November 29-30, 2010, Seoul

Chull-Young Lee

Social Enterprise Network

Financial Intermediaries

For Social Enterprises: Korean Case

Plenary Session 3: Impact Investing and FinanceAsian Social Entrepreneurs Summit 2010

Social Enterprise Network

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Purposes: (1) Study & education of Social Enterprise at business school

(2) To grow responsible business leaders of the future

Partners: Nine(9) business schools, KDI, Work Together Foundation and

some corporations in Korea

Programs: (1) Social Venture Competition Korea

(2) Social Enterprise Forum

(3) Impact@Work (Student’s Internship at Work Places)

Related Topics: Social Entrepreneurship, CSR&SRI, Environmental Sustain-

ability,

Global Poverty & Emerging Markets(BOP), Social Capital

Market,

Strategic Philanthropy, Non-Profit Management

Contents

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I. Landscapes of Today

II.Suggestions for Tomorrow

I. Landscapes of Today

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1. Social Enterprises in Korea are dominantly(99%) Social Service Providers.

99% of 300 Social Enterprises, certified by Min-

istry of Employment and Labor, Dec. 2009, are

Social Service Providers.

Ex: WeCan [Social Service Provider]

WeCan produces cookies to employ

forty(40)

mentally handicapped youths.

Ex: EcoFaeBrick [Social Innovator]

EcoFaeBrick, made by Indonesian business

students, uses cow dung to produce high qual-

ity,

low cost bricks in 22 emerging countries.

No Social Innovator, and accordingly no

social venture capital, is existent in Korea.

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2. Ministry of Employment and La-

bor is the leading and dominant financial sup-

porter:For the 300 Certified Social Enterprises (or 1,000 planned

by 2012)

as Social Service Providers.

By Social Enterprise Promotion Act, 2007

[Landscapes of Today]

고용 노동부

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3.Micro-Finance is a Charity in Ko-

rea:Under Government’s policy guide and

funded by business conglomerates and

commercial bank groups, eleven(11) Smile

Micro-Finance Foundations ( 미소금융재단 )

were launched in December 2009.

Their interest rates are 2-3% below the av-

erage bank loan’s. Their financial sustain-

ability is a concern.

[Landscapes of Today]

II. Suggestions for Tomorrow

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1. Develop Financial Intermediaries, instead of

Government’s direct involvement.

2. Develop Social Innovator Model of Social En-

terprise, along with Social Service Provider

Model.

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1. Develop Financial Intermediaries, instead of

Government’s direct involvement.

Social Service

Providers

[Social Enterprises]

(Grant, Subsidy & Loan)

Micro Finance

Institutions

Social Banks

Social Venture

Incubators

Social Venture

Capital Funds

Funding

Gov’t Central Fund

Civil Foundations

Commercial Banks

SRI Mutual Funds

Individual Donors

[Financial Intermediaries]

(Grant, Loan &Equity Investing)

[Funders]

Social

Innovators

[Suggestions for Tomorrow]

(Capacity Building)

(Grant, Equity Investing

& Loan)

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For Development of Financial Intermediaries:

(1) Make Government’s Central Fund under

MOSF(Ministry Of Strategy & Finance).

[Suggestions for Tomorrow]

Ex: CDFI Fund(Central Fund) at U.S. Treasury Dep’t certifies CDFIs

(financial

intermediaries) and provides funds to them.

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(2) Raise interest rate for Micro Finance to 3%(ex) over average bank loan’s:

[Suggestions for Tomorrow]

Globally, interest rates for Micro Fi-

nance are 12-24%.

Hope Seed Loan, Korea( 희망홀씨대출 ):

Last twelve(12) months, six(6) com-

mercial banks have successfully pro-

vided micro loans to 260,000 micro en-

trepreneurs on interest rate of 3.5%

over average bank loan’s, with default

rates of 1.0-1.3% only.

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(3) Encourage(ex: tax incentive) SRI mutual funds to de-

posit or invest 1-5% their net assets in Financial Inter-

mediaries.

[Suggestions for Tomorrow]

Ex: Pax World’s Community In-

vesting:

Pax World, a SRI Mutual Fund in

NY, deposits 5% its net assets in

social banks or micro finance in-

stitutions.

In Korea, twenty two(22) SRI mu-

tual funds’ net assets(485 Billion

Won) shares 0.24% total mutual

fund’s net assets (Apr, 2009),

compared to 12% in U.S.

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[Suggestions for Tomorrow]

Ex: Columbia Business School, NYC, released Social Capital Market

Report in 2003 under RISE(The Research Initiative in Social En-

trepreneurship) survey project.

(4) Survey Philanthropic Funds in Korea to encourage them

to behave “Strategically”.

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2. Develop Social Innovator Model of Social En-

terprise, along with Social Service Provider

Model:

To develop and activate Financial Intermediaries

and

Consequently, to develop Social Enterprises as a

whole.

[Suggestions for Tomorrow]

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For Development of Social Innovator Model:

(1) Include Social Enterprise in Business School Education.

Ex: Seminar on Education of Social Enterprise at Business School,

May 28, 2010, Seoul

(2) Take Environment & Energy and Health

Care as opportunities for Social Enterprise.

(3) Take Global Poverty (ie Emerging Markets)

as opportunity for Social Enterprise, as well

as for large corporations & MNCs.

Ex: “Out of Poverty”, Paul Polak

“The Fortune At The Bottom of The Pyramid”,

C.K. Prahalad

[Suggestions for Tomorrow]

Treadle Pump

Conclu-sion:

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Innovation is the key.

No Innovations, No Invest-

ments.

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