Although I was coming from a business and finance background, I joined Ashoka Arab World as a support network member in March 2009, for I was thirsty to make a difference in a region known for the daunting challenges it is facing. The private equity sector (it includes funds that take minority or majority stakes in companies) would not obviously be the first place to look at to learn transferable social practices. As you may know, this part of the financial sector is more publicly known for its unethical greed by means of notorious tactics such as stripping companies’ assets and laying off employees. Nevertheless, underneath the often superfluous contrast between these two worlds, “the nice vs. the nasty”, which may be just the tip of the iceberg, there is a connecting fine line between private equity and social entrepreneurship (a typical example of a social entrepreneur project is Mohamed Yunus’s Grameen Bank in Bangladesh), a link that could unlock an untapped and powerful potential for the West-Asia North Africa region (WANA).
In order for me to expound on the similarities between the two sectors, I should first introduce the world of private equity. Private equity has many definitions, from the most esoteric to the simplest one. I will define private equity in broad terms, as seeing in any asset an opportunity where others see a challenge. Most of the time, the asset is a family-owned unlisted company that you buy, grow – by bolstering sales and improving operational performance for instance – and then resell for a profit. As a seasoned investment professional, you are supposed to look at a company from an angle that others don’t see and substantiate that view with judgment and facts. When buying a company, private equity firms generally seek to partner with smart and motivated management teams to migrate the company to a completely new dimension, a dimension that will itself attract more buyers because of the compelling success you have instilled onto the company. Due to the fact that private equity is about changing and empowering organizations with the best available resources, the most successful private equity investment tend to embody, more than any other form of investment, the importance of vision, creativity, and ethical leadership as key success factors of a lasting and positive change for an enterprise and its stakeholders. By now then, you may start to see the similarities between private equity and social entrepreneurship. What private equity aims to do for the corporate sector is akin to what social entrepreneurs endeavors to bring to citizens and society as a whole, with the intended positive effect on social cohesion.
My interest in social entrepreneurship and private equity has reinforced each other strongly over the last year. When I started learning about social entrepreneurship, I quickly became convinced that there would be no chance whatsoever to escape from the dollar profit obsession and that it was inevitable to turn into a “nasty coldhearted dealmaker”. However, reflecting back on these two experiences, I figured out that I started subconsciously shaping a new personal understanding of these two fields. Particularly, I started to think deeply about social entrepreneurship from a practical, “bottom line”-oriented point of view and how my current experience could be of any benefit. And yes, there are benefits, because to me social entrepreneurship is about utilizing business skills to leverage social impact. The process of going from business to social value was not obvious to me, nor was it systematic and rigorous. The WANA region is facing a number of long-standing pressing societal issues – which urgency for alleviation has become even more crucial with the ongoing popular revolts. This puts a premium on applying the appropriate problem-solving tools and result-driven approaches to fruitfully solve these complex social problems. These social problems are only the symptoms of the real issues, though. Dealing with the whole iceberg problem, and not just its appearing tip, implies taking the courage to change mindsets and behaviors towards the desired new social standards, be they in women rights or education or any other area of social and democratic concern. Similarly, oftentimes in private equity deals, management incentives plans are put in place – the underwater part of the iceberg to take the same analogy – to enable the smooth and successful transformation of a business. These core incentives carry oftentimes more weight than the most apparent issue of driving a company’s day-to-day operations – the tip of the iceberg.
Many of the solutions to some of the long-standing issues the WANA region is grappling with can be imagined through a private equity and social entrepreneurial, lens – by capitalizing on leading social entrepreneurs and supporting their efforts to scale their “social business model” up. The private equity approach can teach social entrepreneurs to create a roadmap to capture the best change – exploiting opportunities and thickening the “skin” of their enterprises for social profit to weather the roadblocks impeding their full potential. By the same token, individuals and organizations – with leadership potential – striving towards social cohesion can be equipped with social entrepreneurship and private equity tools to help them go to the next level.
The private equity analogy can help social leaders think in new ways about creating strategic plans to achieve their social mission in the most efficient and traceable way. With this mindset, I embarked on an initiative to lead the design of a Social Cohesion Fund* for the West Asia – North Africa (WANA region) as part of the research activities of the WANA Forum organized by his Royal Highness Prince Hassan Bin Talal of Jordan. This Social Cohesion Fund would capitalize on this golden opportunity to create the first-of-its-kind social investment vehicle in this part of the world and forge the WANA region intellectual capital on structuring innovative social investment transactions for sustainable social and economic returns to all stakeholders in the social cohesion process. As Ronald Cohen, co-founder of Apax Partners, a prestigious UK private equity firm, and one of the most iconic figures of this industry, said “I think the private equity industry has the skills and the resources to turn social entrepreneurship into mainstream activity and social investment into an asset.” These two fields have much in common and are here to help the rare breed of visionary individuals in the WANA region, those passionate social and business entrepreneurs, lead more and better and leave their mark on society for the social inclusion, participation and empowerment of all.
*The fund will be officially launched in the November 2011 TrilateralCommission–WANA Forum workshop dedicated to the theme “European Reaction to the Arab Spring”.
By Nayim Khemaies, Ashoka Arab World Support Network Member and himself a social entrepreneur. Nayim contributed more than 100 hours of coaching and training to young and experienced social entrepreneurs in Tunisia, Jordan, Egypt and Kuwait. He is currently leading the efforts of the WANA Forum to create a regional social investment platform that will engage different stakeholders, particularly governments and private institutions, in order to make meaningful contributions to the prevailing social problems.