The case for social entrepreneurship in Pakistan
By: Priya Shah
Pakistan is home to numerous microenterprises, which will continue to serve as a pipeline for two players: a) policy-makers, for whom long-term social impact can address community needs; and b) investors, who will need greater deal-flow to finance these microenterprises.
The development community in Pakistan has tried to address the challenge of inefficient funding to smaller enterprises at the base of the pyramid by creating microfinance lending instruments and private sector intermediary institutions, including those supported by the International Finance Corporation.
Microfinance Banks (MFBs), such as the Kashf Foundation, First Microfinance Bank Ltd and the Orangi Pilot Project are established as separate legal structures administered and regulated by the State Bank of Pakistan. These institutions have made considerable strides in Pakistan in improving access to capital from loan sizes of US$10 to more than US$1,000 for small businesses. Currently, default rates for SME clients of MFBs in Pakistan are amongst the lowest in the world, epitomising the success of the sector and the strength of their legal structures.
However, new models of social entrepreneurship are fast gaining headway in Pakistan. These models both harness the skills of young entrepreneurs and maximise the available resources (both natural and technical) to create sustainable systems for change. Pakistan requires a dynamic approach towards education to ensure socio-economic growth. Crucially, funding for small enterprises should meet the specific needs of the entrepreneur from seed financing to venture capital to growth equity.
The formation of university clusters and incubator hubs could be a powerful launching pad for developing social innovation projects in Pakistan. Business education programmes can be strong catalysts for socio-economic change. The study of entrepreneurship carries much weight in Pakistan; nationally there are eight business specific academic institutions and in 2011, and Pakistan hosted its inaugural Junior World Entrepreneurship Forum Conference 2011. Research from the University of Arizona has shown that “five years after graduation, the average annual income for entrepreneurship majors and MBAs who concentrated in entrepreneurship at the school was almost 27% higher than for other business majors and students with standard MBAs”.
The Institute of Business Education (IBA), one of the more progressive business schools, was established in Karachi in 1955 with initial technical support from the Wharton School of Finance at the University of Pennsylvania and the University of Southern California. IBA’s Centre for Entrepreneurial Development (CED) aims to promote entrepreneurship education at the university-level, a program that culminates in a business plan competition in which students pitch their business ideas to a panel of judges. Moreover, the IBA CED is not just geared towards students at IBA in Karachi – it targets a consortium of eight universities across Pakistan – including in Quetta, Peshawar and Islamabad. This extension of the program gives students in lesser known and smaller universities access to quality entrepreneurship education, skills and opportunities.
Moreover, other smaller organisations exist in Pakistan which actively encourage social entrepreneurship and promote knowledge transfer. The MIT Enterprise Forum of Pakistan is a membership organisation promoting the growth of innovative and technologically-oriented enterprises through specialised executive education programmes. These programmes include roundtables, investor forums and awards ceremonies, whilst areas of study include developing and applying for investment and funding, discussing exit strategies, investor incentives and regulatory frameworks.
Other incubation centres exist which have been supported by the Government of Pakistan. Seed funding for the Women Business Incubation Centre was initiated through public funds and established within the framework of the Small and Medium Enterprise Development Association. This Centre provides hands-on support to female entrepreneurs. Uniquely, the incubator offers training programs to new business ventures and supports existing enterprises owned and managed by women, specifically in early stages when the fledgling businesses are most vulnerable.
On the social intermediary front, Invest2Innovate is an example which mentors young entrepreneurs by cultivating partnerships, as well as incubating early stage enterprises through the i2i Accelerator program. Invest2Innovate supports a mixture of profit and non-profit enterprises such as MilkOp, a for-profit enterprise that offers support to dairy farmers and EcoEnergy Finance, a non-profit which delivers affordable clean energy solutions for rural areas by distributing solar lanterns and lighting systems.
In essence, there is much scope for microenterprises in Pakistan to develop and scale with the help of incubators and accelerator hubs. Now more than ever, mentorship and peer networks will become crucial to supporting these enterprises at the base of the pyramid and empowering social entrepreneurs across a variety of sectors.