November 29-30, 2010, Seoul
Chull-Young LeeSocial Enterprise Network
Financial IntermediariesFor Social Enterprises: Korean Case
Plenary Session 3: Impact Investing and FinanceAsian Social Entrepreneurs Summit 2010
Social Enterprise Network
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Purposes: (1) Study & education of Social Enterprise at business school
(2) To grow responsible business leaders of the future
Partners: Nine(9) business schools, KDI, Work Together Foundation and
some corporations in Korea
Programs: (1) Social Venture Competition Korea
(2) Social Enterprise Forum
(3) Impact@Work (Student’s Internship at Work Places)
Related Topics: Social Entrepreneurship, CSR&SRI, Environmental Sustain-
ability,
Global Poverty & Emerging Markets(BOP), Social Capital
Market,
Strategic Philanthropy, Non-Profit Management
Contents
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I. Landscapes of Today
II.Suggestions for Tomorrow
I. Landscapes of Today
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1. Social Enterprises in Korea are dominantly(99%) Social Service Providers.
99% of 300 Social Enterprises, certified by Min-istry of Employment and Labor, Dec. 2009, are Social Service Providers.
Ex: WeCan [Social Service Provider] WeCan produces cookies to employ forty(40)
mentally handicapped youths.
Ex: EcoFaeBrick [Social Innovator]
EcoFaeBrick, made by Indonesian business
students, uses cow dung to produce high qual-ity,
low cost bricks in 22 emerging countries.
No Social Innovator, and accordingly no social venture capital, is existent in Korea.
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2. Ministry of Employment and La-bor is the leading and dominant financial sup-porter:For the 300 Certified Social Enterprises (or 1,000 planned
by 2012)as Social Service Providers.
By Social Enterprise Promotion Act, 2007
[Landscapes of Today]
고용 노동부
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3.Micro-Finance is a Charity in Ko-rea:
Under Government’s policy guide and funded by business conglomerates and commercial bank groups, eleven(11) Smile Micro-Finance Foundations ( 미소금융재단 ) were launched in December 2009.
Their interest rates are 2-3% below the av-erage bank loan’s. Their financial sustain-ability is a concern.
[Landscapes of Today]
II. Suggestions for Tomorrow
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1. Develop Financial Intermediaries, instead of Government’s direct involvement.
2. Develop Social Innovator Model of Social En-terprise, along with Social Service Provider Model.
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1. Develop Financial Intermediaries, instead of Government’s direct involvement.
Social Service
Providers
[Social Enterprises]
(Grant, Subsidy & Loan)
Micro Finance
Institutions Social Banks Social Venture
Incubators
Social Venture
Capital Funds
Funding
Gov’t Central Fund Civil Foundations Commercial Banks SRI Mutual Funds
Individual Donors
[Financial Intermediaries]
(Grant, Loan &Equity Investing)
[Funders]
Social
Innovators
[Suggestions for Tomorrow]
(Capacity Building)
(Grant, Equity Investing
& Loan)
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For Development of Financial Intermediaries:(1) Make Government’s Central Fund under
MOSF(Ministry Of Strategy & Finance).
[Suggestions for Tomorrow]
Ex: CDFI Fund(Central Fund) at U.S. Treasury Dep’t certifies CDFIs (financial
intermediaries) and provides funds to them.
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(2) Raise interest rate for Micro Finance to 3%(ex) over average bank loan’s:
[Suggestions for Tomorrow]
Globally, interest rates for Micro Fi-nance are 12-24%.
Hope Seed Loan, Korea( 희망홀씨대출 ): Last twelve(12) months, six(6) com-mercial banks have successfully pro-vided micro loans to 260,000 micro en-trepreneurs on interest rate of 3.5% over average bank loan’s, with default rates of 1.0-1.3% only.
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(3) Encourage(ex: tax incentive) SRI mutual funds to de-posit or invest 1-5% their net assets in Financial Inter-mediaries.
[Suggestions for Tomorrow]
Ex: Pax World’s Community In-vesting:
Pax World, a SRI Mutual Fund in NY, deposits 5% its net assets in social banks or micro finance in-stitutions.
In Korea, twenty two(22) SRI mu-tual funds’ net assets(485 Billion Won) shares 0.24% total mutual fund’s net assets (Apr, 2009), compared to 12% in U.S.
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[Suggestions for Tomorrow]
Ex: Columbia Business School, NYC, released Social Capital Market Report in 2003 under RISE(The Research Initiative in Social En-trepreneurship) survey project.
(4) Survey Philanthropic Funds in Korea to encourage them to behave “Strategically”.
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2. Develop Social Innovator Model of Social En-terprise, along with Social Service Provider Model:To develop and activate Financial Intermediaries
and
Consequently, to develop Social Enterprises as a
whole.
[Suggestions for Tomorrow]
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For Development of Social Innovator Model:
(1) Include Social Enterprise in Business School Education. Ex: Seminar on Education of Social Enterprise at Business School,
May 28, 2010, Seoul
(2) Take Environment & Energy and Health Care as opportunities for Social Enterprise.
(3) Take Global Poverty (ie Emerging Markets) as opportunity for Social Enterprise, as well as for large corporations & MNCs.
Ex: “Out of Poverty”, Paul Polak
“The Fortune At The Bottom of The Pyramid”,
C.K. Prahalad
[Suggestions for Tomorrow]
Treadle Pump
Conclu-sion:
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Innovation is the key.
No Innovations, No Invest-
ments.
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