Social Entrepreneurship Blueprint

Malaysian Social Enterprise Blueprint
Tonibung
Johor Area Rehabilitation Organisation
Les Petits Chefs
Published by
Malaysian Global Innovation and Creativity Centre (MaGIC)
Social Entrepreneurship Unit
Block 3730, Persiaran APEC
63000 Cyberjaya, Malaysia
www.se.mymagic.my
ALL RIGHTS RESERVED. No portion of this publication may be reproduced without written permission of the publisher. While every effort has been made to ensure that the information
contained and herein is correct at the time of publication, MaGIC shall not be liable for any errors, omissions or inaccuracies which may occur.
EXECUTIVE
SUMMARY
Primary: A social enterprise is an entity which
social
balances both impact and business in order to
areas of education, poverty, rural development,
solve a legitimate social or environmental issue
environmental sustainability, employment for the
through its offerings, which are driven by market
marginalised, and at-risk youth.
enterprises
operating
mostly
in
the
needs.
Several challenges and missed opportunities need
Secondary: A social enterprise is an entity that
to be unlocked to unleash the full potential of social
operates by being inclusive and transparent in
entrepreneurship. These include:
Having evolved from the traditional for-profit,
its activities, while being fully accountable to its
Rigidity and lack of institutional awareness
non-profit, and public sectors, impact-driven and
shareholders and beneficiaries.
Lack of legal recognition and policy structure

Negative public perception and recognition
entrepreneurial individuals have been pioneering

social enterprise, a new form of enterprise. This
Countries
like
model unleashes value not only through economic
States,
wealth creation but also by creating beneficial
Singapore, Myanmar and Australia regard social
impact to society and the environment.
entrepreneurship as a key national agenda and have
South
the
United
Korea,
Kingdom,
Vietnam,
United
Thailand,
Lack of access to quality human capital

Lack of access to sizable financial capital
Lack of support to grow and scale
set up agencies to champion the growth of social
The Malaysian Social Enterprise Blueprint is a three-
Social entrepreneurship is a unique sector; currently
enterprises in the country. For example, in Thailand,
year roadmap that describes the strategic thrusts
one without a succinct, accurate description of what
there are now over 120,000 social enterprises. In
needed to accelerate the development of the sector.
is a social enterprise. This lack of a definition has
the United Kingdom, there are over 70,000 social
By the year 2018, we aim for the Malaysian social
led to confusion among stakeholders and potential
enterprises. They employ over a million people and
entreprise sector to be self-sustaining, equitable,
entrepreneurs. While there may not be a universal
contribute more than 5% to national GDP.
and people-centric in order to empower impactdriven entrepreneurs.
definition, social enterprises have primary and

secondary characteristics.
In Malaysia, it is estimated that there are 100
To achieve this, the blueprint identifies three
to encourage the development of more partnerships,
Social entrepreneurship is still embryonic in
fundamental building blocks to develop the sector:
collaborations, and intermediaries. This can result
Malaysia. This is the perfect opportunity for us to
I) social enterprises and social entrepreneurs
in policy discussions and development, strategic
invest strategically to ensure the development of a
II) larger ecosystem
investment, training organisations, capital creation,
sector that will transform the nations economy to
III) institutions including public and private players
and synergies.
one that is more equitable and sustainable.
The three strategic thrusts will inspire a movement,
Affect systemic changes
create an enabling ecosystem, and affect
Enabling sector-wide systemic changes where
systemic changes. Each thrust is supported by
regulatory, tax, and administrative frameworks are
three main catalysts.
introduced to ensure that the sectors development

continues beyond the time horizon of this blueprint.
Inspire a movement
These systemic changes catalyse a tipping point,
Building a critical mass of sustainable social
unleashing an enabling environment and a whole
enterprises to inspire a movement in support
new market for social enterprises.
of social entrepreneurship. This is achieved by

generating awareness in grassroots communities
The development of the social enterprise sector
as well as by equipping them with the necessary
in Malaysia is both a challenging and daunting
skills, knowledge, and capital to launch and scale
task. It requires complete buy-in and commitment
their social enterprises.
from all parties involved. However, this has been

done in various countries, which have successfully
Create an enabling ecosystem

Creating
more
inclusive
and
implemented a national blueprint, masterplan or

cross-sector
participation, including the private and public sectors,
strategy, including Thailand, South Korea and the

United Kingdom.
Table of contents
FOREWORD BY PRIME MINISTER OF MALAYSIA
01
FOREWORD BY MaGIC CHAIRMAN
02
FOREWORD BY MaGIC CEO & EXECUTIVE DIRECTOR OF SOCIAL ENTREPRENEURSHIP
03
ABOUT MaGIC
04
ABOUT MaGIC SOCIAL ENTREPRENEURSHIP
05
ACKNOWLEDGEMENT
06
CHAPTER 1: WHAT IS SOCIAL ENTREPRENEURSHIP?
08
CHAPTER 2: SITUATIONAL CONTEXT FOR SOCIAL ENTREPRENEURSHIP IN MALAYSIA
23
CHAPTER 3: CHALLENGES IN DEVELOPING THE SECTOR
33
CHAPTER 4: APPROACH IN CATALYZING THE SECTOR
42
CHAPTER 5: THRUST 1 - INSPIRE A MOVEMENT
48
CHAPTER 6: THRUST 2 - CREATE AN ENABLING ENVIRONMENT
55
CHAPTER 7: THRUST 3 - AFFECT SYSTEMIC CHANGES
62
CHAPTER 8: EXPECTED OUTCOMES
67
CHAPTER 9: CONCLUSION
71
REFERENCES
74
APPENDIX I EXISTING DEFINITIONS FOR SOCIAL ENTERPRISE
75
APPENDIX II WORKING DEFINITION FOR SOCIAL ENTERPRISE IN MALAYSIA
80
APPENDIX III MALAYSIAN SOCIAL ENTERPRISE ECOSYSTEM
83
I
FOREWORD BY
PRIME MINISTER OF
MALAYSIA
Malaysias strong economic record and a steady

GDP growth over the past 50 years is a testimony to
the entrepreneurialism of our rakyat. As we approach
2020 and become a high-income nation, we must
ensure that we build a people-centric economy that
is sustainable and equitable.
Although the economic growth of the nation is
looking optimistic, the government is also aware
of the growing inequity that is slowly emerging
as a result of the disparity in the socio-economic
development. The role of social entrepreneurship
This Malaysian Social Enterprise Blueprint by
in promoting a sutainable and equitable economic
MaGIC Social Entrepreneurship is a bold and
growth has been a focus of many governments
ambitious
around the world.
the social enterprise sector in Malaysia. Through
strategy
towards
radically
growing
this strategy, I believe that we will create a strong

In the United Kingdom, for example, since the
foundation and environment for social enterprises
launch of the national social enterprise strategy
to grow so I encourage all sectors to be involved in
in 2002, the government has invested billions of
realising this blueprint.
pounds in the sector. Today, there are over 70,000

social enterprises employing more than a million
Together, we can make social enterprises grow
people and contributing more than 5% to UKs GDP.
bigger and stronger in our economy and ensure that
In 2014, it is estimated that the top 1,161 social
we create long-term benefit for our rakyat at the
enterprises in the UK generated 2.5bn (RM13.5bn)
same time.
profit to plough back into society.

The Government recognises the potential of social
entrepreneurship in not only addressing our countrys
pressing issues but also redefining how business
should work in order to achieve a people-centric
economy. That is why in 2013, I announced RM20m
for the Malaysian Global Innovation and Creativity
Centre (MaGIC) to set up a social entrepreneurship
unit to catalyse impact-driven enterprises.
YAB Dato Sri Mohd Najib bin Tun Haji Abdul

Razak
Prime Minister of Malaysia
II
FOREWORD BY MaGIC
CHAIRMAN
Over the last few years, we have witnessed
a new generation of Malaysian entrepreneurs
who are focused not only on creating wealth but
also addressing major social and environmental
issues that are close to their heart. This band
of social entrepreneurs are creating a growing
momentum where more and more Malaysians are
deciding to give back to the community through
enterprising means. This is a positive change in our
entrepreneurship landscape.
Although social entrepreneurship isnt new in
places like the United Kingdom, United States
of America and Northern Europe, its a growing
movement here in Malaysia. In these countries,
believe
that
this
movement
for
social
social entrepreneurship is regarded as a key national
entrepreneurship will ensure a more equitable and
agenda and an important driver of economic growth
sustainable economic growth. When the people
that is both equitable and sustainable. Within
prosper, the country prosper as well.
ASEAN itself, countries like Thailand, Vietnam

and Singapore have set up government agencies
This Malaysian Social Enterprise Blueprint is not just
dedicated to spearhead the growth of social
a document. It is an encapsulation of the dreams
entrepreneurship.
and aspirations of Malaysians who wish to make

this country a better place for all. I encourage all
While social entrepreneurs in Malaysia have
sectors to be involved in this movement to build a
delivered significant impact to their communities
nation that is prosperous and resilient.
and the environment, there are still many barriers

left in their way to grow and ultimately multiply their
impact.
In 2013, the Prime Minister set up a social
entrepreneurship unit under the Malaysian Global
Innovation and Creativity Centre (MaGIC) to catalyse
impact-driven enterprises. The role of MaGIC Social
Entrepreneurship to build cross-sector partnerships,
tapping into the strengths and resources of each
sector to drive this movement, will be key to the
growth of social entrepreneurship in Malaysia.
Tan Sri Dr Mohd Irwan Serigar Abdullah

Secretary-General of Treasury
Ministry of Finance
Chairman
MaGIC
MaGIC Social Entrepreneurship has been mandated
The Malaysian Social Enterprise Blueprint is not a
to develop this sector. We are spearheading
roadmap developed in isolation from other sectors.
the growth through a strategic and pragmatic
It is a roadmap that describes the potential for
approach which is centred on the community of
social entrepreneurs to contribute effectively in the
FOREWORD BY
MaGIC CEO &
EXECUTIVE
DIRECTOR OF
SOCIAL
ENTREPRENEURSHIP
social entrepreneurs. In the past few months since
development and progression of our country to
the units inception, we have conducted several
become a fully developed nation. We passionately
community outreach programmes, especially with
believe that we can make Malaysia the regional
rural and remote communities. We have trained
leader for a people economy. We will achieve this
hundreds of budding social entrepreneurs and
through our mission to unleash the potential of
committed RM500,000 to five social enterprises to
social entrepreneurship to drive long-term benefit
help them grow and scale.
for society and the environment.
MaGIC Social Entrepreneurship is also coordinating
We hope that you will join us on this journey to
Social entrepreneurship in Malaysia is still in its very
the development of this sector by fostering
transform this sector. Together we hope that we can
early stages. The sector has largely been driven by a
collaboration between the public, private, and
create a sector that is resilient, self-sustaining, and
passionate, like-minded community with occasional
social sectors through a series of consultations and
more importantly, equitable for all.
support from the public and private sectors alike.
discussions to better understand what is needed to
While the community of social entrepreneurs in
develop the social entreprise sector in Malaysia. We
Malaysia has delivered significant impact to their
have uncovered unique insights that have shaped
communities and to the environment, there are still
the development of the Malaysian Social Enterprise
many barriers that stand in their way to grow and
Blueprint. As a result, we have a blueprint which is
ultimately amplify their impact.
truly people-centric by design.
III
Cheryl Yeoh
CEO
MaGIC
Ehon Chan
Executive Director
MaGIC Social Entrepreneurship
IV
ABOUT MaGIC
The journey of MaGIC began as a startup itself
you and the next step of moving your startup to a
in April 2014. We share the same passion and
regional and global level. We make sure there are no
experience of taking the leap of faith into the
missing links in the journey of an entrepreneur.
world of startups. MaGIC serves as the platform to
difference within their community.

Whichever startup track you are embarking on or are
already in, MaGIC can make a positive difference to
support entrepreneurs to grow and develop so they
Taking the first step will always be the hardest.
can compete regionally and, eventually, globally.
Your journey into the startup ecosystem will be
your journey. MaGIC happens when you believe.
more impactful with the right support system and

As part of the ecosystem, MaGIC aims to drive and
community. Through our various programs and
catalyse the entrepreneurial spirit in Malaysia. Most
initiatives, there is certainly something that will
importantly, we strive to connect the pieces together.
be highly beneficial and useful to those who have
We are here to be the connecting bridge between
always believed in taking a challenge and making a
For more information visit: www.mymagic.my
ABOUT MaGIC SOCIAL

ENTREPRENEURSHIP
MaGIC Social Entrepreneurship (SE) is a dedicated
environment. To achieve its vision and mission, the
Academy
team within MaGIC that is responsible for fulfilling
social entrepreneurship team is organized around
Upskilling, knowledge, and capabilities for social
the mandate given by the government to develop
three key focus areas:
entrepreneurs through a structured learning program
the social enterprise sector in Malaysia through its

special allocation of RM20 million funding.
to equip social enterprises to be investment-ready.

