Social enterprises are fast emerging as an entity of the alternative economy. When the traditional economic systems of a country or market-based solutions fall short to ensure well-being in the society, social enterprises can spearhead disrupting models to solve burgeoning social problems. But the social enterprises face a myriad of challenges and adversities. Some of these challenges are more contextual and some are generic in nature. Among the many challenges the following four appears to be more obvious and general regardless of the context and other influencing factors –
Lack of funding support
Funding is by far the biggest challenge for the social enterprises. Literature identified that most social enterprises failed to secure start-up capital. Given that most of the social entrepreneurs are individual entities, it is therefore difficult to accumulate enough funds at the beginning. Over time some ventures flourish but a vast majority of the ventures struggle to maintain its existence and sustainability due to capital or ongoing sources of income. The traditional support mechanisms, such as – bank or financial institutions that foster the development of social enterprises is quite scarce as compared to commercial enterprises. This is quite evident in most of the countries as the extant literature suggests and apparent from the discussion with the participants. This is to a lot extent due to the fundamental misconception that socially driven organisations are not profitable and there is risk involved whether to money being lend will be given back or not. Therefore, social entrepreneurs struggle to accumulate the required capital and mostly invest their own savings to tackle social problems.
Ability to scale-up
Social enterprises primarily spring up from the social inequity or the market failure when the traditional systems are not enough to meet the needs. The primary problem-involving majority of the social enterprises is that, it lacks the ability to scale-up the enterprise to the next level. Most of the time it starts with immense enthusiasm or a social outlook to address any specific problem. However, the lack of support and structured polices affect the social enterprise to scale it up to the next level. Partly due to the discontent across the societies and the scepticism towards socially driven actions which is mostly neglected. This also affects the sustainability of the social enterprises. Given that most begin with addressing social problems where the government support is scarce, the expansion opportunities become limited overtime due to resource constraints.
Duality of mission
Social entrepreneurs aspire to create social value by addressing various social problems existing in the societies. This aspiration, however, is not deviant from economic objective as it can also aim to earn profit through the innovative business model. The traditional conceptualisation however, associates the social enterprises largely with the notion of philanthropy or non-profit venture. The duality of this identity has remained a big problem for social enterprises. Some social entrepreneurs earn money through their ventures considering this as a more ethical way to do business, some do this with the mission to create a social impact and some try to create social value and develop a sustainable business model. Thus, it is apparent that the identity of social enterprises has become more ambiguous due to the diverse identity.
Lack of proper business strategy
Another major challenge that most social enterprises face is the lack of proper business strategy leading to non-competitive products. Given the focus largely remains on social needs that to some extent impedes the development of the actual product or service offered by the social enterprise. This also hinders the development of a proper business strategy to compete in the market as many of the social enterprises compete with commercial enterprises. In addition, another fact is that the social entrepreneurs often embark on the journey without having any prior business background which is entirely out of goodwill. Due to this most of them would not have the required managerial skill allowing them to plan, undertake strategic planning, financial forecasting etc. Therefore, the poor strategy argument can be a precipitant to the challenge of fund raising, hinting on that the organisations that are documented by literature as facing financial challenges might actually be facing a strategy deficiency and not a financial deficiency.