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10th Anniversary Essays

Money Is Never Enough

One of 16 special essays on how the field of social innovation has evolved and what challenges remain ahead.

 

Since the 1970s, microcredit has been considered a critical tool for poverty reduction and development. Muhammad Yunus even considers access to credit a human right. After years of research and working hand-in-hand with female entrepreneurs in marginalized Mexican communities, however, I’ve learned that credit is a necessary but not a sufficient condition for success. These women face a multiplicity of challenges, including a lack of social networks, an underdeveloped entrepreneurial business culture, few business skills, no access to mobile technology, and limited contact with professional business development services.

I became a social entrepreneur to help female entrepreneurs overcome these challenges—to work with women in Mexico’s marginalized communities and offer them tailored and practical business development services to help them succeed. To accomplish that I created Crea, a nonprofit social enterprise I’ve been building for the past 5 years. Through our services we’ve helped low-income women become successful: 88 percent of the women we have worked with now have formal accounting systems, up from less than 5 percent when we started; these women have increased their profits 50 percent more than women in similar conditions who don’t work with Crea. Our services have helped these women increase their income and create new jobs and opportunities for people in their communities.

But just like the women I work with, I and other Mexican social entrepreneurs have had to overcome our own challenges. This experience has taught me that money, by itself, is never enough. What we need are changes in legal and fiscal regulations, as well as the creation of a solid ecosystem and infrastructure to allow social entrepreneurs to reach their full potential and help solve Mexico’s and the world’s most urgent problems.

On the legal and fiscal side, one of the biggest problems Mexican social entrepreneurs face is that there are no organizational/legal entities that allow entrepreneurs to run social enterprises per se. An organization can incorporate as a nonprofit and justify tax-deductible earned income only if it can prove that the income is related to the social mission. Or an organization can incorporate as a for-profit and donate, with tax deductibility, up to 7 percent of the prior year’s profits to philanthropic or impact activities. But no organization can have it both ways.

The growth and impact of the social sector is limited by the inflexibility of laws that inhibit innovation and investment in social enterprises. To work around the constraints, Crea has had to incorporate multiple entities, increasing our administrative costs but allowing us to operate successfully while complying with regulations. If we didn’t have a board full of lawyers, our strategy would not have been possible.

One of the biggest problems Mexican social entrepreneurs face is that there are no organizational/legal entities that allow entrepreneurs to run social enterprises per se.

Many Mexicans are striving to change these regulatory obstacles and show that social enterprises are partners and collaborators in the country’s development. Nevertheless, our social innovation sector is relatively small when Mexico is compared to other countries in Latin America, such as Chile. One thing that would help us, and I am sure would help social entrepreneurs in many other countries around the world as well, is enactment of new laws and regulations that would make it easier to create and operate social enterprises. This would be an admirable task for a global NGO to take on.

Another reason the Mexican social sector hasn’t evolved and reached its full potential is that the government has long been reluctant to collaborate with organizations such as ours. Because there are few opportunities to develop strategic collaborations between the government, the private sector, and civil society, it becomes hard to scale up the impact and replicate successful models.

Last, there is a dearth of civic and philanthropic culture in Mexico. Very few people seem to understand or care about impact indicators, and the lack of professionalization in the social sector is striking. The kind of educational opportunities and consulting support that could encourage a stronger civic and philanthropic culture are sorely lacking. Data are not yet driving strategic investment and philanthropic decisions, which in many cases limits the impact on the ground. It also prevents the sector from showing how the financial and social impact it does have contributes to the country’s development.

Despite these obstacles, I am hopeful about the future. Women are the hidden engines of economic growth. By investing in women we are seeing real social and economic development. And we are not alone. Crea is one of many social enterprises that are creating change in Mexico and around the world.

 
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COMMENTS

  • BY Rich Leimsider

    ON February 21, 2013 09:49 AM

    Leticia-

    This is such an important essay- thank you.  If there is one thing we have learned at Echoing Green over the past 25 years, it is that, in fact, social entrepreneurs cannot do it all by themselves.  In the same way that Hernando de Soto has called attention to the importance of the legal environment around property rights for the very poor, it is clearly equally important that we work on improving the regulatory and legal environment for social enterprise.

    We’re so glad to be partners with you in this work!