Community & Outreach
Focusing on generating awareness and buy-in
The vision of the social entrepreneurship team is
among the stakeholders, grassroots, and rural
to make Malaysia the regional leader for a people
communities on the potential and opportunities
economy. This is achieved through its mission to
related to social entrepreneurship.
unleash the potential of social entrepreneurship

to drive long-term benefits for society and the
Ventures
Investing in social entrepreneurs and enterprises
through grant funding for both pilot and growth
stage social enterprises in order to materialise their
social or environmental impact.
For more information visit: www.se.mymagic.my
ACKNOWLEDGEMENT
We would like to thank the following organisations and their representatives for their
input towards the development of this blueprint.
b@g@b@pnna
Chapter 1
What is social
entrepreneurship?
1.1 Why social entrepreneurship?
09
1.2 Definition, understanding & characteristics
13
1.3 Connecting and synergizing the sectors
16
1.4 A viable form of investment
21
1.1
distribution of households by Income Class,
Why social
entrepreneurship?
Having evolved from the traditional for-profit,
The current economic model has created immense
non-profit, and public sectors, impact-driven and
wealth for the majority of the population. While it
entrepreneurial individuals have been pioneering
has alleviated people from poverty and unlocked
social enterprise, a new form of enterprise. This
benefits that have been previously unavailable, the
model unleashes value not only through economic
current economic model is still not equitable.
wealth creation but also by creating beneficial

impact to society and the environment. Social
Based on the Malaysian Department of Statistics
entrepreneurship is the only form of enterprise that
2012 census, 5% of Malaysian households earn
has the potential to radically transform capitalism
less than RM1,000 per month. This is roughly 1.5
as we know it by resolving social or environmental
million Malaysians. Urban and rural households
issues that are neglected by the traditional sectors.
earning less than RM500 were estimated at 87,720

and 292,400 respectively, for the same period. On
Given its unique composition of creating social
the other hand, the number of households earning
impact and entrepreneurship, this sector has the
more than RM5,000 per month is three times higher
potential to solve major and often neglected issues
in urban areas than in rural areas (2012, Malaysian
faced in our nation and globally.
Department of Statistics Table 1 Percentage
Malaysia, 1970 2012).

As more emphasis is given to rapid economic
development and growth, the current economic
model
continues
to
be
detrimental
to
the
environment. Our primary source of energy is still

derived from non-renewable sources. A lack of
social innovation has hindered our ability to elevate
those who are underserved or not served by the
market to enjoy the same quality of life as the rest of
the population.
One of the reasons social entrepreneurship has been
receiving recognition is due to traditional sectors
increasingly becoming outdated and ineffective.
10
Sector
Factors of a shift

Reducing reliance on unpredictable sources of income to
Main benefits

sustain operations

Non-Profit
Increasing ability to scale up impact while being more
grow operations

cost-effective in reaching beneficiaries

Expanding scope of impact beyond the current beneficiary
Creating a distinctive capability and advantage by tapping
For-Profit
Contributing more to the community through more
Attracting and retaining talent by providing an opportunity
Reducing the cost of public service and goods delivery
Increasing the quality of the public service and goods

delivery
Government
Responding quickly to the needs of the public
Reaching out to a public previously beyond reach
Establish presence and footprint in a new market through

social or environmental contributions
for employees to provide in-kind support

Provide returns to shareholders who are increasingly more

conscious about investment
strategic and coordinated philanthropy

Availability of funding to invest strategically in products/

services for beneficiaries
into a traditionally non-viable market

Independence and ability to utilise funding not earmarked

for specific purpose
profile

Creation of reliable sources of income to help maintain or
Contributing back beyond financial means, through inkind support and capabilities
Cost-effective means to serve the public with basic

services and goods
Provide more customer-centric focus in terms of delivery

of public service and goods
Inclusive and participative form of government where all

are served
Table 1.1: Factors favouring the shift towards social enterprise
Social entrepreneurship is a rapidly growing sector
entrepreneurship through affordable design and its
due to its ability to develop social innovations that
ability to transcend geographic boundaries as a
are financially viable to private sector investors.
channel to connect with beneficiaries.
11
Technological advances have also catalysed social
Teaching underprivileged children at ARUS Academy
12
As a result of for-profit and non-profit sector

players supporting social entrepreneurs within their
Case study #1: Embrace
communities, the social innovation that is created

out of the entrepreneurial sector is evident, albeit
difficult to quantify. Technology and social innovation,
the primary domains of academic institutions and
corporate research and development units, are now
being rapidly adopted and introduced to the market
by highly driven and motivated entrepreneurs.
Embrace is a social enterprise that focuses on
survival. Prior to the introduction of this thermal wear,
improving the survival of premature and low birth
access to infant incubators in developing countries
weight infants by providing extremely affordable
and communities was extremely expensive and
and effective thermal wear. Established in 2007
difficult.
by a group of five Stanford University students,

today they have saved over 144,000 infants
By
introducing
affordable
and
easy-to-operate
globally with over 4,400 health workers trained
thermal wear for premature and low birth weight
along with 9,200 mothers educated on the issue.
infants, Embrace has provided underserved and
Embraces solution enables those with no access
isolated communities with the opportunity to save
to infant incubator machines to have better access
childrens lives.
to the healthcare that is critical for the infants
Source: www.embraceglobal.org
1.2
Definition,
understanding &
characteristics
Social entrepreneurship is a unique sector; currently

one without a succinct, accurate description of
what is a social enterprise. This lack of a definition
has led to confusion for stakeholders and potential
entrepreneurs. While there may not be a universal
definition, the inception of this sector has been
primarily attributed to the convergence of the three
traditional sectors; non-profits (social), for-profits
(private), and government (public).
The convergence of the traditional sectors is partly
due to a shift whereby players are adapting certain
traits of other sectors in order to better meet their
objectives and overcome the challenges they face.
13
14
Sector
Initial Imperative
Emerging Imperative
To deliver basic public services and
Develop a more citizen-centric delivery of public services and goods
goods to the citizens
Increase cost efficiency and effectiveness in the delivery of services/goods
To achieve a social or environmental
Develop a new business model that generates additional income
mission for the target beneficiaries
Develop an operating model that is more financially sustainable
To maximize shareholder value
To play a bigger role in advocating for a specific cause or issue
through commercial activities
To operate in a more responsible and ethical manner
Government
Non-Profit
For-Profit
Table 1.2: Emerging imperatives across sectors
Government, which has been traditionally viewed as
organisations are strengthening their philanthropy
the primary supplier of public services or goods, is
and charitable activities by establishing dedicated
slowly moving towards a people-centric approach.
foundations that contribute both financial and in-
This approach means that more focus and resources
kind support to its target beneficiaries.
are being allocated to deliver public services that

are coherent with the publics increasing demand
As a result of the evolving priorities of the traditional
for access and quality of service. A people-centric
sectors, a fourth sector aptly named as the for-
approach also allows for innovation within the
benefit sector has emerged where impact-driven
service to remain relevant and useful.
and entrepreneurial individuals are solving a social

or environmental issue using viable business means.
Similarly, more and more non-profits are focusing
The for-benefit sector has created many variants of
on improving their operating models to ensure long-
blended entities such as social enterprise, social
term sustainability and longevity. Non-profits are
business, and even socially responsible business.
adopting a new business model where a revenue-
These entities have a strong social or environmental
generating component is used to offset the risk of a
mission at their core and have a business model
fall in donation income.
that creates value not only for the economy, but for
society or the environment as well.
Moreover, for-profits are also strengthening their

charitable activities beyond the current scope of
Corporate Social Responsibility (CSR) programs that
typically operate under the organisations marketing
and communication departments. More for-profit
15
1.3
FOR-PROFIT
Connecting
& synergising
the sectors
Opportunities to Provide Public

Service through Private Organisations
Calls for Business Ethics
The role of the social enterprise sector is not to

replace existing sectors but rather to connect and
synergise the traditional sectors in order to deliver
Public-Private
Partnerships
Corporate Social
Responsibility
Competitive
Sourcing
Earned-Income
Venture
economic, social, and environmental value for all

enterprises is to leverage on the opportunities and
synergies existing within the traditional sectors in
order to fulfil their social or environmental missions.
SOCIAL
ENTREPRENEURSHIP
Demands for Efficiency

Preferences for Choice
and Competition
Reliance on Business and
Non-profit Service Providers
Third-Party
Government
Demands for Accountability

Demands for Sustainability
Gaps in Public
Service Delivery
Figure 1.1: Social enterprise Venn diagram
NON-PROFIT
stakeholders involved. As such, the role of social
RNMENT
GOVE
16
There are several key forces at play among the
Social entrepreneurship is also an avenue for the
traditional sectors that are creating an ecosystem
government to be more proactive and focused in
of opportunity for social entrepreneurs. These
meeting the publics demands and expectations for
forces stem from the need of the non-profit, for-
public services and goods. Government ministries,
profit, and government to meet their objectives
agencies, and proxies which are inundated by
in a new and complex environment. The private
the strict procurement and processes are slowly
sector, for example, is reacting to more ethical and
transferring responsibility to social enterprises
transparent ways of doing business in order to
through a social-public-private partnership model
grow and meet shareholders imperatives. For-profit
based on performance incentives and rewards for
enterprises are looking into social entrepreneurship
social enterprises.
as a demonstration of commitment to go beyond

the traditional corporate responsibility programs to
As government seeks to reduce its operational
deliver more business and social value.
expenses and channel more funds towards services

and goods which are directly impactful to the public,
As more and more businesses turn to social
forward-thinking ministries and agencies are already
entrepreneurship as form of conducting business,
looking into social enterprises to deliver public
opportunities for cross-sector collaboration are
services and goods on governments behalf while
being created with government and the non-profit
simultaneously achieving the goals of increased
sector. This cross-sector collaboration has created
operational and cost efficiencies.
a new need for non-profits to be more transparent,

accountable,
and
most
importantly,
adopt
sustainable means of operating their organisations.
17
18
Case study #2: United Kingdom G8

Social Investment Task Force
UK Prime Minister David Cameron established the
Social Impact Investment Task Force in 2013, headed
by Sir Ronald Cohen, to coincide with the UK assuming
the presidency of the G8. In 2014, a report entitled
Impact Investment: The Invisible Heart of Markets was
published, which includes four main recommendations
to rapidly advance the social impact sector.
Recommendations from the task force include relaxing

current laws and regulations to enable non-profit status
organisations to be involved in commercial/trading
activities, while also encouraging governments to create
incentives and instruments that ease the process for
social enterprises to start, operate, and grow.
Similarly, the report calls for GBP 1 trillion of capital to be

created to encourage impact investment in this sector.
The GBP 1 trillion recommendation requires a complete
rethinking about the fiduciary duties of foundations, and
pension funds in particular, to invest in impact-centric
organisations.
Source: Social Impact Investment Taskforce, (2014), Impact
Investment: The Invisible Heart of Markets, UKs presidency
of the G8
Hybrid Spectrum
Traditional
Non-profit
Social
Enterprise
Mission motive
Stakeholder accountability
Income reinvested in social
programs or operational costs
Traditional
For-Profit
Profit-making motive
Shareholder accountability
Profit redistributed to shareholders
Figure 1.2 : Hybrid Spectrum
Social enterprise lies at the junction between non-
viable business means. Further, if the enterprise is
could be categorized into primary and secondary
profit and for-profit organisations. Social enterprise
profitable, it will be able to scale up its operations
characteristics that cover why the social enterprise
has the purpose of a non-profit but the financial rigor
and thus deliver more impact through commercial
exists and how it is operated.
of a for-profit. Within this midsection of the spectrum
or trading activities.
there are several variants that exist in addition to

social enterprise, such as social business, social
The need for a definition is largely due to the necessity
venture, and socially responsible business.
of providing legal context and recognition for this

sector. While there is no universal definition, there
Social enterprise in this context means that a social
are several key characteristics that would describe
entrepreneurs priority is to deliver impact through
a typical social enterprise. These characteristics
19
20
Primary Characteristics
A social enterprise is an entity which
Business Viability
Impact-Driven
balances both impact and business

in order to solve a legitimate issue
through its offerings, which are
driven by market needs
Secondary Characteristics
A social enterprise is an entity that
Generates income from trading activities
Exists specifically to solve a legitimate issue
by offering products or services that are
that is often neglected by either the public
demanded by the market
or private sector
Sustains and grows itself through business
Exists specifically to serve a customer
means that are, by nature, profitable and
and beneficiary demographic that is often
scalable
underserved by the market
Inclusive Equity
Inclusive Governance
Ownership of the social enterprise is
Decision rights are distributed fairly to its
operates by being inclusive and
distributed fairly to the stakeholders who
shareholders, stakeholders, and potentially
transparent in its activities, while being
are involved in the enterprise
the beneficiaries
fully accountable to its shareholders
and beneficiaries
Governed in a fair and transparent way
distributed between the shareholder,
focused on achieving the mission and
management, and beneficiary
objectives
Responsible & Transparent
Fair Compensation & Returns
Table 1.3 : Characteristics of a social enterprise
Ownership of the social enterprise is fairly
Accountable to the actions and
Compensates its employees fairly in
consequences related to the activities of
recognition for their role and contribution
the social enterprise
to the social enterprise
Discloses information that is accurate and
Provides fair financial returns to its
timely for the purpose of informing the
shareholders in exchange for specific
shareholders and beneficiaries
impact outcomes
1.4
A viable
form of
investment
A key challenge for the social enterprise sector is
Social enterprises are increasingly attracting the
a lack of awareness and buy-in from mainstream
attention of a new form of investor who looks
financial institutions and the public sector. Given
beyond
the dual missions of being impact-driven while
Previously, social enterprises would attract mainly
maintaining a healthy bottom line, there is still
wealthy philanthropists as investors. However,
confusion as to how conventional institutions could
given the encouraging returns on investment in
play a role in mainstreaming social enterprise.
the social enterprise sector, mainstream investors
traditional
investments
and
returns.
including corporate foundations, trust organisations,

