Vladislav Krivosheev Vice-President on Corporate Finance Russian Microfinance Center

 Social entrepreneurship (SE) is young – it has not more than 10 years history in Russia.  Lack of knowledge on essence and nature of SE – most people who are involved in SE do not realize that.  Obstacles that prevent from development of SE:  Low level of development of small entrepreneurship, credit cooperation, microfinance institutions, non-commercial activities in social and economic spheres of life  The main prerequisite for development of SE in Russia was start of development of microfinance activities in general and credit cooperation, in particular.  What is common for all types of SE in Russia:  Innovations and entrepreneurship

 SE is implemented through 2 models of credit cooperation: “model of small entrepreneurship support” “model of support for low-income people”  Peculiarities of SE in Russia: As a SE credit cooperation is well developed in Russia only in small cities and in rural areas. Micro lending activity that is isolated from other activities can not be considered as a tool to assist low-income population to be integrated into a normal life.  To organize a successful SE you need: to determine and define your social purpose to use financial mechanisms as a tool but not as a goal of a SE

 SE is not a charity organization. It is a business.  You need to change mind and approach. To manage a SE and to manage a charity organization is different  A lot of companies try to produce social benefits. Most of them do not cover costs of production. It is not a SE.  Social entrepreneurship presents another option for addressing market failures—which can be considered the sources of the opportunities that social entrepreneurs act on.  Like private-sector entrepreneurs, social entrepreneurs seek opportunities to create value—but the value they pursue is social rather than purely economic.

 Social entrepreneurship—the practice of responding to market failures  Way to involve resources that are not yet used in economic activities (human – to involve not active part of the population in economic activities; expansion of social and economic basis of small business).  Social integration through incorporation of business and society, entrepreneurship initiative and social targets of different groups of the population and the country as a whole; use of values of social solidarity for the interests of economic development of the region, development of its business, development of civil society institutes.  Opportunity to solve economic problems of core groups of people by their own efforts and their own resources.  Expansion of social and economic basis of the middle class  In the environment of the financial crisis – support of financial system through non- banking activities  Expansion of social capital through promotion of collaboration between people within the societies  Formation of three parties coalitions between government, business and non- commercial organizations to solve social problems

 Classification of SE in Russia: by industry (rural, industrial, rural-industrial) by region by form of property  Involvement of Corporate Sector and Government in SE:  Small Business:  Non-Commercial / public organizations State companies State regional Funds for small business support

 In the private sector, one-third of new employer establishments do not survive the first two years, and more than half fail in the first four years. For social entrepreneurs, launching a new initiative can be just as challenging.  Government has created an enabling environment for social entrepreneurs in a variety of ways—most prominently by removing barriers, lending credibility, and supporting collaboration  Organization of SE: Need to have a “leading” company that initiates start-up of the entity.  Government: Funds Credit coops (through trade-unions);

1. Need to eliminate barriers to enter the market and the social activities (all what prevents from normal growth of SE in Russia). 2. Provision of informational exchange with companies that provide SME support in other countries. Exchange of expertise. 3. Lack of general culture in regional and federal authorities that are in charge of provision of different permits. SE is a result of a complicated and long evolution not only of institutes that regulate entrepreneurship activities but the business itself. There is a need to reach a certain level of development of both business and society to promote and develop SE.