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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