Asia's Social Entrepreneurs

Do Well, Do Good... Do Sustainably

Howard Thomas, Havovi Joshi

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000449921
• Edition: 1
• Topic: Volkswirtschaftslehre
• Subtopic: Nachhaltige Entwicklung

Social enterprises of all forms drive inclusive growth by creating social and economic networks, and a stable ecosystem, that enable societies to grow and prosper. This book presents a collection of ten case studies that demonstrate the important role played by social enterprises in driving inclusive growth in Asia's economies.

Unlike the traditional models, such as NGOs and charities, that are donor dependent for funding, a social enterprise is a hybrid business model that includes both social mission and revenue generation goals to ensure sustainability and self-reliance. The ten case studies in the book provide a ringside view of how social enterprises operate and evolve to create, sustain, and scale up their social impact. Readers will gain a practical understanding of how social entrepreneurs struggle to maintain a balance between their two seemingly contradictory goals of creating social value and generating economic returns. The book carries the readers on the journey of each of these ten social enterprises, offering unique and valuable insights into the motivations, tribulations, successes, and even failures of these organisations—critical for continued learning, contribution, and innovation in the domain.

The book is appropriate for all readers interested in the role social entrepreneurship plays in stimulating economic growth in Asia, including organisations, government, and universities, as well as individuals.

1

iCare Benefits: Assisting low-income retail consumers in Vietnam

Howard Thomas, Aurobindo Ghosh, and CW Chan

DOI: 10.4324/9781003203582-2

Poverty remains a significant issue in developing countries. In Vietnam, some households cannot afford to buy basic electrical appliances without having to resort to borrowing money at high interest rates. The iCare Benefits: Assisting Low Income Retail Consumers in Vietnam case illustrates how iCare Benefits (iCare), a social enterprise established to help low-income workers, made finance more inclusive by providing interest-free instalment plans.

The case demonstrates how social enterprises are different from for-profit organisations and not-for-profit organisations (NPOs). As a purpose- and profit-driven social enterprise, iCare is less reliant on fundraising as compared to NPOs, and its success hinges on whether it achieves its social mission, unlike for-profit organisations whose corporate social responsibility initiatives are largely public relations exercises. Under iCare’s innovative retail model, it secures loans from partner financial institutions at reasonable rates and offers individual interest-free loans to migrant workers in agreement with their employers who adopt the iCare benefits package. Thus, the employees value the employer as a company that helps and supports them. Upon fulfilling the basic physiological needs of migrant workers, iCare can move on to address their higher-level needs.

Trung Dung, the founder of iCare Benefits, a social enterprise established to aid low-income workers, was born in the south of Vietnam, a seafaring nation located in South East Asia. From a young age, Trung experienced poverty, as his father was interned as a political prisoner in the aftermath of the Vietnam War. He made ends meet through fishing and peddling fruits. In search of a better life, he tried to escape to the United States on a fishing boat but was caught and diverted to an Indonesian refugee camp. He spent a year in camp before receiving authorisation to go to the United States. Despite having no money and speaking little English, he hoped life there would be preferable to the one he had left.

In the United States, Trung took on double the usual university courseload while working odd jobs to send money home. Despite having to brush up on his English, he decided to study mathematics and computer science at the University of Massachusetts in Boston. “Back in Vietnam, there was no future,” said Trung, “The only way to move up is to get an education. Here, the whole world opened up to me.” He got a job at Open Market, an e-commerce software company, before he started his own businesses. His most successful project was OnDisplay Corporation, a software development company that powered e-commerce platforms. It was eventually acquired by Vignette, a content management company, for US$1.7 billion. After experiencing financial success, Trung wanted to give back to the community that had been a big influence during his formative years.

Vietnam economic environment

Vietnam had been a French colony until the independence movement ended in victory at Dien Bien Phu in 1954. However, the ceasefire negotiated at the Geneva Accords resulted in a temporary partition of Vietnam. Civil war between the communist North and the anti-communist South was almost inevitable. When hostilities resumed later that year, the United States backed the South to prevent Vietnam’s neighbours from falling under communist influence. Support from ordinary Americans ebbed as the protracted war inflicted many casualties. After widespread protests, the US government eventually ended American involvement in the war in 1973. Vietnam’s infrastructure and economy had been decimated by war. Critical infrastructure had been destroyed by heavy bombings, and South Vietnam could no longer count on US aid. The government made an economic plan based on the communist principles of collectivisation, the pooling of resources under state control, and land reform.

The Vietnam economy had been heavily dependent on agriculture and exported commodities, such as coffee, pepper, and rubber. During the decade following the war, the Vietnamese government’s failure to meet modest food production goals led to a shift in economic policy. Following the failure of collectivisation, the government instituted a policy in the mid-1980s of ‘doi moi,’ or ‘economic renovation,’ whereby the country discarded central planning to embrace free-market principles. While the state retained substantial influence on the economy, from 1990, Vietnam experienced one of the fastest global GDP per capita growth rates due to an expanding manufacturing sector.¹

Global manufacturers took advantage of an abundance of cheap labour in Vietnam to move out of an increasingly expensive China. While the growing economy lifted many Vietnamese out of abject poverty, the growth of manufacturing also triggered rural migration to urban areas. Trung spoke about the search for a better standard of living,

A worker can typically make US$1 a day as a farmer but that income is not regular. As a factory worker, his or her income improves to US$5 to US$10 a day. That is a significant improvement over what they could earn in the rural area.

