In Search of Inclusive Social Entrepreneurship

(Illustration by iStock/Irina_Qiwi)

DJ Bola is a social entrepreneur born in Jardim Ângela, a poor neighborhood in São Paulo, Brazil, considered in the 1990s to be one of the most dangerous places in the world. When he was 18 years old, he worked as a motorcycle courier during the day and at night he started a new endeavor: A BANCA, an organization that worked with hip-hop in order to improve the lives of young people from Jardim Ângela and nearby regions.

After some years, DJ Bola found out about the Artemisia accelerator program, the first social enterprise accelerator in Brazil. He was selected for the program and it opened a new world for him. DJ Bola could fully realize the potential of his venture and started to attend events and form connections within the social entrepreneurship ecosystem. While attending one of these events, in 2014, DJ Bola noticed there was no one else like him attending; even the waiters seemed to be more affluent than he was. Attendees were discussing solutions that could potentially benefit the poor, but, paradoxically, he was the only one in the auditorium who had actually experienced living in deprived circumstances. Suddenly sensing he did not belong, his first impulse was to leave and go back home. But he took a deep breath, called his wife, and decided to stay. In that moment, he realized that if he left the room he would be missing an important opportunity to give a voice to many unheard people.

Not only did DJ Bola stay in the meeting, but after some years he would co-found ANIP, an organization that supports social entrepreneurs who come from the poor neighborhoods of Brazil. As of 2022, ANIP has impacted more than 100 social entrepreneurs and provided more than 1 million BRL (roughly $190,000) in seed capital for projects led by social entrepreneurs from disadvantaged communities like Jardim Angela.

The story of DJ Bola shows one of the dilemmas of the social entrepreneurship ecosystem: it keeps, usually inadvertently, replicating the intrinsic inequalities of capitalism and often operates under a colonialist mindset, in which more affluent people are implicitly portrayed as “saviors of the poor” as they create initiatives that are meant to improve lives but leave the unequal structures that lock in poverty and exclusion untouched. Although the benefits of social enterprises seem to be well understood, we know very little about what it means to be a social entrepreneur coming from a poor background. There are still only a few examples of successful social enterprises serving poorer people at scale that were created by entrepreneurs from those communities. As the field of social entrepreneurship is engaged in finding solutions for social inequalities, it often falls short of creating opportunities for those who suffer most from those inequalities to become protagonists. 

Intrigued by stories such as that of DJ Bola, in 2020 and 2021 we conducted a survey of 101 social entrepreneurs in Brazil from varying economic backgrounds. This research, conducted in partnership with the Arymax Foundation and SEFORIS (a multidisciplinary program funded by the European Commission to investigate the potential of social entrepreneurship in Europe and worldwide), enabled us to identify how the field of social entrepreneurship reflects the country’s social inequalities. We found that in Brazil, social entrepreneurs from poor communities differ significantly from those from higher social classes, especially in terms of their access to financial, human, psychological, and social capital.

Furthermore, our research revealed that the unequal structure of Brazilian society is reproduced in the field of social entrepreneurship through two mechanisms. The first relates to the perceived capacity of more affluent entrepreneurs to generate greater social innovation. The second is expressed by the countless difficulties social entrepreneurs from poor communities face in creating, developing, and growing a business, which limit their potential to innovate or generate a social impact. With these two barriers in mind, it is extremely important to rethink the support mechanisms available to these entrepreneurs, so that the traditional capitalist model is not replicated in a field in which the intention is precisely to reduce inequality.

The Promise of Social Entrepreneurship

In the last two decades, the idea that social entrepreneurship could be a way of solving social problems has found widespread appeal. Using market mechanisms, many social entrepreneurs have followed the example of Muhammad Yunus and Grameen Bank to set up enterprises with a main objective of tackling social or environmental issues. All over the world, we are seeing the proliferation of an ecosystem that comprises impact investors, accelerators, support organizations, and social entrepreneurs who are all driven by the possibility of generating shared value so that both companies and society win.

