Social enterprise business organisations Cooperatives, micro-finance providers & public-private partnerships (PPPs)

Cooperatives Owned by members (usually customers or employees). Set up and managed in the interest of their members. Aim to cover all costs. Any surpluses are distributed to members as a dividend.

Consumer cooperatives Purchase supplies in bulk, obtaining a discount. Sell these supplies to customers (including members) at low prices. Dividends are paid to members if a surplus has been made. Main purpose = Lower prices for members.

Worker cooperatives Owned by the people who work in the coop. All workers have a say in how the coop is run. Any surpluses are passed on the workers as a dividend. Main purpose is to look after the welfare of the employees (eg by providing good working conditions and fair pay).

Microfinance providers Set up to lend money to people and small businesses that are unable to obtain it from traditional sources (eg family or a bank). Usually lend small amounts. Interest rates tend to be higher than bank loans (due to admin charges and increased risk of non-payment). Main purpose is to help poorer people escape from poverty.

Public Private Partnerships Established to improve the provision of services previously provided purely by government organisations (public sector). A private sector business takes over some aspects of the service from the government. Eg by; providing capital. managing all or part of the business.

PPP Example A government needs to build a new road. A private business builds the road and is given a licence to generate income through toll charges by the government. Benefits include: Gov’t obtains the capital investment to build the road. General public have a road that they can use. Private company can generate profits from managing the road.

Benefits of PPPs Provides governments with an additional source of finance (reduces it’s need to borrow). Reduces risk for both government & private businesses (as risk is shared). Private firms may bring expertise to a project that government personnel lack. Profit motive encourages the private sector firm to be highly efficient (which brings down costs).

Problems of PPPs Possible conflicts of interest between the government (seeking good service) and the business (seeking lower costs). Private businesses may pull-out if they can’t make a profit, resulting either in the loss of an important service, or increased costs for the government. Some government employees may lose their jobs as efficiency improves. Private firms may over-estimate costs to increase profits.