THE BLOG
02/26/2013 10:04 am ET | Updated Apr 28, 2013

Why Social Entrepreneurs Can Save the State

The expansion of social services in developing countries offers the greatest opportunity for social entrepreneurs to create systemic change. In the world of social entrepreneurship, emphasis is placed on selling products and services to the poor, overlooking the spending limitations that lower income families face. But slums are devoid of private schools and hospitals for a reason: the disposable income simply isn't there. Governments need to fill this gap in the most effective way possible, and social entrepreneurs are the solution.

Many social entrepreneurs seek to lower costs until services become affordable for the poor. I admire those who can provide a quality service for a fraction of the standard private market price. An example is Sala Uno, an organization offering high-quality, low-cost cataract surgeries at a clinic in Mexico based on the Aravind model. A typical operation in Mexico costs US $1,600 in the private market; Sala Uno's efficient financial structure provides it for US$500. This model works particularly well for urgent needs. Microfinance is successful because it provides the most demanded resource: money.

The story can be different for less pressing needs, like preventive medical care or education. Within a constrained budget, it's not easy to persuade a mother to pay for a diabetes check-up or a breast cancer screening. We worked with an afterschool start-up looking to improve the educational performance of low-income students. The premise was to target families who couldn't afford a private school education. Mothers were expected to pay around 10 percent of their monthly income. While they rated their kids' education as a top concern in focus groups, when the time came to pay up, their priorities changed. They knew public schools were bad, but at least their kids were receiving a free education. The start-up closed. The book Poor Economics has many interesting examples of the seemingly irrational -- albeit perfectly understandable -- decisions that people make.

A poorly educated or chronically ill population imposes enormous costs on the public sector. Furthermore, the state is mandated (often at a constitutional level) to provide a set of basic services. Most governments provide them either through bloated public sector entities or through private contractors that can be abusive. The gap left by these inefficient groups is the perfect niche for social entrepreneurs to thrive in.

Why are social entrepreneurs able to solve problems that perplex experienced bureaucrats or companies? Because creativity and social purpose are hardwired into our systems in a way that is elusive to the more established players. Only through disruptive innovation are we able to systemically impact people in the most difficult regions. We can experiment with more flexibility than a public agency or a large corporation, and values are the engines that motivate entrepreneurs to fix seemingly unsolvable social problems.

Three conditions are necessary for successful partnerships between governments and social entrepreneurs. First, obtaining results needs to be the key component of the relationship, although they take time. The aim must be to improve the status quo dramatically and objectively. Second, contracts must be continuous if results are met. This is the source of sustainability for successful social enterprises that work with governments. And third, entrepreneurs need to fully realize the enormous responsibility that comes from using taxpayer money to provide a social service.

The keyword for successful social policy is pragmatism. Public leaders must realize that partnering with social enterprises can help society develop in comprehensive and effective ways. And they might just be able to balance their budgets while delivering better services for the poor.

Mois Cherem is a Co-Found and Chief Executive Officer of Enova, a social enterprise that creates blended learning centres in low-income communities.

This post is part of a series produced by The Huffington Post and the Schwab Foundation for Social Entrepreneurship, in recognition of the latter's Social Entrepreneurs Class of 2013. For more than a decade, the Schwab Foundation for Social Entrepreneurship has selected leading models of social innovation from around the world. Today we have 254 from nearly 60 countries, covering renewable energy and sanitation to job training and access to higher education. Follow the Schwab Foundation on Twitter at @schwabfound or nominate a Social Entrepreneur at http://www.schwabfound.org/sf/index.htm. To see all the post in the series, click here.

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