This purpose, which drives many entrepreneurs, influences not only the field of social entrepreneurship but also organizations that are aligned with their movements and initiatives, such as B Corps or the United Nations’ Global Compact. There are even cases of the state and its institutions operating in this area, such as through social impact bonds and the creation of tax incentives for social investment. These trends have direct implications for society, and, as a result, millions of vulnerable families have benefited in recent years.

Yet the logic of social entrepreneurship, even from a well-intentioned perspective, is similar to that of the colonial mentality: Affluent people will tackle the problems of the most vulnerable without necessarily involving them in solving their own challenges. From a global perspective, most social entrepreneurs still come from developed countries or the higher social classes in emerging markets.

Inclusion of and co-design with the most vulnerable is essential if solutions are to be effective. Despite conscious capitalism being an honorable practice and having a positive impact on society, many existing approaches for supporting social entrepreneurs from poorer backgrounds still centralize power and innovation. Instead of mitigating existing socioeconomic inequalities, they may reinforce them, because they do not encourage the poorer populations to be the protagonists of social innovation, and often prevent them from developing the necessary skills and knowledge to scale the benefits generated by social enterprises originating in their communities. It is essential, therefore, to identify obstacles to the inclusive development of social entrepreneurs and the mechanisms for overcoming them.

A Hostile Entrepreneurial Environment

From an individual perspective, the entrepreneurial process begins with a set of resources that allows goals and aspirations to emerge over time. Such resource constraints often force individuals to prioritize commercial over social entrepreneurship; thus, in places where social entrepreneurship is most needed, members of the community cannot “afford” to be social entrepreneurs.

This hostile entrepreneurial environment negatively impacts both entrepreneurial intention and success. The creation, development, scaling, and survival of businesses are hampered by issues such as the quality of internet access, logistical difficulties, and barriers to access markets. These limitations of the environmental context are in turn intensified by several factors: the absence of public incentives and support, and by the fact that enterprises focused on making a social impact are more likely to fail than those focused solely on economic returns.

The research we carried out shows that throughout their journey, social entrepreneurs from poor communities face many obstacles that perpetuate social inequality in Brazil. Our main argument supported by our findings is that these social entrepreneurs suffer greatly from the difficulty to access four types of capital: financial, human, psychological, and social.

Let us look at these types of capital one by one.

Financial capital | We find that the satisfaction and happiness of entrepreneurs increases with access to financial capital. Several studies have shown that in societies that are characterized by high levels of poverty, the well-being of entrepreneurs is related to the savings they have. Once their basic needs are met, however, any additional income does not necessarily translate into greater happiness.

Besides the effect on well-being, access to financial resources is fundamental in starting any new business and sustaining it. Given the relevance of financial capital for social entrepreneurs, it is crucial to develop financial mechanisms that support them so they and their businesses can thrive.

Our research revealed that social entrepreneurs from poor communities have much lower financial capital and their initial capital to start the business is 37 times less than that of entrepreneurs from the affluent classes. The sales of these social enterprises were also 21 times lower than those of higher-income entrepreneurs; although on average, entrepreneurs from poor communities suffered no losses in the year prior to our survey. Among the more affluent entrepreneurs, on the other hand, losses were greater than 280,000 BRL ($56,000), on average. This highlights the difficulty that poor entrepreneurs have, not only in accessing financial capital for starting a business, but also in being able to take risks and incur debt to support long-term growth. This is a central barrier when it comes to entrepreneurs scaling up their business and having a greater and broader impact on the society.

