This article first appeared in Enterprise, The Edge Malaysia Weekly on August 5, 2019 - August 11, 2019

Dzuleira Abu Bakar is a woman on a mission. The third CEO of the Malaysian Global Innovation & Creativity Centre (MaGIC) came on board in April and one of her first tasks is to dress social enterprises for success — in a manner of speaking.

First, by identifying and accrediting them. Then, by channelling business and funds their way to make them more financially sustainable and resilient as they go out into the world and create a positive impact on society and the environment.

Dzuleira points out that while most corporations do things in a very structured manner and are very clear on how to work out their return on investment, most non-governmental organisations — or the “social space” — are very disorganised. “They are all passion and no structure. They want to help but do not know how to deploy resources. And they come to a point where there is no money to do the work,” she says.

Dzuleira feels that the main problem with the social space is that the cause comes before the “how”. “That is always the disconnect. So, the social enterprise space wants to connect that gap. We want to tell these entrepreneurs that even if their objective is to do social and environmental good, they still must operate like a for-profit business. Their thinking has to be like that of entrepreneurs from the get-go, meaning they have to know how to generate their income first.”

There is a proviso here, however. “Not all charity organisations can be social enterprises because you cannot find a business model for all social causes. But I think there is still room for charity organisations to exist. For certain causes, there is no clear way to monetise them so they need to be funded by donations. But certain causes can drive revenue,” says Dzuleira.

Social enterprises are of interest to her because MaGIC — which was previously under the Ministry of Finance but has since been placed under the Ministry of Entrepreneur Development — has been asked to take charge of this group of entrepreneurs.

“This ministry is tasked with looking at entrepreneurship in general and MaGIC’s niche is in technology and innovation. We want all the entrepreneurs to have innovation, to be aligned with Industry 4.0 and to have a tech element so they can scale more quickly,” says Dzuleira.

How does that interconnect with social enterprise? “That is because at the fundamental level, social enterprises are about entrepreneurship. Just that in this case, it is about focusing on a social cause,” she says.

“With regular businesses, we see if we can incorporate tech or innovation to help them grow more quickly. With social businesses, we will try to infuse the elements of entrepreneurship and technology into the social cause they are trying to promote.”

Dzuleira says MaGIC will help teach these social enterprises how to operate as a business as well as how to derive income.

But to begin with the basics, how do you define a social enterprise in Malaysia? “We are still refining the classification. But under our guidelines, it is any business registered under Malaysian law that has a positive social or environmental impact and a financially sustainable model,” she says.

These causes are segregated into various categories. “We look at marginalised women. We also look at the B40 [bottom 40% of the population]. The B40 is a big group, right? You have women and children, and you have those under a certain age group. So, in all these pockets, we hope to find one or two businesses, at least, each year that are already operating as a business but do not know that they qualify as a social enterprise,” says Dzuleira.

She adds that these businesses will be the ones actually creating employment and generating income for their families. “These are the ones actually doing some social work in their community.”

Accreditation guidelines

Dzuleira says the Ministry of Entrepreneur Development came up with accreditation guidelines to create a way to provide assistance to these social enterprises. “The first layer of the guidelines will enable them to be identified as social enterprises because once they are identified as one, they will get various benefits.

“For starters, they will be recognised by the government’s procurement body. So, they can do ‘e-perolehan’. That means when government agencies want to procure something, instead of going to a purely for-profit business, they can support a social enterprise that is doing some social good.”

She cites the example of the Picha Project. “This well-known social enterprise is into catering. It gets refugees to cook and the food is really good. So, a lot of government agencies use Picha for their catering needs. So, with accreditation, organisations such as the Picha Project are able to receive business from government agencies.”

MaGIC will look at extending the market to government-linked companies (GLCs). “We want GLCs to procure from these social enterprises as well. And this is the first layer of benefits,” says Dzuleira.

The second layer of benefits is that MaGIC will facilitate funding for social enterprises, she says. The Ministry of Finance has introduced the SE Tax Incentive plan to ensure more participation from corporates and citizens who want to be part of the social enterprise movement.

“As a company, if you fund the programmes or business activities of an accredited social enterprise, you can get tax credits or incentives. We are discussing with the ministry to expand this further,” she says.

Dzuleira cites the Angel Tax incentive, which provides accredited angel investors with a tax exemption for certain deals. “We have tax incentives for angel investors to invest in certain businesses. So, we could introduce something similar for social enterprises.”

MaGIC will also be targeting existing charitable organisations to upgrade some of them to social enterprises, she says. This will require a huge mindset shift.

“Because they are already operating with the charity mindset. They want to continue promoting their social mission and rely on donors and grants. The challenge is shifting that mindset to get them to figure out how to derive revenue,” says Dzuleira.

This will be the two ways to increase the number of social enterprises in the country, she says. First, by identifying those that are already operating as social enterprises but do not know it. And second, by looking at organisations promoting social causes that can find a way to derive revenue from their activities.

“We want to identify these gems because these people are already doing a lot of good. And we do not want to only take in charity-type organisations. We want to take in people who are doing revolutionary things that are impacting their communities or the environment in a positive way — whether it is through renewable energy or healthcare — but do not realise they qualify for accreditation,” says Dzuleira.

The accreditation of social enterprises is still fairly new in Malaysia. “It was launched on April 12 and I came in on April 15. Before this, there was a lot of noise in the social enterprise space. The great thing that the ministry did is to anchor that space — marking the territory — to say, ‘Look, this is an important segment, an important element to promote.’ That is why the accreditation guidelines came out,’” she says.

Once the companies have been accredited, how will the ministry measure impact? “It will be on a company-to-company basis. It is not a one-size-fits-all kind of thing. We will have four or five headline key performance indicators, whether it is an increase in livelihood, income, employment ... we are in the process of defining this. And then there will be impact measurement for individual verticals,” says Dzuleira.

But she acknowledges that it is very difficult to define the terms and measure impact in this space. “With a for-profit business, there is the minimum return on investment. It is as simple as that. In this space, you need to measure the impact and it is a bit more complicated. We are looking at that because we want to benchmark the impact.”

Measuring impact is especially useful in attracting corporate dollars. “Different organisations, when they deploy money to social causes, want to measure different things. So sometimes, when we partner them, we tailor our impact to what they want as well. We go out on a fact-finding mission to say, ‘Okay, you want to help women, I will identify a group of marginalised women for you. What do you want us to do with them?’” says Dzuleira.

Again, she reiterates MaGIC’s role in all of this. “We want these social enterprises to be treated like business entities. We have started the accreditation process. We have accredited four social enterprises so far — Komuniti Tukang Jahit, Animal Projects & Environmental Education Sdn Bhd, Langit Collective (M) Sdn Bhd and Tanoti Sdn Bhd. We would like more social enterprises to apply for accreditation. We want to work with them.

“In terms of education and awareness, we are running masterclasses for social enterprises as well as boot camps.”

Right now, MaGIC is being a little lenient about the process, she admits. “We want to get more social enterprises accredited to begin with. Later on, we will probably be stricter.”

The social entrepreneurship agenda is being driven by Malaysia’s Social Inclusion & Vibrant Entrepreneurship (MasSIVE), a MaGIC initiative.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.