Social Business: How Social is Social?
Given my longstanding interest in innovation and entrepreneurship for sustainable agriculture (dissertation work at IIM-A in the early nineties) when Profs. Shambu Prasad and Ajit Kanitkar invited me to join a select group of researchers to carry out case studies on social enterprises (SEs) in the farming sector, I had no hesitation in saying YES!
A SE is generally understood as a business enterprise designed and created to address a social problem. However, there are practical problems associated with identifying and researching SEs.
The extent of commitment to the social cause can vary from one entrepreneur to the other, one time frame to another and one context to another! Is SE therefore only to be perceived like beauty, in the eyes of the beholder?! The fifteen cases in the book, Farming Futures, also had a couple of entrepreneurs who did not want to be identified as social enterprises although the researchers thought differently. Conversely, there were a few SEs that appeared no different from commercial entrepreneurs.
This issue came up among other things in the book promotion event that we organized on 29th Nov. 2019 at AMA, Ahmedabad. One view was that besides being efficient, SEs should have a proven track record of being socially inclusive and environmentally sustainable. These are again broad concepts that can only be operationalized through specific indicators. Should there be therefore, a simple instrument that enables us to calibrate the “socialness” of an SE?
My case study was on Ergos, a company which addresses one of the most persistent and challenging problems faced by marginal farmers in India, viz. how to deal with the market without getting exploited! The solution was strikingly simple and obvious – but not until Ergos demonstrated it in Samastipur, Bihar viz. to take scientific micro-warehousing to the door-step of the farmer at a price that (s)he could afford. It was both a learning experience and a pleasure interacting with the Ergos founders Kishor Jha and Praveen Kumar, both young professionals established in their respective fields of finance and HR, having roots in the farming community in Bihar. Kishor nurtured a deep desire to do something to improve the lot of their community back home and established ERGOS in 2012. After a process of self- incubation of about 3-4 years they “co-evolved” the solution with the farming community and built a team of professionals and field workers committed to a common purpose of improving the socio-economic condition of marginal farmers.
In 2019-20, Ergos reached a turnover of Rs 24.6 crores operating 70 Grain Banks (micro-warehouses) and was close to breaking even. It has successfully raised finance of Rs 100 crores from different sources including Rs 36 crores from Aavishkaar. This will help scale up across Bihar and four other states covering 2 million farmers.
Coming back to the question I started with, I believe that responses to a set of six questions can help place an SE on a scale of social orientation. I am sharing these below, with Ergos as an illustration.
1. How serious and widespread is the social issue being tackled?
Marginal farmers constituting 70-80% of the farming community in India, do not have access to modern storage facilities. Most of the public sector warehouses are located on highways 20—25 kms from the village and remain inaccessible to them. An associated problem is the urgent need for cash at the time of harvest which compels the farmer to sell his/her produce to petty traders at unjust prices. In the absence of market information and market linkages the farmer has little or zero bargaining power and continues to get exploited.
2. How inclusive is the solution and how satisfied is the target community?
A three-pronged solution was adopted: i) Micro-warehousing enabled the farmer to hold the produce for a few months and realize higher price (often 20-30%) in the market ii) Farmers were provided with market intelligence and market linkages in order to realize better prices iii) Bank loans were provided against warehouse receipts. The innovation of “grain bank ATM” enabled farmers to access grain for home consumption or cash against the grain stored with Ergos. Farmers have accepted the solution wholeheartedly.
3. To what extent has the targeted community been able to own and shape the solution?
The SE established close relationships with the farming community. The solution was ‘co-evolved’ with farmers. The price of Rs 10-12/Q/m as rent was decided by the farmers themselves. A farmer can access the grain-bank or its services at any time, even if it is just to check out his/her stock of grain. Field workers are rated by the farmer after each service provided.
4. How inclusive is the business model?
The business model ensures that marginal farmers are given priority and they can easily access the grain-bank and its services at an affordable price at their door-step. Assurance is provided through insurance against theft and fire. Their ability to access markets and market information through mobile phones and/or grain-bank kiosks is built through training.
The model also focuses on generating alternative streams of income that cross-subsidies marginal farmers e.g. aggregation and meeting demands for agro-inputs, crop insurance, health insurance etc., collateral management fees from financial institutions etc.
5. How inclusive is the management information system?
Ergos monitors both commercial (e.g. % capacity utilization of grain-banks) as well as social variables (% marginal farmers utilizing services, % volume of goods stocked by marginal farmers). Incentive scheme for field workers is linked to performance on both commercial as well as social indicators.
6. How open is the SE to sharing its innovative solutions with other players?
Ergos is testing a “plug-in model” for partnering with village level entrepreneurs (VLEs) and will provide its technology platform to them that will service farmers for market linkages, credit access and end-to-end warehousing services. They will be linked to the Viability Gap Funding and Village Storage Scheme of GoI.
Both social entrepreneurs and researchers can try out this tool using a five-point scale for each question. Together, we may evolve ways to calibrate the ‘socialness’ of a social enterprise.
Astad Pastakia, based in Ahmedabad, works as a freelance consultant in the area of rural livelihoods, innovations, and entrepreneurship for inclusive sustainable development.
He has published three books including a four volume open-access handbook on livelihood strategies for rainfed areas and several research papers in journals and books.