CareZone struggling for funds to help society

The Life: Social entrepreneurs need to narrow down their business proposition, find the right pople, and run it as a business to flourish. But it is a tough business environment for them.

Many social enterprises are not financially viable, says Sabrin Rahman, the manager of corporate sustainability at HSBC in Dubai. Satish Kumar / The National

Business people who create jobs are not necessarily social entrepreneurs. Nor are those who merely fill gaps in the market.

To be a social entrepreneur, a business person needs to address any of a number of significant and persistent problems, among them the lack of credit for non-bankable people, hunger and environmental degradation. But tackling such issues broadly is difficult.

Ritesh Tilani took a different track. He founded a business called CareZone nine months ago, and narrowed it down to something he thought would work in Dubai: helping people to benefit their favourite social causes. His start-up rewards users for shopping with partner businesses that give something back to the community.

But his enterprise has yet to attract any funding.

As business owners, columnists, bankers and academics debated on Thursday at a forum in Dubai organised by Strathclyde Business School,they argued that social entrepreneurs needed to narrow the focus of their propositions, find the right people and run the projects as businesses - not charities. While there are helping hands for social entrepreneurs - one in the form of bank funding for small to medium enterprises (SMEs) - these individuals usually struggle to get attention.

The forum's moderator, Garth Mitchell, a Strathclyde alumnus, asked which sector should do most to encourage social entrepreneurship. The unanimous answer: the finance sector, via loans, for instance.

But "many of the [social enterprises] are not financially viable", argued Sabrin Rahman, the manager of corporate sustainability at HSBC in Dubai. "The push has to come from education, from primary schools as well as business schools."

Banks are exploring new ways of funding. HSBC launched funds for SMEs last year and in 2010.

Unlike some multinational companies, social entrepreneurs often do not have the budgets to track real-time data or create large distributor networks that use local entrepreneurial talent. But by coordinating social enterprise with business motives such as self-interest, social entrepreneurs might get needed attention, said Hisham Wyne, a columnist who has been published in media including the Khaleej Times and The Huffington Post.

One major hurdle in attracting money for these ventures is that investors seek a return on their money in as little as three months.

This "tends to be even more difficult for social entrepreneurs whose business models may be more complex, as they have to consider the social problem they are trying to solve", said Jeannette Vinke, a senior lecturer at American University of Sharjah. "The short-term thinking across the world, and maybe even more in a more transient society like the UAE, encourages speculative behaviour when it comes to investing money."

For instance, businesses that offer "quick fixes" to obesity through crash diets or plastic surgery may make money within months, whereas a social entrepreneur with a programme of education and exercise to address the root of the problem would need a much longer time to deliver a return on investment, said Ms Vinke.

Social entrepreneurship can work in the UAE, experts say, and Islamic finance concepts could come in handy. "Lenders that share a degree of risk rather than just demanding interest, and lenders that cannot usurp, will make for very good investors in social enterprise," Ms Vinke said.

Meanwhile, Mr Tilani cautioned entrepreneurs to be prepared for the worst and to have a cushion of funding to see their ventures through gestation.

"I … have been focusing purely on looking for funding - while putting everything else on hold - for the past seven months," Mr Tilani said.

His technology venture, he said, could have been scaled up in its first year to have a critical mass of active users if things went according to plan. The lack of funding was mainly because there were no similar ventures for investors to use as a benchmark.

"Most investors in the Middle East are quite risk-averse and would rather invest in areas they understand and where they can predict returns with a high level of certainty," Mr Tilani said.