When the hard way is the only way to learn: the journey of Hagar’s social enterprises Part 1

Social enterprise is the new black: it is the buzz word around the community welfare and development sectors. As with microfinance twenty years ago, social enterprise is being hailed as an (or even “the”) answer to social problems that combines the best of the market economy and business disciplines with a strong and targeted social mission. If only it were that simple.

Hagar_Cambodia_0905-e1354853060321Far from jumping on a recent bandwagon, Hagar has been a pioneer in social enterprise since 1997. What began as a small scale handicraft business providing employment and income for 23 women grew into three Cambodian businesses, employing over 300 women at their peak. These businesses have resulted in various awards and a deserved reputation for Hagar as a key innovator in the fight against global people trafficking.

It has been my privilege to study Hagar’s social enterprises in some depth. I concluded unequivocally that employment in these businesses contributes significantly to the reintegration of the women into Cambodian society, growing their confidence and resilience and assisting them to function as full members of society with the dignity due to them as God’s creations. It is hard to over-estimate the impact of real jobs in real businesses that make real money. The number and variety of businesses Hagar now works with only enhances the prospects for the women and children with whom Hagar is working.

However, social enterprise is a not a model that can be selected off a shelf and implemented in any context. Hagar’s experience has not been smooth sailing and many lessons have been learned.  Hagar did not start with a developed theory but learned by taking risks and at times failing.

By 2012, Hagar no longer fully owned any businesses in Cambodia but was working in partnership with many businesses, in some of which it retained a minority ownership stake. This change in part reflects the difficulties in combining an NGO – with a strong focus on its clients and the need to raise money via donations – with commercial enterprises and their needs for financial sustainability, management disciplines and capital to run and grow the business. The decision making processes are different, each needs its own clear aims (and the aim of bringing them together needs to be clear) and the financial imperatives of each can be in tension.

Hagar has persevered while learning these difficult lessons and is now in the position of having many business partners in Cambodia who are keen to employ Hagar graduates and thus assist in reintegrating these women into society. However, the willingness of these partners did not happen by chance. The pioneering work of Hagar in establishing the concept of social enterprise and planting the notion that businesses can be financially sustainable while achieving socially desirable aims has been transformative in Cambodia. While Hagar may have decided that fully owning businesses was not the best model in that particular context, it is also true that as a result of their previous innovation they no longer need to.

So in Hagar’s Cambodian operation we have a great example of how business can blend with an NGO to achieve great outcomes. There remains no set formula, and each particular situation will require its own approach, but with enough imagination and the courage to take risks, innovative social enterprise can bridge the NGO-business divide and help achieve what neither can on their own.

John McKinnon

“After 17 years in the finance industry, including being a co-founder and executive director of wholesale fund manager GMO Australia, John joined Australian overseas aid and development NGO, TEAR Australia, in 2005, managing first their NSW and then the Australian operations. John currently manages a charitable foundation and is involved with numerous NGOs, with both an environmental and anti-poverty focus. In addition to degrees in mathematics and Biblical Studies, John has recently completed a PhD examining social enterprise and development, using Hagar as a case study.”

You can contact John by email.