Social enterprise in emerging markets: lessons to help address youth unemployment?
By: Stephen Hunt
Tags: Development, Unemployment, Social Enterprise, Youth, Sewf

The Social Enterprise World Forum 2019 took place in the Ethiopian capital, Addis Ababa

The Social Enterprise World Forum (SEWF) is in Addis Ababa this week and Challenges are here among 1200 other colleagues showcasing the power and value behind social enterprise as an approach for achieving the Social Development Goals (SDGs) and wider development. Challenges are presenting at a number of sessions over the week, and our Research Manager, Stephen Hunt is kicking off the engagements by presenting on the role of social enterprise for youth job creation and employment in emerging markets.

As specialists in supporting businesses in emerging markets for inclusive growth, Challenges work centres on using business and market-systems approaches as a vehicle to drive social and economic change. A key part of the work we do is enabling young people to contribute to sustainable and lasting economic development, including playing key roles in job creation, strengthening local economies, and improving transitions to decent work.

While social enterprise and social business models (hereafter just social enterprise) have come a long way to supporting marginalized groups to (re)enter the labour market, there are a number of lessons and observations in regards to approaches to social enterprise addressing youth job creation and employment that we should be taking stock of as we go in to the Forum. Here some key observations and suggestions are outlined that we hope will set the tone for some fruitful and constructive conversations.

There is a large evidence gap on social enterprise initiatives for job creation in emerging markets: simply put, there is very little specific literature on the role of social enterprise as a mechanism for job creation in emerging markets. While there is some learning available on this from OECD countries and more developed markets (which paints a mixed by optimistic picture) the context and challenges of lower and middle income markets are very different. Notably, there is a growing evidence base on best practice in setting up social enterprise ecosystems (such as the British Council’s excellent ecosystem maps), yet understanding how specific approaches in social enterprise support the employment challenges in these types of markets is an important task that needs to be built up.

We need to address the supply-side bias of social enterprise employment initiatives: based on early data by the Global Entrepreneurship Monitor, and British Council, large majorities of social enterprises in emerging markets support youth through supply-side service functions. This includes providing training, employment services and ‘creating’ social entrepreneurs. This is a similar trend among the broader youth employment initiatives in emerging markets. Albeit, while there is no doubt about the importance of these types of initiatives, they dominate the social enterprise landscape, and linkages to demand-side initiatives need to be strengthened to create the jobs needed for young people.

Most social enterprises in emerging markets are low turnover sole traders or SMEs. Interventions to support them must be both balanced and appropriate. Data from the Global Entrepreneurship Monitor and British Council studies show that most social enterprises are SMEs. This trend closely follows the general trends of enterprises and start-up rates in emerging markets. However, like many low- and middle-income markets, the success and survival rates of these types of businesses are volatile. Getting the balance right to supporting SME survival and success is crucial. While access to credit, the correct training, and appropriate policy frameworks present shared challenges for both commercial SMEs and social SMEs, businesses delivering a social mission face additional hurdles to their success. Making sure interventions account for both the shared and distinct challenges between these different SMEs will be pivotal, and collaboration is key. For instance, interventions supporting the broad SME sector will generally make it easier to support social enterprises, but access to the ‘types’ of support services should be inclusive of the specific needs of social enterprise, such as the right types of finance. On the other hand, solely focusing on social enterprise support interventions may not succeed due to the more structural barriers within the wider SME ecosystem stymieing success.

How we foster social entrepreneurship among young people in emerging markets must take account of (and learn from) the current weak evidence of youth employment and entrepreneurship programmes: The creation of social entrepreneurs is a key agenda for the growth of the sector, and this approach is charged with not only addressing social and environmental challenges, but also job creation for the next generation. While social enterprise education plays a key role in achieving this, we must also take account of the broader evidence base on youth employment and entrepreneurship programmes .To date, the majority of initiatives like entrepreneurship, skills training, mentorship, microcredit schemes, and employability programmes have had little to moderate lasting impact in emerging markets. This is the key message from number systematic reviews of youth employment initiatives from across Africa and globally. For social enterprise this is a key lesson to consider: to date, the most common approaches in social enterprise supporting youth employment focus on strengthening their human capital, market-based approaches through cottage industry, job-matching services, or entrepreneurship. However, the evidence on the success of initiatives like these varies drastically, and we need to take stock of best practice and key lessons to inform how social enterprise(s) can best address barriers to employment.

Social enterprise support services need to be aligned with macro-level barriers to decent-work: While all young people face their unique employment challenges, they often face the same macro-level employment barriers to decent work as others, such as skills shortages and skills mismatches. Therefore, not all ‘barriers to employment’ are specific to a given group. It is important that social enterprises understand this, and also ensure their services are cognizant of — and where possible also align to — to wider macro-level barriers to labour market inclusion.