How Social Enterprises Can Serve Asia’s Underserved

Why are mobile phones and bottles of Coca-Cola available in even the most remote parts of Asia, but reliable essential services, such as drinking water, electricity, and clean cooking fuels, are not? More inclusive and effective basic service delivery models are needed to benefit the poor, and the social enterprise sector may hold the key.

The Sustainable Development Goals adopted by United Nations member states in 2015 seek to promote social and economic development while recognizing environmental limits. But many goals—such as universal access to basic services (e.g. clean water, electricity, sanitation, and waste management)—are off-track, including in parts of Asia.

While current models of service delivery are effective for many communities (particularly formal urban dwellers), they may not be appropriate for communities that remain unserved or underserved, such as rural, peri-urban and informal urban dwellers.

Take water as an example. Globally, three in 10 people lack safely managed drinking water services and, for countries presently with less than 95 percent coverage for basic drinking water services, only one in five is on track to achieve universal basic service by 2030. In Asia, all countries face challenges in meeting at least basic drinking water services, in both urban and rural areas, by 2030.

A paradox in modern society, which no doubt frustrates the unserved and underserved, is the potential for “leapfrogging” of some services and technologies but not for others. For example, Asia has amassed 2.8 billion mobile phone users in just three decades, while reliable and good-quality basic household services still lag for many. Why can phones be made available when water cannot? Partly, because of some common misassumptions on delivering services.

Common Assumptions Don’t Hold Water

Technology is not inherently a barrier to greater water service provision. Effective and reliable water treatment, conveyance, and distribution systems have existed for millennia. Furthermore, the OECD recently reported that water-related innovations have more than doubled since 1990. Technological advancements – from reverse osmosis and ultraviolet treatment to e-payment via water ATMs and decentralized energy sources – make it possible to serve even the most hard-to-reach customers. Remaining challenges relate more to bundling individual technologies into ‘systems’ as part of a value chain and to applying appropriate deployment business models, illustrated by the quote: “It takes more creativity and innovation to market a new invention than it did to invent it in the first place.”

It is not an absolute dearth of finance that is limiting greater water service coverage. While public financial resources alone may be inadequate—global official development assistance commitments to the water sector are significant but decreasing—there are increasing opportunities to mobilize private-sector finance. For example, management scholar C.K. Prahalad has highlighted “the fortune at the bottom of the pyramid”, solar entrepreneur Jigar Shah has stated that deploying solutions we have already invented “represents the greatest wealth creation opportunity of our generation”, and both philanthropic and social impact financing sources are increasing. Furthermore, and where appropriate, poverty alleviation is helping transition donor recipients to paying customers, which can improve services and mobilize finance.

Consumers generally do value clean water services. The willingness of poor consumers to pay for improved water services can be high (even when such costs can amount to 7 percent of a family’s annual household budget), sufficient to cover installation and ongoing costs. Consumers are most likely to pay for piped water, vendor-supplied water, and public standpipes to improve household health, hygiene, and livelihood opportunities. This, too, augurs well for mobilizing private finance.

The Structural Problem with Traditional Actors

So if the above factors are surmountable, what is impeding essential service delivery to those with outstanding need? I believe that a pervasive challenge—and one that is under-discussed—is the structural limitation of traditional actors. For all their strengths, some limitations of traditional actors lie in developing areas of need, such as decentralized service provision, last-mile service delivery, and local-level ownership and sustainability.

For example, multilateral agencies and development banks have traditionally supported centralized service provision models, favoring larger loans and working through national governments rather than directly with citizens. National and provincial governments might be bound by election cycles and competing priorities for limited budgetary resources. For-profit companies may not see their responsibility in service provision and may instead provide alternative consumer products rather than systems solutions (e.g. bottled water where mains services are lacking).

Philanthropic and non-governmental organizations may focus limited resources on piloting new approaches or small-scale interventions. Lastly, while communities often best understand their own service-based challenges, they can lack direct access to technology, finance, and project management expertise.

Enter the Social Enterprise

An evolution of approach by the above actors and/or the pursuit of fresh approaches by new actors might be required to accelerate progress on the social development goals. One hybrid approach with potential is social enterprise, contemporarily described by the British Council as a “driving force of social innovation and solving deep rooted social problems.” Importantly, social enterprises can adopt either for-profit or non-profit structures and access both commercial and philanthropic capital (Figure 1), providing them with the flexibility to cater to specific and evolving social challenges.

Social enterprises offer flexibility of structure and capital sourcing

A social enterprise for decentralized basic household services could be structured in several ways, depending on the context and specific objectives. Already, some social entrepreneurs—including the Safe Water Network and Piramal Sarvajal in India, and 1001fontaines in Cambodia and India—are employing different approaches to clean water service provision in Asia. While each enterprise adopts its own technology and business models, they all confirm outstanding demand from unserved and underserved customers and have overcome some of the structural challenges that plague traditional actors. Impressively, Safe Water Network’s global operations serve 1.2 million people via 300 enterprises, with local operations typically breaking even within one year.

However, social enterprise models are not without limitations. These models contend with their own infancy, a lack of public exposure and recognition, and underdeveloped support mechanisms and funding opportunities. Importantly, though, these challenges are less structural than those of traditional actors, meaning that social enterprises may be better placed (independently or in collaboration with others) to help fill the gap in experimentation and deployment of innovative service solutions at scale.

The urgency and scale of effort necessary to meet the development goals will require the social enterprise sector to evolve on the run if it is to be truly impactful. And Asia—with its high number of underserved customers, its relative capacity to access finance and pay for services; and its record of innovation—could be the perfect global region to build upon and extend pioneering social enterprise approaches (such as those discussed above) for impact both inside, and ultimately also outside, the region.

Bradley Hiller, a Visiting Fellow with the Global Sustainability Institute wrote this for Asia Global Online, online publication of the Asia Global Institute, a thinktank at the University of Hong Kong. He was a 2018 Fellow at the Asia Global Institute.