  • BY Michael D Layton

    ON February 26, 2013 05:46 AM

    What Leticia shares about the lack of an adequate enabling environment for the social sector in Mexico is all to true! While recent editorials in the Economist and the New York Times see a dazzling future for Mexico as an economic power house, government policy and private sector practice is doing too little strengthen initiatives like Crea. Without more collaboration and support for Mexico’s social sector and for organizations like Crea, I worry that the dreams of Mexico’s economic boom will not be realized - at least not in a way that foments social justice and greater economic equality. Despite challenging circumstances and thanks to incredible professionalism, creativity and commitment (with an assist from a “a board full of lawyers”), Crea is demonstrating encouraging results and is bringing its efforts up to scale. Congratulations, Leticia!

  • Natalia Saltalamacchia's avatar

    BY Natalia Saltalamacchia

    ON February 26, 2013 06:47 AM

    At ITAM - Mexico City we are proud of having Leticia Jauregui as our former student!!

  • BY Miguel Jáuregui Rojas

    ON February 26, 2013 07:39 AM

    In very few words this article accurately portrays the reality of philanthropy in Mexico as well as the structural, fiscal, financial, educational, legal and social constraints it faces. We urgently need to leapfrog into a true 21st Century philanthropy that is not just focused on “assistance” but rather thinks about social impact metrics, innovation and impact investing, allowing for the better development of Mexico as a whole (with specific emphasis on civic engagement and civic participation). We also need to promote better livelihoods and social mobility with proper access to education, health and all necessary resources to eliminate the inequalities prevalent today as well as ensure equal standing vis-a-vis laws and regulations and the application of rule of law. Indeed, “Money is never enough!”

    A relevant article, of quality and with insightful content.

  • George Srour's avatar

    BY George Srour

    ON February 26, 2013 11:50 AM

    Leaves those of us familiar with Crea’s work even more impressed given the structure (or lack thereof) that exists to support such efforts. Your article highlights that indeed, people, and the social mission they choose to pursue are an enterprise’s most important asset. I have every hope that just as you’ve recognized a way for Crea to redefine the reality of doing business for thousands of women, leaders will see the wisdom in enacting policies that will allow your work to scale.

  • Excellent points on the structural reforms needed to fully benefit from what social enterprise can bring to significant societal issues.

  • jaleen's avatar

    BY jaleen

    ON March 1, 2013 02:32 AM

    So interesting, and so astute.
    A note from the bubble: Social entrepreneurship is so very alive in San Francisco right now, here at the tip of Silicon-Valley-entrepreneurship-as-table-stakes, USA. (We may even be co-opting the term a little bit with all the attention around health tech lately. Is someone watching that?) So it’s easy to miss all the things that our peace-love-tech cultural-soup AND our government are doing to support conditions which help social entrepreneurship flourish.

    I’m always thinking about the cities part, so no surprise I’m thinking in particular about the co-work spaces that are springing up everywhere. San Francisco is experiencing this massive surge in tech-fueled cost-of-living—a 2-bedroom apartment in the Mission costs $3500 (*source: friend, via Facebook, via #internet), where your neighborhood bar gets blogged about for Google googles sitings (http://www.theatlantic.com/technology/archive/13/01/what-happens-when-you-walk-into-a-bar-wearing-google-glasses/272745/)—and we all sort of assume that the former-bookstore around the corner is either getting converted into a workshare space or a new kettlebell gym.

    San Francisco is a special little snowflake, though. Workshare spaces seem so obvious here. Of course social entrepreneurs would have so much more access to knowledge, support tools, investors, and people who know investors, when they can literally sit next to other entrepreneurs (social or otherwise). SF/CA/US government is surely doing what it can to support this energy, and all of the subsequent job creation and tax revenue that co-work spaces are contributing to, in a surely measurable way. But SF is critical mass (if you will)—the experience, investment, and belief in entrepreneurship is part of our air. When you lack a significant cultural history and deep foundational infrastructure to support social entrepreneurship at scale in an environment full of people who probably have at least some loose collective, externally-influenced meaning around clustered concepts like “entrepreneur,” “innovation,” and “success,” to either measure their entrepreneurial endeavors against or mindfully reject, where does a government place it’s biggest bets to lay new ground?

    #in200wordsorless. <3

  • Guadalupe Alessio's avatar

    BY Guadalupe Alessio

    ON April 6, 2014 11:28 AM

    Leticia:

    How insightful is your article, you are right when you say that women are the hidden engines of economic growth,  everyone should invest in projects lead by women in order to promote innovation, creativity and social equality. Women show true commitment, once they are involved in any project.  In this way they will be empowered.

    Best wishes

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