However, urban living was also more expensive. The many migrant workers who resided at the bottom of the pyramid had barely any savings. An estimated 39 million out of 90 million Vietnamese earned US$5 or less a day.²

With limited purchasing power, the retail environment was daunting for such migrant workers. Typically, wholesalers would facilitate market activity by purchasing goods from manufacturers and reselling them to retailers. Wholesalers would buy goods in bulk and arrange the transportation of the goods to and from their warehouses before distributing it at a mark-up to retailers. Retailers would attract end consumers by renting brick-and-mortar stores in locations with high traffic or spending on advertising. The manufacturing boom resulted in the clustering of migrant workers in factories located on the outskirts of major cities, far from any stores.

Furthermore, low-income workers could not obtain loans from financial institutions for big-ticket items. Banks felt that the administrative costs of due diligence required to make small loans was prohibitive. A common alternative was to use informal savings groups known as hui. Pawel Gorski, deputy head, Strategic Marketing Department of iCare, explained how the system worked,

Traditionally, people who know each other, relatives, neighbours or friends, form groups and everybody contributes some amount to the common fund. Then there is a bidding, where the person who bid the highest interest rate will be able to cash out as a loan and then pay interest to the rest of the group. Of course, there is a risk of actually losing the money if one of the members of the group suddenly disappears or is not able to pay. Therefore, they form groups with people they trust and keep each other accountable.

If the group lacked sufficient savings, the workers had to borrow money from the black market at exorbitant interest rates to meet expenses for basic goods.

Enabling change

Trung was aware of the difficulties the marginalised population faced in managing their meagre savings and wanted to introduce modern financial technology (FinTech) to the region. In 2007, he returned to Vietnam to start Mobivi, an electronic payment service, to provide financial solutions to consumers in Vietnam. The service was meant to reduce transaction costs and increase convenience for users. After speaking to merchants and labour unions, Trung realised that the demand for such a service was low, as it was difficult to convince people to switch from using cash to an e-payment service.

Conversations with employers, global manufacturers and financial institutions led Trung to discover that the lack of access to consumer financing made it difficult for factory workers to participate in the traditional retail sector. Gorski explained,

The workers were able to express what they needed. If we could provide access to a fridge, a TV, a smartphone, a fan or a bed mattress, that would be something really useful. So the founders realised by chance, from talking and discussing with workers, trade unions, and global brands representatives, that, beginning with the factories, millions of migrant workers had a huge unmet need.

Additionally, migrant workers were burdened by rental commitments and had little left over for essential products. They also needed to travel an average of 45 minutes to find a market or retail store. The lack of a fridge required frequent trips to the market to buy food. The cooking process also had to be precise to prevent wastage. The absence of a mattress could cause physical pain and disrupted sleep that would affect a person’s work.

Trung wanted to provide an innovative retail service to redress the situation. Eventually, he made a breakthrough. He decided to relaunch the business as a for-profit social enterprise that handled employee benefits and developed a third-party employee benefits programme that would help low-income migrant workers afford basic goods. iCare would work with partner organisations to aid low-income workers at the bottom of the pyramid. It would undertake retail functions to enable migrant workers to access essential life-changing products and services. While Trung’s aim was not to maximise profits, he endeavoured to operate without any handouts, as he believed that it was harder to plan in a company that was dependent on varying amounts of donations annually. Furthermore, fundraising efforts required time and energy that could be put towards other issues.

Building a community

Using an innovative retail model, iCare provided workers with zero-interest instalment payment options for up to six months. Trung forged a collaborative ecosystem with his partners that permitted the social enterprise to operate without donations. Instead of renting a physical storefront in a high-traffic area, he decided to approach large factories, and a partnership development team was set up to persuade them to sign onto the iCare platform. These factories housed large clusters of migrant workers, who were iCare’s target segment. Employers were largely supportive of the initiative, as a successful benefits programme would help with employee retention; only workers with tenure of at least a year would be allowed to register for the programme. Creating a more comfortable home environment would also result in greater productivity at work. These incentives were expected to increase worker engagement and reduce turnover costs for the factories. Gorski explained the process,

The first step is to enter into a partnership agreement with the factory where the workers are employed. The team will have to collaborate with the factory management and the labour union before we are able to ser...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• About the contributors
• Acknowledgements
• Introduction
• 1 iCare Benefits: assisting low-income retail consumers in Vietnam
• 2 Fullerton Myanmar: delivering financial inclusion through social impact and technology
• 3 Yangon Bakehouse: a social enterprise in Myanmar
• 4 SureCash: promoting financial inclusion in Bangladesh
• 5 Veriown: connecting the invisible woman in India
• 6 Great women: integrating micro-entrepreneurs into the regional value chain
• 7 Homage: harnessing technology to tackle Singapore’s ageing challenges
• 8 Juntos Global: deploying human-centred design to motivate the newly banked
• 9 Bettr Barista: a shot at better lives
• 10 Base of Pyramid Hub: connecting solutions
• Conclusion
• Index