This is directly connected to another essential component of scale which usually requires a great amount of capital to be implemented: technology. Thus, unsurprisingly, most social enterprises originating in poor communities are not technology intensive. Two cases in Brazil that exemplify this difficulty are Jaubra and Weuse. Jaubra is a mobility platform similar to Uber, except that their drivers are from poor neighborhoods in which Uber does not operate for fear of robbery and violence. Jaubra was supported by drivers and customers. They operated for years using Whatsapp messages, but they were unable to get financial capital to support development of their own app, which would have allowed them to scale their operations. The same happened to Weuse, a platform that rented clothes to people who had difficulty dressing for work. The enterprise was growing and was able to get angel investment to support the development of the technology needed. However, the COVID-19 outbreak led to a struggle to secure more investments and, consequently, sales decreased. The difficulty to access credit or alternative funding eventually led Weuse to close its doors. Those two examples present cases of entrepreneurs willing to make a difference, with a viable business model and much growth potential, but who couldn’t grow or survive a crisis due to a lack of access to financial capital.

Human capital | Human capital is related to the formal and informal knowledge that is acquired throughout an entrepreneur's life. It is the attitudes and skills that enable individuals to use their competencies and become more productive and efficient. Human capital is positively associated with creativity and value creation.

In the case of poorer communities, there is a large gap in the formal education of entrepreneurs, whose schooling is usually of inferior quality and more limited overall, with business management concepts and knowledge also less accessible. About 30 percent of the social entrepreneurs from poor communities in our research sample did not study at the higher education level. Among affluent social entrepreneurs that number drops to 5 percent. This mismatch in education affects not only the social entrepreneurs but also their employees, who often also lack the management knowledge and other skills needed to develop the businesses.

Whilst some formal knowledge cannot simply be transplanted to poorer communities, increased access to this knowledge could support entrepreneurs in managing their businesses better and, ultimately, help develop their communities. Social entrepreneurs should be empowered to create their own knowledge from practice communities and socially-situated learning (the experience of their own social group).

In Brazil, many organizations try to fill this gap. One of them is Empreende Aí, an enterprise created by a couple that was originally from the southern region of São Paulo city, had the possibility to study business administration at university, and identified an opportunity to teach entrepreneurship to people from similar backgrounds. Without any initial capital, the founders started their operations funded by donations and with capital from public and private bids. After some years, the organization passed through the acceleration program of ANIP, gained traction, and tried to pivot to a B2C approach, selling their courses directly to entrepreneurs. However, this strategy was not successful, since entrepreneurs from these places have no money to invest in their own training. Currently, Empreende Aí has a B2B2C model, in which corporations and foundations invest in their training program that is then offered for free to entrepreneurs from poor communities. To develop this human capital is not easy, because there is a structural gap in education. Thus, courses need to use simple, direct language to be accessible and useful for entrepreneurs and enable them to incorporate what they learn in their daily work. This is easier to achieve by an organization that has also come from a poor background, as is the case of Empreende Aí.

Psychological capital | This refers to an individual’s state of positive psychological development and is characterized by confidence to take on challenging tasks, optimism with regard to current and future success, perseverance for achieving one’s goals, taking a new direction whenever necessary in order to achieve them, and resilience after setbacks. Psychological capital is an important personal resource linked to opportunity identification and promotion of innovation, as well as entrepreneurs’ well-being and satisfaction.

In our research, less affluent social entrepreneurs’ psychological capital suffers and is associated with a lower level of perceived satisfaction. While 76 percent of more affluent entrepreneurs report being satisfied with the work they do; among those from poor communities it is only 44 percent.

One of the challenges for these social entrepreneurs is that they lack positive role models and they are not told by society that they can become great leaders. Currently, one of the most successful social entrepreneurs in Brazil is Edu Lyra who created Gerando Falcões, an organization that combats hunger and poverty. According to Edu Lyra, in his childhood in a favela in Guarulhos, a city in São Paulo state, he had no role models at all. His father became a drug dealer, his neighbor was a murderer, and the fast and more “conventional” path for his life would be crime. However, with the psychological support of his mother, a strong self-initiative, and courage, he became a social entrepreneur. Edu Lyra is an exception of a person that could believe in himself, although society wanted to put him in a box as a person without a future. By 2022, his social organization, Gerando Falcões, was impacting more than 6,000 favelas all over Brazil. Edu Lyra could draw on his emotional strength and psychological capital that in most cases is an obstacle for the survival and growth of social enterprises in communities like his.