From the perspective of an investor, the true financial
private equity, venture capital, and, to some extent
value of this sector is extremely difficult to derive
commercial
due to the variety of definitions of social enterprise.
recognizing the financial impact of this sector.
As a result, it is difficult to accurately measure

and identify social enterprise activities. However,
preliminary data has demonstrated that this sector
is able to generate financial returns for investors.
financial
institutions,
are
quickly
21
22
Figure 1.3 : Average annual financial returns
28%
the impact sector in bringing more capital to resolve
28%
big issues as compared to traditional philanthropy

(Spotlight on the Market 2014, 5).
This is consistent with the UKs G8 Task Force
17%
Report on Social Impact Investment, where a

recommendation was made to create a capital of
11%
GBP 1 trillion by removing barriers and redefining

6%
3%
3%
3%
3%
Loss of more than

15%
Loss of
6% - 10%
Loss of
3% - 5%
Loss of
1% - 2%
the fiduciary duties of charitable foundations and

pension funds specifically (Impact Investment:
The Invisible Heart of Markets, 18). The taskforce
Gain of
1% - 2%
Gain of
3% - 5%
Gain of
5% - 10%
Gain of
11% - 15%
Gain of more than

15%
Financial Times, Investing in Global Impact 2014 Report. Based on

disclosed information by impact investors
recommendation also highlighted that including

impact
as
an
additional
dimension
in
the
investment decision-making process will create an

environment where there is a sizable opportunity for
According to a study conducted by the Financial
In 2014, J.P. Morgan and the Global Impact Investing
social enterprises to tap into and rapidly accelerate
Times in 2014 looking at the financial performance
Network (GIIN) found that of 125 impact investors
the growth of the sector (Impact Investment: The
of several impact investors, for-benefit enterprises
worldwide, 20% have increased their impact
Invisible Heart of Markets 2014, 28).
are more likely to generate 8% to 10% returns
investing commitments from the previous year.
on
for-benefit
According to another 2010 report by J.P. Morgan and
enterprises are registering double-digit financial
the Rockefeller Foundation, the impact-investing
returns, in addition to their social and environmental
market may reach USD 1 trillion by 2020. The growth
impact (Investing for Global Impact 2014, 36).
of impact investment unleashes new potential for
investment.
Moreover,
several
Chapter 2
Situational context for social
entrepreneurship in Malaysia
2.1 Economic & social challenges
24
2.2. Addressing the challenges
25
2.3 Current state of social entrepreneurship in Malaysia
26
2.4 Transforming & accelerating change
27
23
24
2.1
Economic & social

challenges
The development of the Malaysian economy has
However,
fundamental
Almost a quarter of households in Malaysia earn less
been a story of both remarkable strides and of
challenges despite making huge strides in both
than RM 2,000 per month. The state of Kelantan is
missed opportunities to leapfrog other developing
economic and social development. For example,
poorer than Indonesia and a little better off than Sri
countries. The Malaysian Gross Domestic Product
only 24% of the workforce has an education beyond
Lanka, with only half of Kelantans rural households
(GDP) has increased 17.5 times and GDP per person
secondary school and only 10.4% posess a tertiary
having access to running pipe water
has increased 7.8 times from 1980 to 2013. As the
degree. Given the lack of quality talent to fulfil the
State of Households Report 2014, viii). The lack
economy has shown significant growth thanks to its
needs of a high-income nation, Malaysia faces big
of equitable spread of wealth and access to basic
rich resources and export-oriented commodities,
barriers in realising its ambition to become a fully
public services is persistent, which has resulted in
median household income is now one of the highest
developed nation within the next decade (Khazanah
government emphasizing collective economic and
in Asia, after developed nations (Khazanah State of
State of Households Report 2014, 8).
social development.
Households Report 2014, viii).
Malaysia
still
faces
(Khazanah
2.2
Addressing
the challenges
Case study #3: UK Peterborough

Social Impact Bond
Social Impact Bonds (SIBs) harness private

capital to achieve measurable gains on social
challenges. SIBs improve the social outcomes
of publicly funded services by making funding
conditional on achieving results. Investors pay
for the project at the start and then receive
We face many social, economic, and environmental
there are still remote and isolated communities that
payments based on the results achieved by the
challenges as a country. While the country
do not have access to reliable and cheap forms
project.
continues to make progress towards becoming a
of electricity. While almost the entire population of
high-income nation there must also be a recognition
Peninsular Malaysia has access to electricity, 5% of
that advancement should not come at the expense
the population of Sabah and Sarawak lack access
of the marginalised and isolated communities of
to electricity (Improving Rural Development 2011,
Malaysia, regardless of political belief, race, gender,
175). This is equivalent to 300,000 people who
and religion.
do not have access to reliable energy; roughly the

population of Kuala Terengganu.
While urban and most rural communities are

connected to the national/state electricity grid,
In 2010, a GBP 5 million Social Impact Bond was

launched to tackle the increasing challenge and
cost of managing recidivism in Peterborough.
A consortium of six companies led by One
Service managed to reduce recidivism by 8%
by providing accommodation, medical services,
family
support,
employment
and
training,
benefits and financial advice.

Source:http://www.socialfinance.org.uk/
impact/criminal-justice/
25
26
2.3
Case study #4: Thailand Social

Enterprise Sector
Current state of social

entrepreneurship in Malaysia
Thailands approach to developing the social

enterprise sector has been largely focused on
the community of social entrepreneurs in the
country. The government has had a strong
interest and commitment to develop this sector
The Malaysian social enterprise sector is currently
Malaysian Global Innovation and Creativity Centre
through the establishment of a promotion
in its infancy. The sector has been largely driven
(MaGIC).
committee under the Prime Ministers office
by isolated communities in a specific geographic
in 2009.
region or a particular theme. However, there is a
Even though there is an increasing number of
common recognition among key stakeholders that
supporting intermediary organisations for social
In 2010, the government created the Thailand
social enterprise has the potential to solve many
enterprises, including British Council, myHarapan,
Social Enterprise Office (TSEO) in order to
social challenges by utilising the best of for-profit
iM4U,
Social
further develop the sector as a focal point
and non-profit sectors.
Enterprise Alliance, only 0.02% of Malaysians are
for policy development and management
working in social enterprises. In comparison, 1.5%
of the sector. In 2014, TSEO held another
Recognising this potential, Malaysia hosted the
of Chinas working population is working in social
public consultation on the Social Enterprise
Global Social Business Summit in 2013, the very
enterprises (Global Entrepreneurship Monitor 2013,
first time the summit was held outside of Europe.
30). Although the intermediaries in this sector have
At the summit, the Malaysian Prime Minister, YAB
actively generated awareness and supported the
Dato Sri Najib Razak committed RM 20 million to
community, these initiatives alone are inadequate to
set up a Social Entrepreneurship Unit under the
fully realise the potential of this sector.
Scope
Group,
Tandemic,
and
Promotion Act in order to further mainstream

social entrepreneurship as a legitimate and
recognised sector of the economy.
Source: http://www.asef.org/images/
docs/Session%201.3_Nuttaphong%20
Jaruwannaphong%20%28Thailand%29.pdf
2.4
Transforming
& accelerating
change
The social enterprise sector has the potential to play
a pivotal role in the larger transformation journey of
NKRA
Improving Students
(Ministry of Education)
Providing better access to education for remote and isolated

communities through enabling technology and relevant curriculum
Supplementing current national curriculum with relevant industry and

vocational skills to increase post-education options
Empowering students to be more invested in their own education

through self-taught and peer-to-peer learning opportunities
Raising Living Standards
of Low-Income
Households
transformation program. There are several National
(Ministry of Women,
Transformation Program (GTP) 2.0 fit for social
Outcomes
Malaysia, as outlined in the federal governments

Key Results Areas (NKRA) within the Government
Potential role of social enterprise
Family and Community
Providing skill-based programs and workshops for low-income

individuals to be more employable and market ready
Creating market access and opportunities for underserved or

underemployed demographic to generate and increase income
Development)
Designing and developing basic necessities/infrastructure for

durability and affordability to create wealth in physical assets such
as housing
entrepreneurs involvement.
Improving Rural
Development
(Ministry of Rural and
Providing alternatives to basic necessities such as reliable electricity,

sanitation and water supply
Regional Development)
Equipping youth with entrepreneurial and business skills needed to

generate and increase household income
Creating self-sustaining infrastructure independent of existing grids

for remote and rural areas
Table 2.1: NKRAs supporting social enterprise growth
27
28
Case study #5: Tonibung
Case study #6: TRY Mabul
Tonibung is a social enterprise based in
TRY Mabul is a social enterprise that operates
Penampang, Sabah that provides indigenous
in Mabul Island, Sabah, where the youth
and remote communities with reliable and
of the island have no access to secondary
affordable sources of electricity. The remote
education. The youth of the island are likely to
communities of Sabah do not have access to
experience substance abuse, gambling, and
the states electricity grid and consequently
even being pulled into gangs that prey on the
rely on either diesel generators that are costly
community. TRY Mabul aims to prevent these
to operate, or solar panels that are costly to
destructive habits by providing the youth with
install and complicated to maintain.
the vocational skills needed by the tourism

industry.
Tonibung solves the lack of accessible,

reliable and cheap sources of electricity by
TRY Mabul provides youth with relevant skills
using micro-hydroelectric dams that generate
needed in the local tourism industry, training
reliable and affordable sources of electricity
them in culinary arts, hotel management,
for remote communities. Tonibung also trains
national agenda of growing a more equitable
and tourism skills. TRY Mabul equips the
local indigenous youth with the theoretical
economy and also promoting sustainable social
youth with skills that will give them better
and applied knowledge needed to become
career prospects and escape the poverty
development. This calls for more comprehensive
qualified micro-hydroelectric dam technicians
cycle despite a lack of access to secondary
and long-term investment in the sector to build a
and engineers.
education.
These are just some examples of how social

entrepreneurship can be a key instrument in the
connected ecosystem that supports the movement.
Case study #7: ARUS Academy

ARUS Academy is a social enterprise based
in Bukit Mertajam, Penang that provides
students from low-income communities and
high-need schools with 21st century learning
opportunities, such as programming and
coding. ARUS Academy works through a
cross-subsidisation model where income
generated from its ARUS camps are used
to sustain its Academy courses aimed at
disadvantaged youth from the community.
ARUS provides better access to quality

education that complements the current
national
curriculum.
By
bringing
STEM
(Science, Technology, Engineering, and Math)

and Maker Education to their beneficiaries,
ARUS inspires its students to become better
learners, encourages them to pursue higher
education, and supports them to ultimately
escape the poverty cycle.
29
30
Case study #8: EPIC Homes

EPIC Homes is a social enterprise based
in
Selangor
that
provides
indigenous
communities with affordable and quick-toassemble housing. 82% of Orang Asli are in
need of housing aid in Peninsular Malaysia,
approximately 12,322 families.
EPIC Homes works by connecting volunteers

with the indigenous community and training
volunteers
courses
to
become
builders
through
and
training
programs.
After
volunteers are sufficiently trained, they are

dispatched to an indigenous community for a
build project. Houses can be built for around
RM 50,000.00 and within a week. EPIC
Homes is now improving its house design
and venturing into disaster recovery projects
as part of its growth strategy.
Case study #9: Biji-Biji

