Bangladesh Social Enterprise Project - Bangladesh Enterprise Institute

able to start and grow at a rate much faster than comparable developing countries. The policy
emphasis should therefore simply be to remove the remaining barriers to social and
conventional entrepreneurship, to ensure that the benefits of growth are delivered to
marginalised people, and to ensure that growth is economically, socially and environmentally
sustainable. The level of private sector activity can probably not grow much faster, what is
required is a greater quality of activity which directly targets equitable and sustainable
economic and social development. Social entrepreneurship can significantly contribute to such
an objective.
3.0 The Barriers to Social and Conventional Entrepreneurship
Access to credit: Micro‐credit was invented specifically to solve the fundamental market failure
that poor people lack collateral and therefore lack access to loans for investment, locking them
into activities which create little value. Additionally, the transaction costs of making and
securing the repayment of small loans to dispersed customers are typically too high to be
attractive to a conventional bank. Organisations such as BRAC and Grameen have made
significant progress in overcoming these barriers and micro‐credit is now a well‐established
activity. More recently, social entrepreneurs have recognised a “missing middle”‐ the small
enterprises which are too large for conventional micro‐credit but too small for conventional
bank borrowing or issuing equity. Such small enterprises are essential for job creation and
organisations such as BRAC are developing finance products to suit their needs.
Access to other finance products: The growth in credit can be dangerous to individuals if it is
not accompanied by growth in access to other financial products, in particular insurance. Smallscale
entrepreneurs risk facing uninsured risk if they borrow to invest in a business which then
fails through some external problem such as weather or crop failure. Informal village‐level
mutual insurance rarely works as each member of a village typically faces identical risks – for
example a flood in a village would tend to affect each member of a mutual insurance scheme
simultaneously.
Poor people also often lack the ability to save money securely and at a
BSEP: Policy Brief
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