Social capital | Social capital entails the relationship networks that can be accessed or mobilized by way of personal ties. Two forms are frequently identified: strong ties in small, homogeneous groups, and weak ties in larger, heterogeneous groups, involving people with whom entrepreneurs have less day-to-day contact or less connection. Entrepreneurs with fewer ties to people of greater economic power have less access to information and fewer resources coming from other networks, which can be important for the success of their entrepreneurial efforts.

In the poorest communities, entrepreneurs generally use social capital to fill institutional voids in order to access emotional, human, or financial resources of all kinds. In fact, previous studies support the argument that social networks are more important for entrepreneurs in emerging economies than in developed economies. Within communities, however, ties tend to develop among people who share similar characteristics, and in the case of the poorest places, people who have similarly low levels of resources.

This difficulty in accessing other networks limits the establishment of partnerships with more organizations and obtaining the resources that are essential for developing the businesses of entrepreneurs from these communities. The conclusion of our research is aligned with this: On average, more affluent social entrepreneurs had 36 percent more partnerships with other organizations than social entrepreneurs from poor communities.

Again, the case of Edu Lyra presents an example of a social entrepreneur who, even though he came from a very poor place, was able to build a strong network with more affluent people who believed in his cause and ideas. With the help of a few of the wealthiest people in Brazil, Edu Lyra could scale and get the support of several institutions, large companies, and rich individuals. Unfortunately, his case is an exception. There is a difficulty for social entrepreneurs from poor communities to create ties with diverse networks that enable them to access different markets and resources. This is even more challenging when their background is marked by intersectionality. It is much harder for a Black woman to access those networks than for a white male, even if they both come from the same kind of poor neighborhood. This indicates that inequality within the social entrepreneurship field goes much beyond social classes. It is also about gender, race, and prejudices across society.

Financial, human, social, and psychological capital can be analyzed separately, but they are interconnected and form a set in which, in general, entrepreneurs from poor communities are disadvantaged and suffer from a lack of these four types of capitals.

Ethnic Markers and Crisis Impact

Racial distinction speaks loud and clear to most of the Black population in Brazil. While 75 percent of the poorest Brazilians are Black, 70 percent of the richest are white. This difference is mirrored—and even increases—in social entrepreneurship: 87.5 percent of the social entrepreneurs from poor communities in our sample said they were Black, while in the more affluent classes, 91 percent of the entrepreneurs said they were white.

Socioeconomic differences also have important consequences with regard to how entrepreneurs are able to cope with crises. While COVID-19 pandemic, on average, had no impact on the sales performance of more affluent social entrepreneurs, entrepreneurs from poor communities sold 27 percent less, and half of their companies were threatened with closure because of the pandemic. This indicates that these social entrepreneurs are not only at a disadvantage when starting their business but are also more vulnerable to crises, which further widens the gap between the two realities.

This is how socioeconomic inequality is perpetuated, because those who seek solutions for social issues that affect poor communities are the wealthiest people. Entrepreneurs from the poor regions, in turn, are left with the prospect of replicating already established successful models—and with little room and conditions for innovations.

If we want to create conditions that favor structural socio-economic changes, we will need to break down the (in)visible walls of society and conceive new opportunities for equality for disadvantaged communities as they build their own solutions. This can disrupt not only the development of new products and services, but also of new business models and social innovation that has a real impact. This is a new perspective, in which poor people are neither consumer, beneficiary, nor producer, but the protagonists of new solutions.

Despite all the challenges, social entrepreneurs from poor communities have some comparative advantages in their work in the social field. We looked at three of them in particular: first-hand experience of the problems faced; local knowledge; and access to the people who will benefit from their businesses.

While social entrepreneurs from more affluent strata seek to understand problems from an external viewpoint, as foreigners, social entrepreneurs from the places they serve experience the adversities they seek to resolve on a daily basis. In addition to lending greater legitimacy to their actions, this practical experience means that the mission, purpose, engagement with the cause, and sense of urgency become central to the business.

