In a recent survey conducted by J.P. Morgan of more than 50 impact investors, when asked about the most critical challenges to the growth of the impact investment, industry respondents ranked ‘shortage of high quality investment opportunities with track record’ as second, only a few votes behind ‘lack of appropriate capital across the risk/return spectrum’ (JP Morgan, Perspectives on Progress, 2013). As policy makers, investors or support organizations we are all looking for the perfect social enterprise, which offers innovative, scalable solutions to achieving social impact – or even the transformation of society. The organization should ideally be led by a charismatic, ethical, and creative entrepreneur, and a great communicator in front of an international audience. Start-ups are not very popular but instead we prefer organizations that have already proven that they are successful in what they do. Many look for organizations that not only generate a massive social impact but also at least a decent return.
But where are those superheroes? In Turkey, we see a growing interest in social entrepreneurship and the number of social ventures (and those that like to define themselves as such) is increasing every year. Yet only few have managed to achieve social impact at scale and are financially sustainable – or even ‘investment ready’. Some participants in a recent social enterprise meeting in Istanbul therefore complained that “we are always talking about the same names”. An investor who had extensively been looking for impact investing opportunities in Turkey expressed his disappointment in a recent conversation: “We have been unable to find social enterprises that are profitable let alone generate a market return”.
This situation is not surprising. In Turkey, social ventures and even more so high-risk, early stage social ventures find it hard to access suitable and affordable finance and support. Furthermore, few players in Turkey recognize the importance of market infrastructure for the growth of this field. Even less are ready to support market building activities such as research, awareness raising, training and so forth.
To quote from an excellent recent blog series by the Omidyar Network, a philanthropic investment firm: “It is as if impact investors are lined up around the proverbial water pump waiting for the flood of deals, while no one is actually priming the pump!” Not only are impact investors are waiting at the pump, but most other players in this field are also it seems.
Why does it make sense to look beyond individual organizations? Because the impact of one organization is always limited to what a single organization can do - even if these organizations successfully scale their operations all over Turkey and internationally such as inspiring Ashoka Fellow Bedriye Hülya with the Sport Centre Franchise Concept for Women B-Fit. Microloans provided by two existing microfinance institutions in Turkey (MAYA and TGMP) have certainly made a difference to their growing number of customers in Turkey (estimated at approximately 100,000 today). However, the number is low in international comparison and also in view of the high number of adults with insufficient access to financial services in Turkey (42 per cent, with a massive gender gap between male and female adults according to World Bank 2012 data).
Therefore, I argue that unless we look at the conditions surrounding existing entrepreneurs or start-ups in the social impact field in Turkey and consider social ventures as elements of a wider eco-system, we will not reach social impact at a grand scale. In a Harvard Business Review article in 1993 business strategist James F. Moore introduced the notion of a business eco-system noting that “even excellent businesses can be destroyed by the conditions around them”. The same observation is true for value driven entrepreneurs and social investors.
We therefore need to shift some of our attention towards building and accelerating social impact markets. A social impact market can be defined as a system of institutions, procedures, and social relations, in which parties engage in monetary and non-monetary exchange of goods, services and information for social impact. (Andrew Wolk, 2012). I like to use the term ‘social impact markets’ for our work because it emphasizes:
- the (eco-) system perspective,
- The need to place the beneficiary and impact perspective at the core of our work,
- The importance of different institutions, their respective functions, and interests as well as the social relations between players,
- The role of procedures, information, and incentives, and
- The plural (markets not a market) refers to the existence of several demand-supply relationships that we need to consider.
So what are the key elements of a social impact market that we need to focus on: players, processes, and rules?What is our vision on how this field should develop in Turkey? What are well-functioning social impact markets, what do we like about experiences elsewhere and how to make them work in Turkey? I will look at some of these questions soon.