Founded in 2012, Biji-Biji is a social enterprise
Biji-Biji
that champions sustainable living and minimising
sustainable
carbon footprint. Through the use of green
workshops.
technology, waste management methods, and
watering
charges
clients
builds,
for
product
Their
services:
design
and
By 2015, Biji-Biji generated over RM500,000
installations,
in sales, mostly from commissioned projects,
creative ways to reuse trash, Biji-Biji aims to
bamboo structures, and furniture made from
outdoor installations and selling upcycled furniture.
inspire a society that is accountable for its waste
discarded
Biji-Biji has obtained corporate jobs from clients such
and leaves a minimal impact on the environment.
teaching children to find creative solutions
materials.
garden
include
for common household waste.
self-
vertical
builds
three
Workshops
include
as Hong Leong Foundation and Genovasi Malaysia.
31
32
Case study #10: PT Foundations Community Health Care Centre

Founded in 1987, PT Foundation is a community-
of 2013. PT Foundation generates revenue
community. They include: number of calls received
based organisation in Malaysia that works with
through user fees at the health centre. Costs cover
on the counselling line, the number of men who
key affected populations on HIV and AIDS, gender
HIV screening, counselling, and referral services.
reached out to the organisation, number of HIV tests
identity and sexual health. PT Foundation provides
Through a cross-subsidisation model, patients
conducted, as well as number of clients who followed
information, advocacy, HIV prevention, care and
who can afford the full fee of testing subsidise
up on treatment. By monitoring these indicators, PT
support services.
those who cannot afford to pay.
Foundation is able to gauge the level of outreach and

the effectiveness of its programmes.
PT Foundations Community Health Care Centre
PT Foundation uses a set of service-oriented
was transformed into a social enterprise in August
indicators
to
measure
its
impact
on
the
Chapter 3
Challenges in
developing the sector
3.1 Rigidity & lack of institutional awareness
34
3.2 Lack of legal recognition & policy structure to support
35
3.3 Negative public perception & recognition
38
3.4 Lack of access to quality human capital
39
3.5 Lack of access to sizable financial capital
40
3.6 Lack of support to grow & scale
41
33
34
3.1
Rigidity & lack

of institutional
awareness
The government and market regulatory agencies
as social enterprises, which may have non-profit
is all about. The lack of definition and awareness
are ill-equipped to support social enterprises and
motives but are engaged in for-profit commercial/
of this sector has made it difficult to develop its
entrepreneurs due to the lack of legal recognition as
trade activities. As such, many social enterprises in
legitimacy. Consequently, institutions such as
to what constitutes a social enterprise in Malaysia.
Malaysia are limited by the laws and statutes under
banks, foundations, and even government agencies
The lack of a unifying entity to coordinate and
which they are registered, which either prevents
are unable to help social entrepreneurs in starting or
champion social entrepreneurship in Malaysia
them from engaging in larger commercial activities
growing their organisations.
creates further unnecessary complexity.
or receiving tax and financial benefits available for

non-profits.
The existing legislation that governs how an
While social enterprises do engage in commercial

activities, they typically require a longer operating
organisation is registered in Malaysia needs to
period to break even and ultimately generate returns
be re-examined. Current legislation caters to
in Malaysia requires all parties involved, including
to their investors.
organisations that are either for-profit or non-profit.
community, private, and public sector players
It does not cater for blended organisations such
to be uniformly aware of what social enterprise
3.2
Lack of legal
recognition & policy
structure to support
One of the biggest hurdles any social enterprise
start a social enterprise, it does not enjoy the same
encounters is to find the right legal structure under
tax benefits and government incentives that non-
which to register and operate. The lack of a legal
profits or charitable organisations receive.
definition and recognition of social enterprise as a

distinct form of organisation in Malaysia has led to
Similarly, social enterprises that operate as a society,
many social entrepreneurs operating under a variety
charitable organisation, or non-profit, face a very
of legal forms, which are governed by different acts
real and substantial risk of legal non-compliance
and regulations.
as they engage in commercial activities to sustain

their operations and increase their impact. As such,
Many social entrepreneurs are faced with the dilemma
the lack of a suitable legal entity structure limits
of choosing an entity under which to incorporate
many social enterprises in Malaysia from properly
due to dual goals. While sole proprietorship has
operating.
been the cheapest and most convenient way to
35
36
Case study #11:

What Malaysians want in a social
enterprise definition
The Malaysian Global Innovation and Creativity
Question 1
In identifying business models as a requirement,
What are the most

important characteristics
of a social enterprise?
participants understood that social enterprises

must generate profit from selling a product or
service commercially. However, there was also
an ethical component to the financial sustainability.
Participants felt that it was necessary that this
Centre (MaGIC) held a series of roundtables
business model was socially responsible and
nationwide
aligned with the enterprises social mission. In other
and
invited
submissions
from
social organisations, academic institutions, and

private organisations to define social enterprise.
Participants agreed that social enterprises must
words, the business must generate profit with
have a core social mission that is consistent in
purpose and social impact.
Over 200 participants attended the roundtables
their activities, a business model for financial
across nine cities: Kota Kinabalu, Penang,
sustainability, and raised the issue of profit
Johor Bharu, Kuching, Kota Belud, Alor Setar,
distribution.
and Cyberjaya. Common themes across the

discussions are highlighted here.
Two main questions were asked regarding
defining social enterprise:
1.

Having a core social or environmental mission

was integral for all responses. Some university
submissions stated that this needed to be the
primary reason the social enterprise was set up. The
social enterprise must be socially driven, and their
social mission cannot be a convenient afterthought.

What in your view are the most important
The mission must be consistent in practice and
characteristics of social enterprise?
2.
How do we address organisations that fall
into the grey areas of social enterprise?
all activities such as production, sales, and hiring

should align with this mission. Participants at
the roundtables also identified passion, grit, and
Participants and respondents highlighted that

revenue must be reinvested conscientiously:
either back into the business or the respective
beneficiary communities. However, participants
were divided over the enforcement system for profit
reinvestment. Some participants highlighted the
need for an asset or dividend lock, whereas other
participants felt that this hindered innovation and
creativity.
Binary University, for example, highlighted that
profits can be returned to the owners in the form
determination for the social purpose as a common
of dividends but should be capped to prevent
characteristic in social enterprise behaviour.
excessive profiteering. Further, the university added
that some countries have introduced an asset lock
Question 2
so that assets cannot be distributed amongst the
How do we address
organisations that are
in grey areas of social
enterprise definition?
owners for personal gain if the enterprise dissolves.

Assets must be transferred to another asset-locked
body or non-profit organisation. This was echoed in
a British Council submission; when the profits from
selling the business are returned to shareholders, it
as well as ethics and morals. These are much more

difficult to measure but they highlight an important
element of character of the social enterprise sector.
British Council highlighted several key elements to
judge the social enterprise label:

functions as a traditional for-profit business.
An organisation charter that outlines its social

or environmental mission as well as ethics and
Across the roundtables, the concept of community

was emphasized as a critical component of social
enterprise. Roundtable participants recognised
that social enterprises must serve a community in
need. However, the exact relationship of a social
enterprise to empower or include a community was
varied. It ranged from donating to hiring from these
communities.
Roundtable
participants
identified
three
key
components of gauging whether a company could

be labelled as a social enterprise: social mission,
social impact, and financial distribution control.
First, organisations need to have a clear and
consistent
social
mission
with
identifiable
beneficiaries. Second, organisations need to create

social impact in communities. Whether this impact
There was some debate regarding staying local
should be measured by the organisations or tested
versus the ability to scale. Some participants felt
by an independent body was not decided at the
it was more responsible for social enterprises to

employ people and source supplies locally, while
others felt that this hindered an enterprises ability
to scale and replicate its model.
roundtables. Thirdly, social enterprises should

control the distribution of their profit.
There was an emphasis on intangible elements of
a social enterprise: authenticity, sincerity, passion,
impact

The implementation of an impact measurement

tool
An equity model that limits how shares are

distributed if the company is sold
Participants and respondents brought up concerns

that a definition was only relevant if an independent,
governance body existed to impose it. However,
respondents also raised concerns of the usefulness
of putting up barriers in such a nascent sector.
37
38
3.3
Negative public
perception &
recognition
Public perception often confuses social enterprise
donations, charitable contributions, or grants to
with the traditional social and non-profit sector. The
help them pilot or scale their ventures.
general publics perception of this sector is often

related to altruism and charity as opposed to a
Production costs are often higher for social
viable or financially rewarding career option.
enterprises due to their sustainable and inclusive

practices and sourcing of materials. Without
This misconception means that social enterprises
education, the general public does not see the value
often
charge
and may not be willing to pay for more expensive
competitive pricing, and recruit talent. In turn, many
goods and services provided by social enterprises.
struggle
to
attract
investment,
commercial and traditional investors stay away

from social enterprises. This leads to low capital
Lastly, this perception makes it difficult for social
availability for social enterprises to either pilot or
enterprises to attract top or fresh talent, especially
scale. Many social enterprises end up relying on
when competing with the private or public sectors.
3.4
Lack of access
to quality
human capital
Given the lack of institutional and community
and charitable in-kind contributions of professional
support available for social entrepreneurs in
service firms due to their low profit margin.
Malaysia, this sector struggles to attract and retain

quality talent. Entrepreneurship, not to mention
Without quality expertise, social enterprises lack
social entrepreneurship, is seen as a high-risk and
the capability to attract investment, scale, or
non-viable career option for youth.
attract mergers and acquisitions. This creates

a perpetuating cycle of small and limited social
Significant support is needed to channel talent

into this sector and help social enterprises set
enterprises.
Case study #12:

Capability building grants
The UK Social Impact Investment Taskforce
Report
recommends
that
impact-driven
organisations have access to grants build

capacity. This access builds the organisational
capability needed to operate in a highly
complex and large capital industry. The need
for
impact
measurement,
and
accountability
requires
transparency,
impact-driven
up, operate, and grow their business and impact.
organisations to have the ability to accurately
Available professional business and consultancy
measure, evaluate and report their results to
supports are still beyond the means of the average
meet their fiduciary duty to its shareholders
social entrepreneur, who often relies on pro-bono
and beneficiaries.
39
40
Case study #13:

Relaxing legal barriers to
increase financial capital
3.5
The UK Social Impact Investment Taskforce
Lack of access to
sizeable financial
capital
Report calls for the review and relaxation of

current laws that prohibit non-commercial
organisations to engage in commercial activities
in order to encourage more participation in
the impact investment sector by charities,
foundations, and other organisations.
A review of existing laws is needed to ensure

that
current
organisations
with
charitable
status or benefiting from tax incentives will
Malaysia has a robust and strong financial sector.
to the embryonic nature of this sector, but also due to
continue to receive benefits even if they
Almost all Malaysian-based institutions are able to
the lack of awareness by these financial institutions
engage in commercial activities. This would
cater to both commercial/conventional and Islamic
to find social enterprises that are investment ready.
require a significant shift in the current form
banking needs of the market, from individuals and
Given the lack of financial and business incentives
small & medium enterprises to large corporations.
from the government to help create financial capital
While the government has set in place sound
wealth in this sector, many social enterprises are still
regulatory frameworks to encourage these sectors,
funded mainly through charity, foundation work and
very little is being done to unlock opportunities for
even corporate responsibility programs.
social entrepreneurs to get funding to start and

grow their social enterprise.
This may deter and inhibit the competitiveness of

social enterprises in Malaysia.
This lack of access to financial capital is not only due
of organisation governance, especially on the

fiduciary duty of its trustees and members.
The review of existing laws and regulations

promotes
asset
and
fund
management
companies, such as pension funds, to make

large investments in impact-driven companies
such as social businesses, enterprises, and
other charities with revenue generating activities.
3.6
Lack of
support to
grow & scale
There are numerous barriers and challenges for
social enterprises in Malaysia to start and grow their
social enterprise. The very few social enterprises
in Malaysia that have been able to scale are
currently held back due to lack of support available.
Successful social enterprises in Malaysia also tend
to financially plateau due to an inability to expand and
penetrate new markets in and outside of Malaysia.
41
42
Chapter 4
Approach in
catalyzing the sector
4.1 Identifying the fundamental blocks to develop the sector
43
4.2 Applying the catalyst to accelerate the sector
45
4.1
Identifying the
fundamental
blocks to develop
the sector
The development of any sector requires the
The blocks are the thematic keystones of the
will be further catalysed by identifying key strategic
commitment and buy-in of all stakeholders in order
blueprint, and the activities within each block are
thrusts, which will rapidly develop the social
to effectively create an irreversible change and
purely focused on creating a lasting and systemic
enterprise sector through targeted investment and
momentum in the social enterprise sector. As such,
change in the sector.
relevant initiatives for social entrepreneurs.
the development of this sector should be focused

on enabling impact-driven and entrepreneurial
For this 3-yactualear blueprint, the fundamental
individuals to become highly successful social
blocks are: I) Social Entrepreneurs, II) Ecosystem,
entrepreneurs.
and III) Institutions which all play an important role

in developing the sector. Each fundamental block
43
44
The building blocks and challenges faced in the sector
Social Entrepreneurs
Social entrepreneurship is a new term and
Ecosystem
Institutions
The ecosystem is sporadic and
Existing institutions are unable to
awareness building and buy-in from the
disconnected and requires close
create supportive regulatory, tax, and
grassroots community is required for it to
coordination to drive policy formulation
administrative frameworks to support
be well-known
and generate social innovation
social entrepreneurs
Social entrepreneurs are highly driven
The ecosystem is isolated, with minimal
Existing institutions are unable to support
and passionate individuals, but lack the
private sector involvement to encourage
and scale up social entrepreneurs due to
business acumen needed to start, grow
collaboration, investment, and wealth
a limited procurement system to deliver
and measure their impact accurately
creation
public services
Social entrepreneurs lack the option to
The ecosystem lacks the synergies
Existing institutions lack the financial
effectively launch their social enterprise or
between traditional sector players in
structure to provide consistent guidelines
scale up their impact and footprint due to
a coordinated social-public-private
for compliance and audit of social
a lack of funding options available
partnership model
enterprises
Table 4.1: Building blocks and challenges faced in the sector
4.2
Applying
the catalyst
to accelerate
the sector
The development of the social enterprise sector in

