A social business, as defined by Prof. Yunus, is a business or project that, apart from generating profits, focuses on making a positive impact on society. In practice, this means that any profit that the organisation or project makes through its efforts to make a positive impact is reinvested with the aim of increasing its positive impact. The main difference between a social and a traditional business is that profits are not simply handed over to investors.
At Yunus Social Business, we aim to reduce poverty through the social businesses that we invest in. If looked at transversally, there are many ways of reducing poverty, such as improving access to social services or other public services, fair and decent employment, healthcare and environmental justice.
The impact investing industry in Colombia is very dedicated. It consists of stakeholders from academia and the government, as well as private individuals and investment funds and although everyone is trying hard to make a difference, all these players have different missions. This has resulted in an industry that is not working in harmony. Investment funds, for example, have a different agenda to the government, as these are looking to invest in those businesses that are doing incredibly well and are making a positive social impact.
What they are looking for is difficult to find because social investing only came to Colombia around 5 years ago, meaning the market is not yet very developed and social businesses are still establishing themselves. This is where investment funds like Yunus Social Business come in, as one of our roles as a fund is to offer social entrepreneurs the tools they need to establish themselves. However, this does not mean that we support anyone and this is the difficult part – we aim to invest in robust businesses that are active in a market in which social entrepreneurs are only just starting become established.
The government on the other hand is giving foreign investment funds access to the Colombian social impact industry and is also providing businesses particularly in the agricultural sector with support.
One of the significant challenges we face is that people in Colombia do not entirely understand the concept of a social business, which often results in funding going towards subsidies or foundations instead.
Subsidies as well as foundations play an incredibly important role in the ecosystem, but they should not be confused with social businesses. The Colombian ecosystem is currently in a transitional phase. The first social entrepreneurs have proved that social business models are sustainable and we are now seeing those businesses emerge and establish themselves that will be successful in the medium term.
Academia has always played an important role in Colombia and there are many good courses to choose from. However, most are focused on productivity in the traditional sense. Many young people feel that academia does not offer them the opportunity to learn how they can use the skills in the area they are studying to create solutions to social problems. Changes have already been made and there are now universities that teach about topics such as social leadership. In addition, Yunus Social Business has founded the first centre for social innovation in Colombia. We are all doing our best to meet the demand for such courses. However, we as well as the universities are only reacting to the demand. We do not have a shared agenda that defines a five year strategic plan for the social impact industry.
There must be between 12 and 20 investment funds active in Colombia. Most of them are international, although we do now have a first national investment fund which has been founded by Fundación Bolívar Davivienda. Other investment funds include Acumen, Yunus Social Business, the UK Prosperity Fund for Colombia, Incofin from Belgium and Global Innovation Fund.
In Colombia, the agricultural industry is the most resilient, but this does not mean that investments being made into this industry are intelligent. This is because we do not have the capacities yet to develop an entirely resilient agricultural industry. Social businesses in this industry are still establishing themselves. We are seeing positive social impact being made, particularly by organisations aiming to socially reintegrate people who have returned from armed conflict. However, as the peace agreement was only signed in 2016, these businesses are all still very young. They began emerging 2 or 3 years ago, so they have not yet established themselves and their business models can still be improved.
There are many new businesses emerging, but we cannot yet call the agricultural sector in Colombia resilient. I think the same is true for all industries in Colombia.
The second most active industry in Colombia is services. Colombia is known for quality of workmanship and low prices and is the third biggest powerhouse in these areas after India and Mexico. Businesses offering technology services or social housing are emerging particularly quickly.
