History in Brief

History in Brief

Social enterprise has a lengthy private history, but a short public one. Nonprofit organizations have long engaged in income generation and businesses to either supplement or complement their mission activities. 1

In the United Kingdom, cooperatives functioned as a means to fund socioeconomic agendas as early as the mid-1800s. Beginning in the 1960s, US nonprofits experimented with enterprises to create jobs for disadvantaged populations. Micro-credit organizations made their appearance in developing countries by the 1970s, at about the same time Community Development Corporations (CDCs) were gaining popularity in the United States. Yet it is only in the last 15 or 20 years that academics, practitioners, and donors have been studying and recording cases of nonprofits adopting market-based approaches to achieve their missions.

The growing practice of social enterprise is fueled by nonprofit organizations’ quest for sustainability, particularly in current times when support from traditional, philanthropic, and government sources is declining and competition for available funds is increasing. Social enterprise enables nonprofits to expand vital services to their constituents while moving the organization toward self-sufficiency. Nonprofit organization leaders understand that only by establishing an independent means of financing can they become a going concern.

The Pioneers

John Durand began working with seven mentally retarded people in 1964, today Minnesota Diversified Industries is a for-profit social enterprise which employs over 500 disabled people. In 2000 the company reported $54 million dollars in annual revenues with only half a million coming from grants.

In 1971 with a $1,000 loan from a moneylender, Mimi Silbert began a program for recovering drug addicts and ex-convicts. Since its inception Delancey Street has successfully mainstreamed over 15,000 former clients on self-generated resources from its numerous businesses: restaurant, moving company and construction, which cumulatively net revenues of over $6 million a year (2001).

In 1963, Jack Dalton opened Pioneer Fellowship House as a residence for recovering alcoholics, he required each resident to pay $25 per week for room and board, perform house chores and attend nightly meetings.2 Today, through its employment, training, and behavioral health and community corrections programs, Pioneer Human Services (PHS) serves over 5,000 clients a year, 1,300 at any given time. PHS employs a staff of approximately 900, and has an annual budget of roughly $55 million, 99.6 percent of which is earned through sales of its products and services from its eight businesses which run the gamut from manufacturing, food service, distribution and logistics, real estate asset management, and printing.

Professor Muhammad Yunus, Head of the Rural Economics Program at the University of Chittagong, Bangladesh, began a research project in 1976 to explore the possibility of providing banking services to the rural poor. The Grameen Bank Project (Grameen means "village" in Bangla language) was piloted in three villages neighboring the University with the following objectives: to extend banking facilities to poor men and women; to eliminate the exploitation of the poor by money lenders; to create opportunities for self-employment for the multitude of unemployed people in rural Bangladesh; and to enable disadvantaged (mostly women from the poorest households) to self-manage money and business. Based on its success, the project expanded in 1979 to several locations throughout Bangadesh including Dhaka, the capital. By October 1983, the Grameen Bank Project was transformed into an independent bank by government legislation.

Today Grameen Bank serves over 2.4 million borrowers and has over 20 businesses including:

  • Grameen Shakti (GS), a not-for-profit rural power company whose purpose is to supply renewable energy to unelectrified villages in Bangladesh as well as create employment and income-generation opportunities in rural Bangladesh;
  • Grameen Telecom whose objective is to provide mobile phone service to 100 million inhabitants in rural Bangladesh by financing members of Grameen Bank to provide village pay phone service and by providing direct phones to potential subscribers;
  • Grameen Knitwear Limited, a 100% export-oriented composite knitwear factory.
  • 1Adapted from Sealey, Sealey, Boschee and Emerson, A Reader in Social Enterprise, 2000.
  • 2Powering Social Change: Lessons on Community Wealth Generation for Nonprofit Sustainability, Community Wealth Ventures, 2003.