Social Entrepreneurship in China

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    23 September 2012 Last updated at 11:38 ET

    Social entrepreneurship takes off in China

    Seven years ago, Hong Kong natives Legward Wong and Jeff Ng decided to set up a small business to tackle what theybelieved to be a big social problem.

    In traditional Chinese culture, the elderly were revered for their wisdom and contribution to their community.

    After decades of raising children and working to support the family, they used to be able to look forward to their golden years of

    being pampered by the younger generation.

    But because flats in this cramped city of more than seven million people are notoriously tiny and residents here tend to work long,

    gruelling hours, many senior citizens have ended up in nursing homes, instead of being cared for by family members.

    According to Mr Wong, in the 1990s, the government gradually stopped subsidising care for the elderly through non-profit

    organisations because of the high cost.

    "High land costs and high labour costs in Hong Kong not only bring up a huge social concern, it also means taking care of elders

    becomes more difficult," he tells BBC News during a visit to the Evangel Home for Senior Citizens in the western suburb of Yuen

    Long.

    As a result, privately-run group homes, often offering a lower quality of care, became more widespread.

    Some senior citizens found themselves in homes that could not cater to their needs, creating anxiety for their families.

    New business model

    So Mr Wong and Mr Ng set up the Home of the Elderly, a service to match senior citizens with nursing homes based on their

    requirements.

    The seniors and their families were not charged. Instead, the nursing homes paid the company a fee for each successful

    placement.

    This business model, unknown in Hong Kong at the time, became the basis for one of the city's earliest social enterprises.

    Today, their company has a staff of 40 people and works with almost half of Hong Kong's 600 nursing homes.

    It made a profit of about HK$1m ($129,000; 79,000) last year, about one-third of which was donated to their charitable

    By Juliana LiuHong Kong correspondent, BBC News

    News - Social entrepreneurship takes off in China http://www.bbc.co.uk/news/business-

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    foundation, promoting awareness of seniors' needs.

    Emerging trend

    Unlike non-profit organisations, social enterprises must aim to be money-making and self-sustaining.

    But while they make money, often they make less money than regular businesses, and they re-invest the profits in a related

    charity, targeting social problems.

    In China, social entrepreneurship is a growing trend.

    In a 2011 study of family philanthropy in Asia by Swiss bank UBS and the Insead business school, 40% of the China-based

    respondents rated the emergence of social entrepreneurship as the most highly-anticipated trend.

    When billionaires Bill Gates and Warren Buffett travelled to China to persuade the country's richest people to give away their

    wealth, they were reportedly told by internet entrepreneur Jack Ma that rich Chinese people preferred to invest their money in

    socially responsible businesses, rather than giving it to charities.

    For Ross Baird, executive director of Atlanta-based Village Capital, who works with social entrepreneurs in China, the US, Kenya

    and India, that makes sense.

    "I think the Chinese are among the most innately entrepreneurial people in the world. And in every country, it is the entrepreneur

    who can respond more quickly to meet a need than anyone else," he says.

    Although hard data on the rise of social entrepreneurship is hard to come by, Mr Baird says opportunities for investors like Village

    Capital to put money into these types of businesses are growing exponentially.

    He cites one of his partners, the Empowering Chinese Social Enterprise Leaders fellowship, which is affiliated with the Clinton

    Global Initiative, as receiving 100 applications for one of its programmes in 2011.

    In 2012, the same programme received 1,000 applications, he says.

    Lack of trust

    The popularity of social entrepreneurship in China is also being driven by a lack of trust among the general public in state-run

    charities, says Home of the Elderly's Mr Wong.

    "It is easier to create value by yourself than asking people for donations, because the social trust level between people is not

    high," he says.

    According to UBS and Insead, mainland China has the strongest level of government control over philanthropy of the Asian

    countries surveyed.

    Most private charities in China are prohibited from raising money publicly.

    In 2008, 89% of donations went to government-backed organisations such as the Red Cross Society and other groups under the

    Department of Civil Affairs, according to the study.

    A devastating earthquake in the south western province of Sichuan in 2008 led to a brief boom in corporate and personal giving.

    But last year, a high-profile scandal in which a young woman named Guo Meimei posted online photos of herself enjoying a

    lavish lifestyle funded in part by the Red Cross hurt China's charities.

    The Red Cross denied the connection.

    A man, reportedly her boyfriend, who worked for a company affiliated with the charity resigned from the firm when the scandal

    spread, but the damage had been done.

    News - Social entrepreneurship takes off in China http://www.bbc.co.uk/news/business-

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    According to Forbes magazine, total giving by China's top 100 philanthropists plunged by 41% in response, mirroring wider

    mistrust in state-backed charities.

    Working together

    Despite the scandal, some social enterprises are choosing to partner with the Chinese government to reach the greatest number

    of people in need.

    The flagship product of One Earth Designs, based in eastern Hong Kong, is a solar cooker weighing about 20kg that can harness

    energy from the sun to boil a litre of water in about 10 minutes.

    The target customers are rural residents in the vast, impoverished areas of western China, where electricity is scarce.

    Catlin Powers, the company's co-founder, says she was drawn to tackling the massive scale of the environmental and health

    problems faced by villagers burning solid fuels such as wood, dung and coal.

    "We actually started out as a non-profit and in the process of working on community projects we realised that in order to reach all

    the people who have this need we would have to scale in a big way," she says.

    "And the only way to do that sustainably is by generating sustainable profits."

    In China, Ms Powers estimates that about 700 million people use solid fuels that cause pollution and pollution-related deaths.

    A similar number exists in India, while about 300 million burn such fuels in South East Asia.

    In rural areas where villagers cannot afford the $100 to $200 price tag for each of the cookers, One Earth plans to sell directly to

    the Chinese government, which will then resell them at a heavily subsidised price.

    The company, which will begin to sell the cookers this year, expects to break even next year. By 2016, sales are projected to top

    $45m.

    Across town, with one company under his belt, Home of the Elderly's Mr Wong is already dreaming up his next venture.

    A prosthetist by training, he wants to recycle prosthetic limbs no longer used by patients in the West.

    He aims to drive around China in a truck, providing the prosthetics to people in need.

    He is still working out details of his business model, but he is certain that doing business is the best way to solve social problems.

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