10th Anniversary Essays
Sixteen special essays on how the field of social innovation has evolved and what challenges remain ahead.
Since the 1970s, microcredit has been considered a critical tool for poverty reduction and development. Muhammad Yunus even considers access to credit a human right. After years of research and working hand-in-hand with female entrepreneurs in marginalized Mexican communities, however, I’ve learned that credit is a necessary but not a sufficient condition for success. These women face a multiplicity of challenges, including a lack of social networks, an underdeveloped entrepreneurial business culture, few business skills, no access to mobile technology, and limited contact with professional business development services.
I became a social entrepreneur to help female entrepreneurs overcome these challenges—to work with women in Mexico’s marginalized communities and offer them tailored and practical business development services to help them succeed. To accomplish that I created Crea, a nonprofit social enterprise I’ve been building for the past 5 years. Through our services we’ve helped low-income women become successful: 88 percent of the women we have worked with now have formal accounting systems, up from less than 5 percent when we started; these women have increased their profits 50 percent more than women in similar conditions who don’t work with Crea. Our services have helped these women increase their income and create new jobs and opportunities for people in their communities.
But just like the women I work with, I and other Mexican social entrepreneurs have had to overcome our own challenges. This experience has taught me that money, by itself, is never enough. What we need are changes in legal and fiscal regulations, as well as the creation of a solid ecosystem and infrastructure to allow social entrepreneurs to reach their full potential and help solve Mexico’s and the world’s most urgent problems.
On the legal and fiscal side, one of the biggest problems Mexican social entrepreneurs face is that there are no organizational/legal entities that allow entrepreneurs to run social enterprises per se. An organization can incorporate as a nonprofit and justify tax-deductible earned income only if it can prove that the income is related to the social mission. Or an organization can incorporate as a for-profit and donate, with tax deductibility, up to 7 percent of the prior year’s profits to philanthropic or impact activities. But no organization can have it both ways.
The growth and impact of the social sector is limited by the inflexibility of laws that inhibit innovation and investment in social enterprises. To work around the constraints, Crea has had to incorporate multiple entities, increasing our administrative costs but allowing us to operate successfully while complying with regulations. If we didn’t have a board full of lawyers, our strategy would not have been possible.
One of the biggest problems Mexican social entrepreneurs face is that there are no organizational/legal entities that allow entrepreneurs to run social enterprises per se.
Many Mexicans are striving to change these regulatory obstacles and show that social enterprises are partners and collaborators in the country’s development. Nevertheless, our social innovation sector is relatively small when Mexico is compared to other countries in Latin America, such as Chile. One thing that would help us, and I am sure would help social entrepreneurs in many other countries around the world as well, is enactment of new laws and regulations that would make it easier to create and operate social enterprises. This would be an admirable task for a global NGO to take on.
Another reason the Mexican social sector hasn’t evolved and reached its full potential is that the government has long been reluctant to collaborate with organizations such as ours. Because there are few opportunities to develop strategic collaborations between the government, the private sector, and civil society, it becomes hard to scale up the impact and replicate successful models.
Last, there is a dearth of civic and philanthropic culture in Mexico. Very few people seem to understand or care about impact indicators, and the lack of professionalization in the social sector is striking. The kind of educational opportunities and consulting support that could encourage a stronger civic and philanthropic culture are sorely lacking. Data are not yet driving strategic investment and philanthropic decisions, which in many cases limits the impact on the ground. It also prevents the sector from showing how the financial and social impact it does have contributes to the country’s development.
Despite these obstacles, I am hopeful about the future. Women are the hidden engines of economic growth. By investing in women we are seeing real social and economic development. And we are not alone. Crea is one of many social enterprises that are creating change in Mexico and around the world.