Malaysia must be done at an accelerated pace in
order to capitalize on the growing momentum that
exists within the community. As such, each building
block will be accelerated by a relevant strategic
thrust that encapsulates the ethos and key activities
required to achieve the objective of a sector-wide
advancement by 2018.
The strategic thrust acts as a catalyst to the building
blocks of the development of this sector. Each
strategic thrust has specific outcomes which will
indicate sector-wide development at an accelerated
pace.
45
46
Strategic thrusts of the building blocks
Social Entrepreneurs
Ecosystem
Institutions
2015
2016
2017
Inspire a movement
Create an
enabling ecosystem
Affect
systemic change
Generating awareness among the
Creating a more inclusive sector through
Enabling sector-wide systemic change
grassroots community while equipping
participation from the private and public
whereby regulatory, tax and administrative
them with the necessary knowledge and
sector by encouraging discussions on
frameworks are introduced to ensure that
skills to successfully launch and scale
policy development, investment, capital
the sectors development would continue
their social enterprise.
creation, and synergies
beyond the time horizon of this blueprint
Table 4.2: Strategic thrusts of the building blocks
Three strategic thrusts to meet the challenge of creating a

thriving ecosystem for social enterprises in Malaysia...
Affect systematic changes
...realised by enabling initiatives that will culminate

in a thriving ecosystem for Malaysia
Introduce supportive regulatory, tax and administrative

framework
Advocate for public procurement to encourage more good
quality, cost-effective, and innovative public services
Institution
Define the financial structure and provide guidelines for

legal compliance and auditing
Create an enabling ecosystem
Ecosystem
Establish knowledge base to inform policy and

development, spurring social innovation
Encourage private sector involvement to increase
collaboration, strategic investment, and capital creation
Foster social-public-private partnerships to create
synergies
Social
Entrepreneurs
Inspire a movement
Create awareness and promote better understanding of

social entrepreneurship
Build the human capital of social entrepreneurs and those
who work in social enterprises
Catalyse more successful social enterprises by
helping them pilot or scale
Figure 4.1 : Three strategic thrusts for social enterprises
47
48
Chapter 5
Thrust 1 :
Inspire a movement
5.1 Create awareness & promote better understanding of social entrepreneurship
49
5.2 Build the human capital of social entrepreneurs
51
5.3 Catalyse more successful social enterprises by helping them pilot or scale
53
Case study #14: Thailand Social

Enterprise Office (TSEO)
The
Thailand
Social
Enterprise
Office
demonstrates how to effectively generate

awareness and showcase the value of social
5.1
enterprise to the larger community and public

at large. The TSEO was created to ensure
Create awareness
& promote better
a focal point for matters related to social

entrepreneurship and help formulate policies
and relevant instruments to unlock government
benefits.
understanding of social
TSEOs approach to developing the sector is
entrepreneurship
other sectors as well. The approach undertaken
based on generating social innovations that

are impactful to not only the sector, but also to
by TSEO focuses on building the capacity of
the social entrepreneur, in addition to creating
enabling infrastructure and facilities such as
co-working spaces for social enterprises.
Grassroots involvement and support is necessary to justify the investment

and allocation of resources into developing the social enterprise sector
in Malaysia. Thus, increasing public awareness is crucial to create a
movement within the critical mass and trigger the shifts required to bring
systemic change to the sector.
TSEO is currently in the process of providing

inputs for the drafting of the Act on Social
Enterprise Promotion for Thailand.
49
50
Creating awareness among

passionate and driven individuals
Reaching out to underserved and

remote communities
Bridging the community divide
Creating awareness among the public is necessary
Social entrepreneurship should be inclusive to
exists in isolated pockets and is limited by geographic
to create a passionate community that will support
all communities, regardless of socio-economic
boundaries,
and demand a large-scale national movement
background. There must be an element of
and knowledge sharing between urban and rural
for social enterprise. As such, there must be a
inclusiveness and outreach, especially to those who
communities of social entrepreneurs. Bridging
coordinated effort to highlight the potential, results,
are underserved and located in remote communities.
the gap between these communities will create
and opportunities that are available for would-be
Social entrepreneurship needs to be positioned not
a platform where knowledge and opportunity is
social entrepreneurs.
only as another form of enterprise, but also as a
shared equally for the greater benefit of the sector.
solution for those who are off the grid.

Creating awareness on a community level generates
out
to
underserved
and
remote
The community of social entrepreneurs currently

leading
to
minimal
collaboration
Educating the public on the social

enterprise sector
the momentum for the larger public to learn, commit,
Reaching
and advocate for the accelerated development of
communities would not only expose them to an
The public should be educated about social
the sector.
instrument for development, but also surface
enterprises and their impact. This knowledge will
innovation that exists in these communities.
empower them to support the sector, whether

through the purchase of products or services,
5.2
Build the
human capital
or creating supporting instruments. A deeper
community understanding of the sector will unlock
the potential of high growth and scalable social
enterprises.
of social
entrepreneurs
Evidence base and knowledge of

the sector
The social enterprise sector in Malaysia requires
Understanding of the landscape and state of the
this sector to strengthen and mature. Significant
sector will allow a strategic investment of resources
resources must be allocated to develop necessary
where it is most needed in the sector. Once the
knowledge, capability and quality talents. Given the
awareness is there, it will become easier not only
dual objectives of a social enterprise to deliver not
to identify social enterprises but also for social
only financial returns but also positive impact to
enterprises to self-identify. A defined sector also
society and environment, active intervention must
facilitates research and development to be carried
be introduced well before an individual ventures
out.
into this sector while providing similar opportunities
significant human capital investment in order for
throughout the life journey of the social enterprise.
51
52
Embedding social
entrepreneurship in the
education system
Connecting the sector with

tertiary academic institutions
Providing continuous technical

and capability opportunities
There is a skills gap between what the sector currently
As a sector in its infancy stage with rapid development
In order to build a pipeline of quality social
requires and what tertiary academic institutions
foreseen in the next few years, it is critical for social
entrepreneurs, it is recommended that social
are imparting to those seriously venturing to
entrepreneurs to be continuously developed as they
entrepreneurship is embedded in the current
become social entrepreneurs. The skills gap exists
start their social enterprise venture. As the sector
national education system for both public and
primarily due to the lack of collaboration between
matures through the legislation and introduction of
private academic institutions. Embedding social
practitioners and academics. Skills such as impact
new policies and tax/financial instruments, there is
entrepreneurship into the curriculum should begin
measurement, issue identification, and general
a need to ensure that social entrepreneurs are well
at the secondary school level in order to enable
business acumen are currently lacking, reducing the
equipped to receive changes in the sector.
tertiary institutions to provide more technical and
quality and likelihood for a social enterprise to be
in-depth capacity building for youth to venture into
investment ready.
social entrepreneurship.
Providing social entrepreneurs with the opportunity

to continuously learn and up-skill their capabilities
Connecting practitioners and academics would
would increase the likelihood of success for the
Embedding social entrepreneurship courses and
ensure that social entrepreneurs are equipped with
social enterprise to operate and rapidly scale up its
elements into the curriculum would also create a
the fundamental skills and acumen needed to run
impact footprint as well.
lasting awareness and cultural acceptance of social
a successful social enterprise, while increasing the
entrepreneurship as a viable academic and career
pipeline of social entrepreneurs who are viable for
option post-education.
investment.
5.3
Catalyse more
successful social
enterprises by
helping them pilot
or scale
To ensure the long-term success and continuity of
ideation to pilot, and eventually expansion stage. The
this sector, it is imperative for the social enterprise
performance of social enterprises demonstrates the
to deliver the impact and financial returns expected
viability of this sector and encourages the injection
by the market. The success of the social enterprise
of more financial and human capital to sustain it.
must be based purely on its ability and prospect to

deliver results. Institutional players should provide
support in terms of opportunities and in-kind benefits
in order for social enterprises to progress from
53
54
Creating a safe environment

to venture into social
entrepreneurship
Developing an advocacy mindset

among all institutional players
Demonstrating overall viability for

further investment
Venturing into social entrepreneurship is a highly
There must be a significant shift in the mindset of those
The long-term success and continuity of the social
risky move for any individual, requiring not only
involved in the social enterprise sector in Malaysia.
enterprise sector lies in its ability to demonstrate
extensive capital but personal support for the social
Major institutions such as government agencies,
positive results in both impact and financial returns.
entrepreneur as well. Subsequently, there is a need
private sector companies, and even intermediaries
Therefore it is important for social enterprises to
to create a safe environment where interested
must take an advocacy role rather than a passive-
receive strategic investment based on their ability
individuals are able to test out their social enterprise
observer role in this sector. Institutions have to clear
to meet both criteria. This affirms social enterprises
idea through a controlled pilot or simulation. This
a path for social entrepreneurs to be successful by
ability to create impact and self-sustain, further
enables the individual to determine the projects
unlocking resources and opportunities which are
demonstrating the very real potential of this sector.
overall viability before going full-scale and making
not typically made available to them.
the career transition.
Demonstrating the overall viability of the social

Developing an advocacy mindset among all
enterprise based on its performance in the market
Creating a safe environment would enable more
institutional players would ensure more resources -
will attract more interest and participation from
interested individuals to evaluate and decide whether
whether it be financial or in-kind - to be unlocked
the traditional sectors, and inject more capital and
or not to assume the risk of venturing into social
for social entrepreneurs, allowing them to rapidly
talent into this emerging sector.
entrepreneurship full-time, while simultaneously
progress their social enterprise from pilot to growth.
increasing the likelihood of creating successful

social entrepreneurs.
Chapter 6
Thrust 2 :
Create an enabling environment
6.1 Establish a knowledge base to inform policy & development to

spur social innovation
56
6.2 Encourage private sector involvement to increase collaboration,

strategic investment & capital creation
58
6.3 Foster social-public-private partnerships to create synergies
60
55
56
6.1
Establish a
Case study #15:

Spurring social innovation
knowledge base
National Endowment for Science Technology
to inform policy &
focuses on increasing the innovation capacity
development to spur
and the Arts (NESTA) is an organisation that

in the United Kingdom (UK) through programs,
investments, policies, research, and strategic
cross sector partnerships.
social innovation
One of its initial projects include Bethnal Green
Creating an enabling environment requires much more than just the
UKs Cabinet Office Social Incubator Fund.
injection of human and financial capital into the sector. It also requires a
Bethnal Green Ventures is an accelerator
common platform for all stakeholders to discuss and debate the merits of
program that aims to bring technology-based
what is needed to create larger institutional change for social innovation
solutions to solve the worlds most pressing
in Malaysia. By creating a common platform and wider participation in

the development of relevant policies, a more participative and equitable
approach to the development of this sector is ensured.
Ventures, in which NESTA co-invested with the
social problems.
Source: http://www.nesta.org.uk/our-projects/
success-stories/Bethnal-Green-Ventures
Creating a platform for open

discussion
Driving policy development and

instruments for implementation
Establishing a knowledge base
A common platform for discussion is necessary for
The development of this sector should not be made
wealth of knowledge created in the form of new
the development of this sector from a larger national
in isolation from other sectors. Social entrepreneurs
advancements in technology and social innovation.
perspective. While the sector itself should be led by
must drive the discussion about the development
As such, there is a need to create a knowledge
the community of social entrepreneurs, it should
of this sector by showcasing real results, which will
base where research and development activities will
also be mindful and inclusive of other institutional
create the case for larger involvement and advocacy
be commissioned to grow the sector strategically
players from the private and public sectors. This
from other sector players. Social entrepreneurs
through the application of specific instruments
common platform needs to gather and create a
need to drive matters related to policy development
such as capital injection, grant allocation, and even
knowledge base that drives social innovation, the
and instruments in order to create cross-sector
legislation.
main output of this sector.
support between the social enterprise sector and

other sectors in Malaysia.
Creating a platform for open discussion and a
The development of this sector will rely on the
Further, practitioners, academics, and other sector