Personal experience also enables entrepreneurs to hold “market intelligence” about their communities that typically falls outside the data that market research can identify. On top of that, they are able to use appropriate language in their interactions with the public and customers, and they have a deep knowledge of where the bottlenecks and friction points are that prevent social innovations from being implemented.

Finally, one of the biggest challenges of working in poor regions is “the last mile”: in other words, how to access markets and reach the target population efficiently. Social entrepreneurs who are already based in their own communities have a natural competitive advantage through their access to those who are benefited.

New Roles in the Impact Ecosystem

Perceiving poor communities as creators of new solutions may be considered a naive or idealistic approach. The difficulties faced by those entrepreneurs identified in our research call for survival strategies rather than radical innovation. For this to change, impact ecosystem organizations must rethink their roles and act effectively to train and support entrepreneurs from these communities in overcoming their setbacks.

New financial mechanisms tailored to entrepreneurs from poor backgrounds are needed to help mitigate the financial risks associated with developing innovations. These mechanisms must be aligned with support and training programs for entrepreneurs and managers to enable them to develop new solutions (products and services) that may be unconventional but are in tune with their social reality. In addition to addressing financial, organizational, and structural issues, psychological support initiatives must be orchestrated to help entrepreneurs deal with the challenges inherent in this journey, and with other personal and community challenges associated with living in a context of limited resources.

Greater cooperation is also essential in the way the different players—major companies, NGOs, support organizations, entrepreneurs, and government—are linked. We believe these links would create alternative ways for promoting social enterprises in this layer of society. This perspective is in line with the ecosystem concept, whose components harmoniously create better conditions for all.

ANIP, the organization created by DJ Bola, has exactly the aim to have an integrative vision and commitment to facilitate access to different types of capital. ANIP was founded in 2018 by a coalition between Artemisia, FGVcenn (the Center for Entrepreneurship and New Business at the Sao Paulo School of Business Administration), and A BANCA (the social organization co-founded by DJ Bola). ANIP offers entrepreneurial education courses and training in management. It also provides social entrepreneurs from poor neighborhoods with financial capital through loans and seed capital, facilitates access to markets and exchange networks, improves their self-confidence, and facilitates conversations for peer-to-peer psychological support.

Over four years, ANIP has directly benefited 105 social enterprises from poor communities, has invested more than BRL 1 million (roughly $190,000) in seed capital in poor neighborhoods of Brazil, and has engaged with more than 200 actors in the social enterprise ecosystem. The organization works intensively with social entrepreneurs to show its potential for disruptive innovation. It has already linked a number of actors from civil society and the private sector to promote changes that come from the poor communities themselves. In this sense, the role of DJ Bola and A BANCA as the protagonist and main manager of ANIP is essential for maintaining the culture, way of thinking, and logic of the communities they serve.

Geography and co-location are essential when it comes to developing collaboration, partnerships, and support in an entrepreneurial ecosystem. Seminal definitions of ecosystems emphasize the creation of an ecosystem as being a group of actors interconnecting on a local geographic scale. The specific geographic dynamics of each region are relevant. The consolidation of a strong and vibrant social impact ecosystem, in fact, depends more on organic and frequent interaction between actors who are engaged in building shared meanings and looking for the structures and resources that are necessary for developing social enterprises than on the force of top-down actions.

Despite local experience, knowledge, and ease of access to markets, social entrepreneurship in poor communities is still hampered by environmental factors and the lack of access to capital, a scenario that reflects the inequality structures of emerging markets and replicates a colonialist mindset. We believe that the development of bottom-up structural mechanisms in a collaborative, holistic, and decolonial manner can help the social entrepreneurship field develop its potential to truly work toward a better society.

Read more stories by Edgard Barki, Marcus Alexandre Yshikawa Salusse, José Guilherme F. De Campos, Thomaz Novais Rocha & Ute Stephan.