Social enterprises have trouble landing capital in Vietnam

VOV.VN - On the face of it, social enterprises seem to make perfectly good sense for a country like Vietnam, said Thai Thi Huyen Nga, program officer of the Centre for Social Entrepreneurship Development at a recent conference in Hanoi.

social enterprises have trouble landing capital in vietnam hinh 0
Promoting a business model that can do good work in society addressing problems such as poverty while also being self-sustaining seems like the perfect solution to many of the country’s challenges.
  

However, Miss Nga noted, the fragmented social enterprise ecosystem in Vietnam lags decades behind that found in the UK and other developed nations, leaving the country’s entrepreneurs facing many headwinds.

She added that finding the financial capital to start and get a successful social enterprise up and running is the number one challenge facing the development of this business model in Vietnam.

What is a ‘Social Enterprise’?

The meaning of 'Social Enterprise' differs from country to country. In the UK, they are defined as businesses that exist to address public or environmental needs.

However, in the US, the focus is on for-profit businesses that look to simply create or bring about some new and positive change in the world.

In many other parts of the world, such as Vietnam, there simply is no properly legislated definition of such a blended organization.

This means that Vietnamese are left with the layman’s definition of social enterprise, of which there appear to be two – a nongovernmental organization that generates part of its own income through commercial activity –  or a business that exists to profit and do good in the community.

The state of social enterprises in Vietnam

There are now only about 200 such societal enterprises in Vietnam employing very few and contributing little to the gross domestic product, according to speakers from the British Council, one of the conference organizers.

This compares to some 55,000 such businesses in the UK that gross nearly US$34 billion and contribute roughly US$10.5 billion to the country’s GDP per annum, the speakers noted.

They said the segment in the UK employs a total of 475,000 workers and 300,000 volunteers, which equates to such enterprises employing 5% of the total number of workers in the private sector.

Meanwhile, Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR) has issued a report warning that there is very little international support for these enterprises in Vietnam.

In the report, the VEPR states bluntly that the country cannot look to international financial sources for their development but must make full use of local aid especially donations from businesses in the domestic private sector.

Echoing the views of Miss Nga, the report indicated that the main challenge faced by such enterprises in Vietnam, relates to generating enough investment capital or donor funding to pave the way towards sustainability.

Most such enterprises have discovered that international donors will only recognize a registered nongovernmental organization and will not –  in most instances – support a for-profit registered organization, no matter how socially beneficial it is.

On the other side of the coin, from an enterprise development or venture capital perspective, the road to sustainability for a such enterprises are invariably long and fraught with risks, making it an unattractive investment vehicle in most cases.

Therefore, the VEPR report asserts it is fundamentally critical that a simple legal framework for the operation of social enterprises be expeditiously completed and placed in operation in Vietnam.

The challenge for the government is to find a way to make the support of such enterprises in Vietnam attractive to domestic private sector companies to fund as part of their corporate social responsibility initiatives.

Currently, there is little incentive beyond moral compulsion for those with money to support businesses in Vietnam with a social mandate. 

VOV

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