When Malaysian entrepreneur Majidah Hashim quit her corporate job and set up a business two years ago helping people with autism make handcrafted teas with local herbs and flowers, the government stepped in to assist.
Majidah was one of dozens of social entrepreneurs who received grants from Malaysia’s government as part of a 2015 national plan to boost the number of businesses with a mission to help people or the environment from 100 to 1,000 by this year.
This assistance let her get SevenTeaOne up and running, one of many social enterprises started in Malaysia in the past few years.
The nation was ranked the ninth-best nation in which to be a social entrepreneur in a 2016 poll of 45 nations conducted by the Thomson Reuters Foundation and funded by Deutsche Bank.
However, Majidah said the help was short-lived, fueling concerns in Malaysia as well as elsewhere in Southeast Asia that official encouragement of the sector was stumbling as businesses were found to need more guidance and time than expected to succeed.
“It was like they were pregnant with us — they gave birth and they left us there,” Majidah said.
The 20 million ringgit (US$5 million) plan has so far pushed the number of social enterprises up to about 200, according to the Malaysian Global Innovation and Creativity Centre (MaGIC), a government unit tasked with running the project.
This has led to concerns in Southeast Asia’s third-largest economy that momentum to build the social enterprise sector is fizzing out with patchy official support and issues like a lack of funding and financial sustainability.
Majidah received a 30,000 ringgit grant from MaGIC to help kick-start her business and attended one of its programs where she learned about social enterprises.
“When we graduated, we were very energized. We got to know a lot of people, we were out there and ready to run our business,” she said. “But very shortly after that, the whole [social enterprise] department was disbanded. There was little follow up from MaGIC on how my company is doing.”
FILLING THE GAP
Similar to Thailand and the Philippines, Malaysia is among Southeast Asian nations that have tried to tap the potential of social enterprises — businesses that aim to address social and environmental problems while making a profit.
Rapid economic growth in the region in the past few decades has seen nations become wealthier, but failed to tackle social challenges such as urban poverty, unequal access to education and environment sustainability.
This is where Southeast Asian governments hoped social enterprises could step in to help plug the gap, as most nations have traditionally had low tax models, meaning that state welfare systems are not comprehensive.
Despite concerns, MaGIC insisted that there has been strong growth in the sector and its initiatives have helped aspiring social entrepreneurs and raised public awareness.
“We are currently at the three-year mark and are still running initiatives and programs to increase the number of social enterprises,” chief executive Ashran Dato’ Ghazi said in a statement.
Its initiatives include an accreditation scheme that aims to help social enterprises enhance their profile.
While social enterprises should be financially independent, in nations where they have been a success, supportive policies have been seen as vital.
One example is Britain, where the government has invested heavily into the sector and the number of social enterprises has grown to 70,000, according to Social Enterprise UK, an organization that represents the sector.
Its policies include encouraging government procurement officers to consider the social and environmental effect of the contracts that they award rather than just going with the lowest bid.
Trying to gain a foothold in the market remains one of the biggest barriers for Malaysian social entrepreneurs, said Mastura Rashid, who runs The Nasi Lemak Project.
Mastura sells a traditional coconut rice with spicy shrimp paste dish known as nasi lemak, or “fatty rice,” made by poor families living around the Malaysian capital, Kuala Lumpur.
Mastura also received a grant from MaGIC and had a steady flow of business, but she had to cut back her operation last year by reducing the number of delivery orders. The orders tended to be for small quantities, so the profit was barely enough to cover costs, she said.
Now, she only focuses on big orders, but these are scant.
“It boils down to the issues of costs and human resources,” she said, adding that she needed a strategic rethink to keep her business sustainable.
NEED TO SOLVE
Problems have plagued other official efforts to help social enterprises in the region.
In Thailand, there are an estimated 5,000 to 10,000 social enterprises, according to the Thai Social Enterprise Office set up by the government in 2010 to boost the sector.
However, momentum slowed after a 2014 military coup and the office has now been dormant for nearly three years.
In the Philippines, where the number of social enterprises has more than tripled over the past decade to about 165,000, more than half said limited capital was the biggest barrier to grow their business, according to a study last year by the British Council and the Philippine Social Enterprise Network.
Similarly in Singapore, the government-backed Singapore Centre for Social Enterprise — which supports about 400 of these organizations — said in a report last year that many struggle to survive beyond the first two to three years of their business.
Singapore, the Philippines and Thailand were ranked No. 4, No. 20 and No. 29 respectively in the 2016 Thomson Reuters Foundation poll.
However, Majidah was confident that there is appetite for socially responsible products like her tea, even if authorities fail to step up to the plate.
“There is a very real need to solve social problems in Malaysia. If you have socially responsible products and are looking to recruit single mothers, ex-drug addicts or juvenile delinquents, there is still a need for that,” she said. “There are enough caring Malaysians who will support your products.”
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