players can collaborate together on the knowledge
knowledge base would ultimately identify any
Driving policy development and instruments for
base. This collaboration from stakeholders across
hidden or underutilised resource that could be
implementation are necessary to steer the sector
multiple sectors ensures that strategic investments
used to rapidly develop the sector and spur social
to generate social innovations that are replicable,
could be made in order to spur more social
innovation.
scalable and, most importantly, solve a legitimate
innovation and breakthrough.
issue faced by beneficiaries.
57
58
6.2
Encourage private sector
Creating opportunities for private

sector to be involved
The early-stage development of any sector is
involvement to increase
typically led by the state or its relevant agencies, and
collaboration, strategic
it is intended for. However private sector players,
investment & capital creation
involved in the early stages to comprehensively
is supported by the grassroots communities that

particularly those in the financial sector, must be
understand the trends and direction of this sector.
Further this will enable them to identify what
The longevity of any sector is based on its ability
institutional changes are required for them to make
to sustain itself independent from the state or
significant investment and commitment to this
governing agencies. To ensure the viability of this
social enterprise sector.
sector in the long term, it is necessary for the private

sector to play a prominent role.
To achieve this the government will need to

disclose information and data as to how effective
it is in delivering public services and goods to its
citizens. This gives social enterprises a foundation
to determine how best to solve this issue through
facts and information. Similarly, government needs

to devise an instrument where social enterprises are
Incentivizing the private sector to

commit and participate
rewarded for reducing costs and improving quality
Private sector players are restricted by the level
of public service delivery.
of commitment of their shareholders. While more

companies are being more responsible and ethical
Similarly the government should also encourage
in their practice, there must be significant incentive
more participation across all sectors through a more
for the private sector to be involved and actively
collective and inclusive movement, which could be
contribute to social enterprises. Targeted incentives
modeled after the collective impact or shared value
are specifically devised at each stage of the sectors
movement that is happening globally.
development to ensure continuous buy-in and

commitment from the private sector.
Creating opportunities for the private sector would

enable the social enterprise sector to be developed
This is where the government and regulatory
in a more coordinated manner while also ensuring
agencies play a major role in crafting incentives
that resources such as financial and in-kind
such as tax and other business benefits that would
capabilities are made available.
enable the private sector to commit resources and

investment to develop this sector. The role of the
government in this instance would be to absorb the
initial investment risk while slowly transferring the
risk back to the market through instruments such as

match funding or even seed funding.
Incentivizing the private sector requires close
coordination and strong governance to ensure that
the incentives being introduced are fair for all parties
involved. By creating the right incentive instruments,
private sectors will be able to inject more financial
and human capital required for the social enterprise
to tap into.
59
60
6.3
Foster social-public-
Identifying opportunities
within existing public-private
partnerships
private partnerships
Current public-private partnerships are purely based
to create synergies
the government in the delivery of public services.
on the notion that the private sector is able to help

However, current government procurement systems
and guidelines do not favour social enterprises who
Public-private partnerships in Malaysia have been
are typically much smaller, in terms of both financial
shown to improve public service delivery while
and working capital available. Therefore current
reducing operational cost for the government and
public-private partnerships must be evaluated in
its agencies. Given the increasing demand for a
order to identify the potential areas in which social
customer-centric public service delivery, there is an
enterprises could partner with government.
opportunity for social enterprises to play a major

role in delivering public services on behalf of the
Identifying opportunities within existing public-
government in a more efficient and effective way.
private partnerships would instantly create a
Opportunities must be identified and dedicated
market for social enterprises to compete in, while
for social enterprises in order to create market
simultaneously creating an opportunity for the
demand.
social enterprise sector to be injected with financial
capital.
Creating dedicated domains for

social enterprise
United Kingdom. There, social enterprises are

incentivised to participate through the creation of
special endowments or access to social impact
bonds offered by the government and local
municipalities. The incentive of the social impact
The next step in the social-public-private partnership
bond must be financially viable for investors and,
is to carve out a specific niche within the market
most importantly, be effective in addressing the
for social enterprises to meet. The creation of a
issue. Here, the role of the government is to create
dedicated domain or preference for social enterprise
a preference and performance measure to ensure
would be useful in order to create a marketplace that
the partnership meets both impact and financial
is predictable, and will generate a reliable source
objectives.
of revenue for the social enterprise. The dedicated

domain and preference however should be based
Creating a dedicated domain and preference for
on the ability of the social enterprise to bring public
social enterprise would ensure the delivery of public
services or goods to a community that is either
services and goods while simultaneously injecting
underserved or completely isolated.
significant cash flow into the sector through

the commercial partnership between the social
Instruments such as the social impact bond have

proven to be effective in countries such as the
enterprise and the private and public sector.
61
62
Chapter 7
Thrust 3 :
Affect systemic change
7.1 Introduce supportive regulatory, tax, & administrative frameworks
63
7.2 Advocate for public procurement to encourage more good quality,
65
cost-effective & innovative public services
7.3 Define the financial structure & provide guidelines for legal & audit
66
7.1
Case study #16: Regulating an

impact-driven sector
The Community Interest Company (CIC) was
created in the United Kingdom (UK) in 2005
Introduce
supportive regulatory,
tax & administrative
frameworks
under the Companies Act 2004. The legislation

and passing of this law facilitates the process
of starting and operating a social enterprise in
the UK.
Additionally the Office of the Regulator of CICs
was also established to help individuals start
their social enterprise, as well as to regulate
the sector by investigating complaints from
the public. Similarly, the Office of the Regulator
acts as a focal point for all matters pertaining
The previous two thrusts describe the ongoing effort that is required to
to regulatory changes in the sector through the

announcement of dividend caps, incentives,
create the critical mass of successful social entrepreneurs and enterprises
and even new forms for the registration of
in a strong and robust community. However, in order to fully develop this
a new social enterprise. As of 2014 nearly
sector, a more systemic change is required to ensure that developments
10,000 Community Interest Companies have
are irreversible and the sector continues on a growth path that continually
been incorporated and there are currently over
improves the state of Malaysian social enterprises. Hence, there is a need
180,000 social enterprises in the UK.
to create systemic change through legislation involving the regulation,

taxation and administration of this sector.
Source: https://www.gov.uk/government/
organisations/office-of-the-regulator-ofcommunity-interest-companies/about
63
64
Identifying key legislative changes

to support social entrepreneurs
Defining regulatory and taxation

regime for social enterprise
Many legislative changes are needed to fully support
There is a need to define a regulatory and taxation
this sector, mainly in regards to acts that govern the
regime for the social enterprise sector here in
registration of a legal entity in Malaysia. Currently
Malaysia. Given the complexity and dual missions of
legislations related to the registration of a legal
social enterprises (having a social or environmental
entity do not fit the definition of a social enterprise.
purpose through commercial means), there must be
As such, the current legislation landscape is not
a mechanism to properly govern and regulate this
conducive to the progression of this sector.
sector in a way that is conducive for individuals to

become social entrepreneurs and for private sectors
The development of this sector must include
to invest in social enterprises.
legislative changes regarding how a legal entity is

recognised. This needs to be followed by a coherent
Defining a regulatory framework and subsequently,
set of policy instruments that will augment the
taxation regime will ensure the sector continues to
operation of different regulatory agencies such as
serve its purpose of solving legitimate issues for its
the securities commission, registrar of companies,
intended beneficiaries while reducing likelihood for
and societies.
exploitation.
Identifying key legislative changes would ensure a

specific form of legal entity that fits the definition of
social enterprise and would facilitate the process of
starting and easily operating a social enterprise.
7.2
Advocate
for public
procurement
to encourage
better quality,
cost-effective &
innovative public
services
While many governments have ventured into including social enterprises in its public procurement process,
there are still fundamental changes that need to happen in order for social enterprise to competitively
deliver public services or goods. Current public procurement processes and criteria must be re-evaluated
and considered in order to identify what type of government procurement would be most logical and
beneficial for social enterprise to participate in.
Expanding current public

procurement to include social
enterprises
While
current
public
procurement
has
Setting up performance and

service-level targets
Government must set up realistic and specific
been
performance and service-level targets for social
progressing with the introduction of public-private
enterprise to fulfil. As such, current procurement
partnerships, there is still space and opportunity
criteria and eligibility rules must be re-examined
for social enterprises to compete. Given that social
in order to ensure social enterprises are not
enterprises are relatively and typically smaller,
automatically disqualified for legacy rules and
the government must be able to expand public
criteria.
procurement to include social enterprises in areas

where social enterprise could be a viable provider.
Performance and service-level targets must be set
Expanding current public procurements to include
specific to the nature of the goods and services
social enterprise must be strategic and targeted,
being procured from the social enterprise. These
which consider a clear valuation and categorization.
targets ensure that social enterprises are qualified

to be awarded with public procurement contracts.
65
66
7.3
Define the
financial
structure
& provide
guidelines for
legal & audit
To ensure that the social enterprise sector
Developing a financial structure

for social enterprise
A
standardised
financial
structure
must
Adopting and creating standards

for legal compliance
be
Given the commercial and trade elements of
introduced and adopted in order to properly regulate
a social enterprise, it is recommended that a
the social enterprise sector. Given the large amount
standardised framework is developed and adopted.
of investment that will be created through different
Such a framework ensures that a social enterprise
entities such as government, financial institutions,
meets its primary objective of delivering impact and
foundations and trust organisations, there is a need
generating revenues through commercial or trade
to clarity how to measure and evaluate the impact
activities.
that the social enterprise aims to deliver.

Adopting and creating standards for legal and audit
A standardised framework to measure and assess a
compliance would attract the injection of more
social enterprises impact and financial performance
capital in the sector as a form of investment from
creates the trust and confidence that will attract
other sectors.
more investment and capital into this sector.
continues to grow in Malaysia, there must be

a coherent structure to govern the sector from
Developing a financial structure for social enterprise
a legal and compliance perspective. Social
would create a consistent framework for regulatory
enterprises work on legitimate issues where
bodies to measure and evaluate a social enterprise
the beneficiaries are very much dependent on
based on specific guidelines and specifications.
solutions through enterprising means. However,

there must also be safeguard mechanisms for
the market to regulate, free from exploitation.
Chapter 8
Expected outcomes
8.1 A robust community & movement of social entrepreneurs
68
8.2 A thriving environment for successful social entrepreneurs
69
8.3 A resilient sector which is equitable & driven by the social entrepreneurs
69
8.4 Beyond the blueprint
70
67
68
8.1
A robust
community
& movement
of social
entrepreneurs
One of the expected outcomes of this blueprint
This blueprint also aims to create a community
is to create a robust community and a movement
of social entrepreneurs who have, by design, the
of social entrepreneurs that are connected and
mindset and culture of continuous improvement.
integrated across Malaysia by 2018. Having gone
Empowered intermediaries and other entities will
through the entire phase of starting, operating,
provide the social enterprise community with the
and growing a social enterprise, this community of
opportunity to acquire the skills and capabilities
social entrepreneurs are the very people who will
required to improve their social enterprise, making it
lead, inspire, and set the momentum and direction
investment-ready for either piloting or scaling.
of the sector.
201
2016
2015
Thrust 1 : Inspire a
movement
Thrust 2 : Create an
enabling environment
Thrust 3 : Effect
systematic changes
Regional
leadership
Figure 8.1 : Three thrusts for

growing the social enterprise
sector
8.2
A thriving
environment
for successful
social
entrepreneurs
The creation of a robust community and movement
Moreover, creating a connected sector for social
of social entrepreneurs must be complemented
entrepreneurs also creates the platform for systems
with a supportive network that encourages natural
change in the sector. A connected sector facilitates
partnerships to arise between social entrepreneurs
the discussion and action on policy development
and other relevant entities. This means that different
and legal legislation needed to fully utilize the
stakeholders and sector players be it non-profit,
potential of this sector
for-profit, or government are collaborating in a

way that would encourage more social innovation
to be produced in Malaysia.
8.3
The end-state of this blueprint is to create a resilient
However, to create a sector with embedded
social enterprise sector where the stakeholders
market resilience requires the implementation of
involved understand how advancing the sector is
several institutional and fundamental changes. This
mutually beneficial, hence taking accountability
blueprint calls for the introduction of regulatory,
for advancing the sector. This blueprint also calls
taxation, and administrative frameworks to drive the
for social entrepreneurs to lead the sector and
advancement of this sector. More regulatory, policy,
accelerate it in terms of both impact and business
and legislation frameworks better enable advocacy
returns, with clear guidance as to how this sector
of public procurement in the delivery of public
should be governed and regulated through a
services to be open for social entrepreneurs.
consistent legal and audit framework.
A resilient
sector which
is equitable
& driven by
the social
entrepreneurs
69
70
8.4
Beyond
the blueprint
While the blueprint focuses on a three-year time

