A few years back when I was trying to introduce my micro venture into the Indian handicraft sector as a Social Enterprise (SE) for Profit, I encountered a mix of responses from various quarters. Firstly, most of the people do not know what a Social Enterprise means; it’s a completely new and unheard of concept for many. When I tried to explain the definition of SE that “A social enterprise is an organization that applies commercial strategies to maximize improvements in human and environmental well-being, (in my case in the unorganized handicraft sector and the cause of the artisans) —this may include maximizing social impact alongside profits” – people got even more confused and the moment they heard the word profit, it got stuck in their mind overlapping the proposition of social good impact and almost spontaneously they frowned at it suspiciously. Some went ahead and spewed the scorn and mistrust on my face saying how could you do social good while making profit? You must be exploiting the artisans and making profit only for yourself. You are not a Non-governmental Organization (NGO)! Better make a NGO!
I understood by NGO they meant my enterprise is not a Not for Profit or Charity organisation. In lay man’s dictionary NGO is synonymous with Not for Profit. If it had been a NGO, means a Not for Profit, people would have still believed me.
It hit me hard and I went ahead and tried to form a “NGO” in the desperation to make my well intention-ed entrepreneurship credible.
Before that when I inquired to know how the Not for Profit NGO would work and benefit the sector, I got to know that to get government fund from the concerned government departments or bodies, you need to have “good relationship” known in colloquial language as “setting” with the key officials (Babus). Once the grant is released you spend a portion of that to return the favor from the Babus or to reimburse the ‘return’ or part of it you spent in advance, spend a portion to showcase the proposed ‘project’ and rest is your profit. How do you manage the accounts of these expenses as you are not supposed to take personal profit or spend on bribe from the grant money of a NGO? Simple. Auditors and Chartered Accountants are there to camouflage it under various expenses. And everyone knows almost everything and everybody barring exceptions can be purchased right from fake bills and certificates to auditors to police to judiciary and Babus (bureaucrats) to ministers in India!
It bewildered me as I realized it would take me ages to set up the ‘settings’ in the babudom (bureaucratic world), acquire the skills to learn the tricks of the trade, and apply it in this scenario. Still I mastered courage to form a Not for Profit, NGO on my own hoping to do something meaningful in all honesty. At the beginning I stumbled upon the first entry barrier. I was informed I need to pay under the table to get my application accepted at the concerned office of registrar and thereafter some more “expenses” would be incurred on account of expediting the clearance and finally the registration of the NGO. I gave up.
Where there are lot of Not for Profit NGOs across the world doing genuine selfless work in various deserving sectors and for different causes, there are many NGOs which have not maintained their accounts and activities clean and clearly documented. I have seen people whose personal fortune astonishingly increased despite having no other source of income, but only by running a Not for Profit or Charitable NGO. This also makes me wonder why there is so much rush for setting up NGOs in India in the last decade.
Recently it has come to light that there is one NGO for every 600 Indians! This figure has been arrived only taking into account a few states disclosing the number of NGOs operating in their territory which is doubtful to be the actual figure while many major states have not provided any data regarding the operational existence and financial accountability of the NGOs in their areas.
Cynics would raise eye brows at this sudden spurt of philanthropic enterprise which does not otherwise match our still uncouth civic behavior across the classes in India and corruption becoming a way of life. However, those who are active in social sector attribute this sudden growth to increasing wealth, a growing entrepreneurial spirit, governance gap and rising social inequality.The newly amended Company Act 2013 that mandates companies making net profit of 5 Cr or more to spend a minimum 2% of it on social causes also suddenly made NGOs as important partners in philanthropy through whom the Corporate Social Responsibility (CSR) objectives are executed.
According to information received through RTI queries by Asian Centre for Human Rights, the Union and state governments between 2002-09 released Rs 6654 crore to various NGOs, averaging almost Rs 950 crore per year.
Here comes the perception of trust deficit about NGOs and their accountability regarding their efficiency and transparency in handling funds.
Recently stalwart social activists such as Anna Hazare’s Hind Swaraj Trust or Teesta Setalvad’s Sabrang Trust came under legal scrutiny and charges of misappropriation of funds.
Notwithstanding the counter charge of political motive and intent of bureaucratic interference behind such allegations, “the lack of transparency and accountability in non-profits has been raised consistently by a newly emerging group of non-profit watchdogs, including Credibility Alliance,iCongo, and GiveIndia. They seek to increase NGO accountability through annual reviews, accreditation, and call for a non-profit code of conduct. However, the fact that Credibility Alliance has so far enlisted only 600 non-profits speaks volumes about the lack of interest in calls for accountability. (And this is an uniquely Indian problem: international NGO watchdogs like the Humanitarian Accountability Partnership have barely registered around 70 international non-profits in their lists.)
Yet people are in denial and prefer to believe NGOs to be sacrosanct because the word ‘profit’ has a deep rooted flawed perception in the Indian mind-set.
India’s first Prime Minister, Jawaharlal Nehru, famously told the industrialist JRD Tata, “Never speak to me of profit. It is a dirty word.” The socialistic era of our economy currently meddling with the challenges of reforming to liberalized or free economy has further made the notion of profit foggy.
In our caste system too we have not assigned much status and respect to Vaishyas or traders and businessmen as compared to Brahmins and Kshatriyas. That reflects when we tauntingly call them ‘Baniyas’. It is believed in the society that they are unscrupulous in the pursuit of making profit.
In this context understanding the concept of Social Enterprise For Profit becomes difficult.
Social enterprise as a democratically owned and run trading organisation, that is financially independent, has social objectives and operates within an environmentally responsible way. It differs with CSR or Not for Profit NGOs in that their commitment to impact is central to the mission of the business sustained through viable revenue models.
Hopefully people will gradually open up to the idea of generating profit through sustainable revenue model and fair trade to deliver social good. Whereas Not for Profit NGOs need to spruce up their fund management and accountability through a better code of ethics, more efficient records management and eliminating corruption.