Less profit is good business?

Wednesday September 20, 2017 Julian Williams

Social enterprises are sweeping the world.  Here in New Zealand, Christchurch is hosting the Social Enterprise World Forum (SEWF) in September 2017. People who lead these enterprises are called social entrepreneurs. They run profitable businesses but they are not exclusively concerned with making a profit. But why? Do they not have to pay dividends to investors? Well no, because the investors are not interested in dividends! All surpluses are applied for growth and development of the social enterprise, so that it can achieve social and environmental benefits for people and the environment. That’s the value proposition for investors.   


Some simple examples are helpful. A social entrepreneur can sell shoes profitably and use the profits to make shoes freely available to shoeless people who need them. We can extend the shoe example to just about any good and service including native trees; nutritious food; clean water for communities; social services, language schools; and financial services. A social enterprise can also sell goods and services of one kind profitably and then use the surpluses to provide goods and services of another kind.


Muhammad Yunus is a social entrepreneur who helped poor entrepreneurs. He was awarded the Nobel Peace Prize in 2006, among many other honours, for funding the Grameen Bank. The Bank provides loans to entrepreneurs unable, because of poverty, to qualify for conventional bank loans. This social enterprise was based on Yunus’ research at the University of Chittagong on ways to provide banking services to the rural poor.


The SEWF will be a big boost to the social enterprise movement in New Zealand. In New Zealand, we have many social enterprises, both large and small. The Government says it wishes to support the development of the social enterprise sector in New Zealand, according to a 2014 message by the Department of Internal Affairs (DIA). Further, it says it acknowledges the innovation and entrepreneurship of this sector and the valuable contribution social enterprises can make to community strength and resilience.


Public service departments should be interested in social enterprises, because the DIA message says that they can support a range of government goals including the development of a productive and competitive economy.

We are watching this space with keen interest. Just think what it could mean for socio-economic development in the regions.