horizon, what happens beyond 2018 still remains
a question. While some countries prefer to have a
more national focus such as South Korea, Thailand
and Vietnam, there is a precedent in regards to a
country that has taken social enterprise to a regional
focus which is the United Kingdom through its
presidency of the G8.
The question will continue to be at the forefront
of those involved in this sector. While social
entrepreneurship does have the immense potential
to effect systemic change in Malaysia, there is a
larger ASEAN population of 600,000,000 that could
also benefit from a strong regional champion of
social entrepreneurship.
71
Chapter 9
Conclusion
9.1 A challenging prospect to realise the full potential of the sector
72
9.2 Creating an equitable economic & social model for all
73
9.3 Getting involved, a call to action
73
72
9.1
A challenging
prospect to
realise the full
potential of the
sector
themselves.
in Malaysia is a challenging and daunting task

that requires complete buy-in and commitment
While this blueprint calls for a sector that is very
from all parties involved, ranging from grassroots
much focused on enabling the social entrepreneur,
communities to industry leaders and influencers.
it must also be inclusive and beneficial for other

sector players in the non-profit, for-profit and
Social entrepreneurship in Malaysia is in its
government sectors alike. The advancement of the
embryonic stage of development. The actual
social enterprise sector must be fair and equitable,
landscape itself is blurry, with many players still
where the environment is conducive for impact-
hidden from our reach and coverage. As such, this
driven and entrepreneurial individuals to succeed
sectors advancement would require all stakeholders
and compete.
to be agile and adaptive to its changing needs, and

primarily the needs of the social entrepreneurs
9.2
Creating an
equitable
economic &
social model
for all
As the development of the social enterprise sector
The social enterprise sector should be a truly
must be equitable and fair, so must the responsibility
competitive and fair sector where the success of the
and accountability of developing this sector. There
social enterprise occur as a result of its own efforts
must be recognition that the advancement of this
and ability to solve social and environmental issues
sector is contingent on a collaborative effort between
through enterprising means. This sector should not
each ministry, agency and private sector entity, each
be exclusively dominated by any single entity, but
of whom playing a significant contributing role.
instead coordinated and supported by the different

stakeholders in different capacities.
While this blueprint is by no means a definitive and

rigid way of advancing this sector, we do encourage
those involved and interested to participate in any
way possible. While the blueprint is the commitment
of the government to spur the development of this
sector, it is also an opportunity for all to make a
contribution moving forward.
For more information visit: www.se.mymagic.my
9.3
Getting
involved, a
call to action
73
74
References
Jose Ernesto Amoros, Niels Bosma, (2013), Global Entrepreneurship Monitor 2013
Global Report
Financial Times Limited (2014), Investing for Global Impact, London

Global Impact Investing Network & J.P. Morgan (2014), Spotlight on the Market
Eric Bidet, (2011), Social Enterprise in South Korea: History and Diversity, Emerald
Group Publishing Limited
Performance Management & Delivery Unit (PEMANDU) (2011), Improving Rural

Development
Jacques Defourney and Yu-Yuan Kuan, (2011), Emerging models of social enterprise
in Eastern Asia: a cross-country analysis, Social Enterprise Journal
Heerad Sabeti, (2011), The For-Benefit Enterprise, Harvard Business Review
Khazanah Research Institute 2014, The State of Households, Kuala Lumpur
Social Impact Investment Taskforce, (2014), Impact Investment: The Invisible Heart
of Markets, UKs Presidency of The G8
Nguyen Dinh Cung, Luu Minh Duc, Pham Kieu Oanh, Tran Thi Hong Gam, (2012),
Social Enterprise in Vietnam, British Council
Andrew M. Wolk, (2007), Social Entrepreneurship and Government: A New Breed of

Entrepreneurs Developing Solutions to Social Problems, Root Cause
Index of Tables and Figures
Index of Case Studies
Table 1.1
Factors favouring the shift towards social enterprise
10
1 Embrace
12
Table 1.2
Emerging imperatives across sectors
14
United Kingdom G8 Social Investment Task Force
18
Table 1.3
Characteristics of social enterprise
20
Peterborough Social Impact Bond
25
Table 2.1
NKRAs supporting social enterprise growth
27
Thailands Social Enterprise Sector
26
Table 4.1
Building blocks and challenges faced in the sector
44
5 Tonibung
28
Table 4.2
Strategic thrusts of the building blocks
46
ARUS Academy
28
TRY Mabul
29
EPIC Homes
30
Figure 1.1
Social enterprise Venn diagram
16
Figure 1.2
Hybrid spectrum
19
9 Biji-Biji
31
Figure 1.3
Average annual financial returns
22
10
PT Foundations Community Health Care Centre
32
Figure 4.1
Three strategic thrusts for social enterprises
47
11
What Malaysians want in a social enterprise definition
36
Figure 8.1
Three thrusts for growing the social enterprise sector
68
12
Capability building grants
39
13
Relaxing legal barriers to increase financial aid
40
14
Thailand Social Enterprise Office (TSEO)
49
15
Spurring social innovation
56
16
Regulating an impact-driven sector
63
Appendix I Existing definitions for social enterprise

While there are a variety of definitions of social
has been created by someone who has applied
seek to expand the financing available to blended
enterprise, most definitions fall into two schools of
entrepreneurial approaches to the social sector.
enterprises and also offer credible commitments to
thought:
The social entrepreneur has found innovative, new
enforce such enterprises dual missions.
ways of addressing social problems or meeting

Social enterprise as an organisational model
social needs. This concept of social enterprise does
In the United Kingdom alone, the social enterprise
In this school of thought, social enterprises are
not necessarily require that the social enterprise
sector employs more than two million people,
organisations that focus on both economic and
have a commercial business model. This idea of
including half a million sole traders. Social
social value creation, often with a trade-off between
social enterprise has been adopted several global
enterprises represent 15% of SME employers.
the two. This may include non-profit organisations
foundations celebrating social entrepreneurs, such
Further, social enterprises are estimated to have
that set up income-generating business units
as Ashoka, The Skoll Foundation, and the Schwab
total annual incomes of 163 billion a year and
or business ventures that employ people from
Foundation.
contribute 55 billion to the economy in Gross
marginalised communities. This idea of social
Value Added in the UK.
enterprise is at the base of social enterprise policy
Social Enterprise Policy Frameworks Globally
in countries such as South Korea, the US, and the
A variety of legal frameworks exist for enterprises
In the next two pages we have outlined the ways that
UK. It is also the social enterprise concept used by
that blend elements of the non-profit and for-profit
these frameworks seek to regulate an enterprises
large global investors in social enterprises such as
categories. Three prominent examples of these
social mission, tax treatment, and financing.
Acumen Fund and LGT Venture Philanthropy.
hybrid forms of organisation include the low-profit

limited liability company (L3C) in the USA, the
Social
enterprise
as
the
initiative
of
Community Interest Company (CIC) in the UK,
changemaker. In this school of thought, the
and the privately-regulated Benefit Corporation
focus is on the social entrepreneur as a social
(commonly referred to as B-Corp) in the USA. What
innovator. A social enterprise is an organisation that
is common amongst these hybrid forms is that they
75
Community Interest Companies (UK)
SOCIAL MISSION
TAX & LEGAL

TREATMENT
The Community Interest Test requires that a

reasonable person might consider [the CICs]
Low-Profit Limited Liability Company (USA)

activities are being carried on for the benefit of the

community.
The CIC must report its community interest
provides will not be confined to an unduly restricted
achievements to the Regulator annually, and in this

report, it must confirm that access to the benefits it
group.
must
significantly
further
the
Based on the CIC framework
No special tax benefits
Can accept program related investments (PRIs)
Can accept equity investment money and issue
equity
Asset lock: limits the distribution of assets to
accomplishment of one or more charitable or

educational purposes
The company would not have been formed but for
the companys relationship to the accomplishment

of those purposes
Neither
income
production
nor
property
appreciation may be a significant purpose of an

the L3Cs formative documents.
carried on for the benefit of the community
Prohibited from being a charity
L3C
L3C, and some statutes require this to be stated in
Required that the activities of the company are
An
Community Contribution Company (Canada)
Offers some tax benefits over a standard for-profit
Can avoid entity-level federal income tax liability
form
entirely due to its pass-through treatment (in
which the partners are taxed individually, but the

partnership is not directly taxed).
FINANCING STRATEGIES
76
Can accept equity investment money and issue
Asset lock: legal promise stating that the
shares
companys assets will only be used for its social
from private foundations in the form of loans or
objectives
directors, members, or equity holders; all assets

perpetually devoted to community benefit.
Dividend cap: can pay shareholder dividends

limited to 35% of annual profits
shares
shareholders to a maximum of 40%, with the

remainder distributed to charitable organisations
On dissolution, assets may not be paid out to
must go to another entity whose assets are

and/or other asset-locked entities
Dividend cap: can pay shareholder dividends

limited to 40% of annual profits
Benefit Corporation (International)

Mission lock: must thrive to increase both social
value and shareholder value. The purpose of
Social enterprise (South Korea)

the organisation can only be changed with a

Decisions must be made taking all key stakeholders

into account
Must commit to use the power of business to solve
social and environmental problems.

30% of employment should be the disadvantaged
or 30% of the business should be providing a social

service
The organisation may take on multiple types of

incorporation, such as NGO or for-profit organisation
Reduced taxes
Incorporated as a traditional corporation
The organisation should spend of profits on the
to attract and accept PRI (program-related
Profits must cover at least 30% of labour costs
A B-corporation may be in a better position

investment) money
or other operations which do not adversely affect
communities
The organisation must undertake a manufacture

health, society and environment in the long-term
with social services or jobs or contributing to local
Specific requirements in purpose, accountability,

benefit report
a social objective, such as raising local residents
quality of life, etc., by providing vulnerable groups
supermajority vote of shareholders
and transparency must be met, including the annual
The organisations main purpose should be to realise
Social enterprise (Thailand)
social objective
The organisation may take on multiple types

of incorporation, such as NGO or for-profit
organisation
Does not currently enjoy tax benefits but

feasibility is being examined
Does not enjoy specific benefits
77
78
Social Enterprise Policy Frameworks in Asia
South Korea
Can take the form of a corporation or an
enterprises through incubation institutions and
association under the Civil Law, a company
support programs. The regulatory environment also
under the Commercial Act or a non-profit private
encourages enterprises to participate.
organisation;
South Korea is the only country in East Asia to legally
It should employ paid workers and conduct
Singapore
enacted the Social Enterprise Promotion Act (SEPA)
business activities, such as the production and
In Singapore, no specific legislation regarding social
2006. As of November 2014, there are 1,165 certified
sale of goods and services;
enterprises has been enacted, nor has an explicit
It should have a decision-making structure
definition for social enterprises been provided. Based
aims to promote more than 3,000 certified social
in which interested persons, such as service
on the operation model, Singapore classifies social
enterprises by 2017.
beneficiaries and workers, etc., can participate;
enterprises as Work Integration Social Enterprises
Where it has distributable profits for each fiscal
(WISE),
Article 2 of the Law on the Promotion of Social
year, it should spend at least 2/3 of the profits for
services models, and social needs models. There is
Enterprises describes the legal concept of a social
social objectives (applicable only to a company
no legal entity that is a hybrid between a traditional
enterprise as the following:
under the Commercial Law);
non-profit and traditional for-profit.
define a social enterprise. In 2006, the government
social enterprises in South Korea. The government
plough-back-profit
models,
subsidized
A company which reinvests profits in the
South Korea has also implemented a dedicated
Rather, the majority of charities and non-profit
business or the local community putting priority
unit, called the Social Enterprise Division, under
organisations in Singapore are established in the
on pursuing social purposes rather than on
the Ministry of Employment and Labor, as well as
form of a company limited by guarantee (CLG),
maximizing profits for shareholders or owner of
the Korea Social Enterprise Promotion Agency
meaning that the liability of its members is limited
the company.
(KoSEA), which is responsible for implementing
by its constitutional documents to such amount as
Its main purpose should be to realise a social
and promoting social enterprise policies such as
the members undertake to guarantee. While a CLG
objective, such as raising local residents quality
business incubation, business unit certification,
can accept donations and grants, it is unable to
of life, etc., by providing vulnerable groups with
business monitoring, consultation services and
receive funding in the form of equity as it does not
social services or jobs or contributing to local
networking. The government takes the lead in
have share capital. A CLG may be registered and
communities.
fostering the step-by-step development of social
regulated as an approved charity in order to enjoy
full income tax exemption on income and receipts.
which do not adversely affect health, society

and environment in the long-term;
Under the Ministry of Social and Family Development,
2. Apply a doctrine of self-sufficiency;
the government has created the ComCare Enterprise
3. Have the potential to have its own financial
Fund (CEF) to help newly established social
stability;
enterprises survive and grow during their first two
4. Accumulate revenue principally from businesses
years of existence. It aims to provide seed funding
or operations carried out to further a purpose of
for sustainable new and existing social enterprises
addressing problems and develop communities,
that train and employ disadvantaged populations
societies or environments, or returning benefits
in Singapore. The government provides financial
societies;
assistance to newly created social enterprises from

the perspective of investment.
Thailand
5. Possess the capacity to be in a variety of

organisational forms;
6. Exercise good governance
In Thailand, the Regulation for National Promotion
In 2011, the government formed the Thai Social
of Social Enterprises provides the definition of a
Enterprise Office (TSEO). As well as working with
social enterprise as a business that has the explicit
the stock exchange, the TSEO is looking into tax
purpose of addressing problems and developing a
incentives for investors and social enterprises
community, society, or environment, and generating
themselves, as well as working on common social
revenue by selling goods or providing services not
impact measurement standards.
with the primary object of maximizing profit for its

shareholders or owners.
It must possess the following specific attributes:
1. Undertake a manufacture or other operations
79
80
Appendix II Working definition for social enterprise in Malaysia

