. There is also the added challenge that in Africa there is a lack of capacity for managing funds available to support entrepreneurship.”

There are other issues linked to the failure of social enterprises to pass the “self-identity test”. David Cheboryot, East Africa manager for E4Impact Foundation which supports impact entrepreneurship in Africa, said there is a tendency for social enterprises to undervalue themselves. This, he argues, means they fail to attract funding.

“There is an appetite in the market for supporting social enterprises, but this opportunity is never maximised mainly because most social enterprises are founded with the aim of solving a social problem, and therefore they undersell on promoting their profitability,” said David.

The UK is widely recognised to have one of the most developed social enterprise eco-systems in the world. They have also demonstrated commitment to supporting the growth of social enterprise and social investment globally. Paula Woodman, senior advisor for British Council's Global Social Enterprise programme and who was a member of the Nairobi panel, explained some of the survey findings. She also spoke about how the UK had supported the social enterprise eco-system.

“A mapping survey by the British Council among 183 social enterprises in Kenya has shown that over 50% of those who started social enterprises were women and young people; and that female entrepreneurs were more risk averse as compared to their male counterparts. In terms of access to finance for social entrepreneurs, it is worth asking, then: how fit are the financial institutions in understanding the market they are funding?”

The UK has done much work in policy and legislation to support social enterprises in the areas of trading and sustainability. The UK government account for 20% of all business purchases by social enterprises, and one of the landmark legislations in the UK is the Social Contract Act.