In developing a social enterprise definition for
Goal 4 The social enterprise definition should
Social agendas include, but are not limited
Malaysia, we set out four key goals:
be applicable to different types of legal entities,
to, activities aimed at the improvement of:
including Sdn Bhd, associations, or companies
1. Material living conditions for the bottom
Goal 1 The definition is designed to support the
limited by guarantee. Malaysian social enterprises
development of enterprises that might not naturally
have incorporated in all these forms.
2. Health;
flourish in the market economy. As a result, it should
3. Education;
benefit organisations whose primary mission is
Definition
social.
Any
Goal 2 The definition must be sufficiently specific to
40% income bracket;
4. Productive and valued activities for

be
bottom 40% income bracket;
considered a social enterprise if it satisfies all of the
5. Governance and basic rights;
following requirements:
6. Leisure and social interactions
legally
registered
organisation
shall
provide policymakers, investors, and grantmakers
(inclusion of other members in society);
the confidence that when they support a social
1. The primary mission of the organisation is to
7. Natural and living environment;
enterprise, they are supporting a bona fide purpose-
address any of the social agendas listed below.
8. Economic and physical safety;
driven organisation. It should be able to provide
The organisation takes all reasonable effort to
9. Children;
answers to classify a wide variety of organisations,
execute the mission;
10. Culture;
whose social purpose is ambiguous. The definition

should also be difficult for profit-driven organisations
to abuse.
2. The organisation is designed to use a commercial

business model to sustain itself;
3. The majority of its profit is reinvested into
carrying out its social mission;
Goal 3 The definition must be sufficiently open to
4. The organisation fulfils its social agenda in a
allow social entrepreneurs to innovate and adopt a
way that is both distinct and socially meaningful
wide variety of business models and approaches to
from any other traditional commercial enterprise,
addressing social challenges.
especially in operations and management
11. Disability;
12. Unity and discrimination;
13. Older persons;
14. Poverty;
15. Water and sanitation; and
16. Participation of women and youth
in the workforce.
A social enterprise is not considered to fulfil a social
3. Organisations that operate exactly like other
agenda if its activities are limited to:
profit-maximising
not
To help understand how this definition applies
1. benefiting only the members of a particular body
considered social enterprises, regardless of
to different types of organisations, we have put
their stated mission. The requirement that a
together a series of fictional companies and tested
social enterprise fulfils its social agenda in a
them against the definition in the next page.
or the employees of a particular employer; or

2. political campaigning and activities intended to
support political campaigning.
organisations
are
Social Enterprise or Not?
way that is both distinct and socially meaningful

from any other traditional commercial enterprise
means that social organisations have to do
Implications
things that traditional, profit-maximising do not.
The definition has a few noteworthy features:

1. Pre-revenue
startups
can
be
Many businesses already solve real problems

social
enterprises. The definition does not require

that an organisations business model sustain
its activities. Instead, the definition requires that
social organisations be designed to be selfsustaining. This means that the business model
should plausibly sustain the organisations
activities.
2. Social enterprises are not designed to rely
on volunteering, grants, or donations to stay
afloat in the long-term. While the second
criterion allows for these forms of support to be
used to start a social enterprise, it is expected
to sustain itself with a commercial business
model in the long run.
and have a social impact through the course of

their normal business. A social enterprise must
go above and beyond a traditional, profit-driven
entity in creating social impact. This is referred
to as the concept of additionality. A social
enterprise might have significant differences in
operations that reduce profits but create more
benefits to the underprivileged. It may also
include activities that help change a market for
social benefit. An organisation that simply fulfils
existing market demand for a product or service
-- even if its a socially-oriented product or
service -- is not considered a social enterprise.
81
82
Organisation
Is it a social enterprise?
Northern Bank Berhad is a large financial services group. In its portfolio
Northern Bank does not meet criteria 1 and 3 of the definition. The primary
of social initiatives, the bank has a large CSR department where it funds
mission of the bank is to generate profits. It also does not invest the majority
generously initiatives to build creativity in education.
of its profits into its social mission.
GoTent produces tents for UNHCR and other organisations that help
GoTent does not meet criteria 4 of the definition. GoTent simply fulfils
provide emergency housing for refugees. To date, the company has not
commercial demand for tents from social organisations like UNHCR.
issued any profits or dividends to shareholders so all profits have been
Providing a product or a service to a buyer in the social sector is not sufficient
reinvested into the company.
to becoming a social enterprise. If, for example, GoTent redesigned tents

for extreme affordability to sell tents to social organisations at prices that
traditional for-profit tent makers would not, GoTent could be considered a
social enterprise.
NGOConsult is a consulting firm that serves nonprofits and social
NGOConsult is a variation of GoTent. Much like GoTent, NGOConsult fulfils
enterprises exclusively. In addition to strategy consulting, NGOConsult
an existing market demand from international agencies and foundations to
provides training to social organisations. The trainings are free to social
provide training to NGOs. As a result, NGOConsult does not meet criteria 4.
enterprises and paid for by international agencies and foundations.

HelloFood is a food delivery app. The app allows you to order healthy
HelloFood does not meet criteria 4. A number of other food delivery apps
food, which is delivered by a network of independent delivery bikes. The
already exist in the market. HelloFoods social mission is being accomplished
company claims it has increased the revenue for independent delivery
in an identical way by existing profit-driven enterprises.
riders, a low-income group. It also says it has reduced the exposure of

people to safety risks like robberies and thefts when getting food late at
night. HelloFood has reinvested all profits back into the company to date.
Appendix III Malaysian social enterprise ecosystem

The Big Picture
backgrounds, the majority stated that they wanted
The Ecosystem
In Malaysia, social enterprise is a young but rapidly
to work on something that was impactful to society.
In order to flourish, social enterprises require access

to a range of support from government, academics,
growing sector. Over 100 social enterprises exist

in Malaysia. More than 75% of Malaysian social
The typical Malaysian social enterprise has a
civil society, impact investors, incubators, network
enterprises were founded in the last five years.
team of four full-time paid staff and six regular
platforms, angel investors, consultants, market
volunteers. For each full-time paid staff member in
access facilitators, and others. Innovation does
According to the national survey, 19% of social
a social enterprise, the organisation has two regular
not exist in isolation, but comes about when
enterprises are involved in community development
volunteers.
different kinds of stakeholders come together share

knowledge, learn from each other and interact.
& integration, 15% are involved in the environment

and sustainability, 14% in economic access and
The typical social enterprise also has yet to
Villgro Innovations Foundation and Okapi Research
poverty alleviation, 11% in education, and 10% in
break even. Over two thirds of social enterprises
outlined the elements of a healthy social enterprise
healthcare.
have not yet broken even. Among those social
ecosystem as demonstrated below. Several aspects
enterprises who have started sales, 50% havent
of a healthy social enterprise ecosystem exist in
yet consistently covered costs, 28% have broken
Malaysia, although not all of them. >>
The Founders and the Social Enterprises
even but are looking for consistent customers, and
The majority of social enterprise founders are aged
only 22% have found a consistent set of customers.
30 and below, showing that there are more youth

taking the initiative to start a social enterprise.
The majority of the social enterprises biggest

revenue stream came from doing B2B sales
Approximately two thirds of founders transitioned
(38.78%), followed by B2C sales (28.57%).The
into social enterprise from the corporate sector,
top 3 priorities of surveyed social enterprises are
compared to a third that had previously been
(i) to build their business sustainability, (ii) secure
working in the social sector before. When asked
additional funding and (iii) seek expert support and
why they had transitioned from their corporate
mentorship.
83
84
Categories
Description
Malaysian Context
Support Organizations
Investors and angels
A variety of support services from private sector and civil society exist in Malaysia
Incubators/accelerators
including organisations such as myHarapan, Tandemic, and Social Enterprise Alliance.
Banks providing ease of access to
Further, grant providers and competitions also exist in Malaysia, such as from:
loans
AirAsia Foundation
Support services and mentors from
The British Council & Arthur Guinness Funds Entrepreneurs for Good
private sector and civil society
myHarapan Social Business Challenge
providing
Agensi Inovasi Malaysias Berbudi Berganda Challenge
other
kinds
of
non-
financial services such strategy,

management, legal support
However, this is far from creating an enabling support system. Malaysia is lacking in
Business plan competitions
financial involvement from investor, banks, company CSR initiatives, and philanthropy.
CSR and philanthropy
The development of most social enterprises in Malaysia is funded through grants or

personal money. Rarely are social enterprises backed by investors. According to the
national survey, 81% of social enterprises put in their personal money. Among those
who put in their own money, 70% of them fully funded their ventures themselves.
Knowledge providers
Primarily from academia and consulting,
A growing number of academic institutions are involving themselves in social enterprise.
these are organisations and institutions
These institutions include the Centre for Social Entrepreneurship at Binary University
that provide knowledge and capacity-
and the Social Enterprise and Economic Development program at Universiti Malaysia
building
Kelantan.
However, academic institutions and consultancies in Malaysia has not yet undertaken
a great deal of research and capacity in social enterprise, leaving ample space for
improvement in this area.
Categories
Description
Malaysian Context
Network, Enablers,
Shaping the way stakeholders interact,
Malaysian government is taking a more active role in supporting the social enterprise
and Policy
rather than directly supporting social
sector. However, over two thirds of social enterprises in the national survey felt that there
entrepreneurs,
was a lack of policy advocacy.
these
organisations
include network platforms and forums,

macro enablers including international
Increasing public forums and conferences are focusing on social enterprise as a
foundations
development
theme, such as the 2015 International Conference for Young Leaders, which focused
infrastructure
on Changing Communities through Social Entrepreneurship. Additionally, the Global
agencies
and
supporting
and programmes, and the government
Social Business Summit was held in Kuala Lumpur in 2013.

However, there do not exist ecosystem enablers that provide access to markets or
actively link philanthropy funding to the social enterprise ecosystem.
85
86
What are the challenges, barriers, and potential
incentives such as tax relief in order to promote
more visibility and community outreach to spread
solutions for Malaysian social entrepreneurs?
the growth of social enterprise. Suggestions also
knowledge and awareness of social enterprise.
included establishing an independent body that
Examples of these included roadshows, urban
would monitor impact measurement guidelines
and rural outreach, social enterprise ambassadors.
across registered social enterprises.
Community engagement should involve different
Three
key
challenges
for
Malaysian
social
entrepreneurs emerged in the roundtables, survey

results, and submissions: the lack of a legal entity
aspects of society such as academicians.
for social enterprises; low public awareness; and
Challenge 2
a struggle in acquiring the right skills, talent, and
Low public awareness serves as a barrier to potential
Participants
funding to sustain and scale their enterprises.
customers and investors. 95% of social enterprises
information about Malaysian social enterprise needs
in the MaGIC national survey voted that the public
to be more easily accessible.
Challenge 1
has between very little or little understanding on
highlighted
the
fact
that
online
Not having a formal legal identity for social
SEs. Over a third of social enterprises identified
Challenge 3
enterprise holds back the sector. In the roundtables,
weak public understanding of social enterprises as
Lacking the skills to turn a profit - Over 16%
social enterprises stated that choosing between
being one of their biggest challenges in running their
of respondents in the national survey identified
non-profit versus for-profit labels were undesirable.
venture. Roundtable participants and submissions
financial sustainability and revenue generation as
A key reason for wanting a formal legal identity or
stated that larger society often equated social
one of their top three challenges. Among those who
certification was because
corporate foundations
enterprises to non-governmental organisations
have started sales, almost half havent yet been
or CSR departments (i) found it problematic that
that are not-for-profit. Further, public mindset sees
able to consistently cover costs, 28% have broken
profits come into a social project or (ii) have legal
commercial business as more convincing and
even but are looking for consistent customers, and
restrictions that make it difficult for corporate
legitimate, which puts social enterprises at a value
only 22% have found a consistent set of customers.
funders to support a private company or a Sdn Bhd.
disadvantage. This serves as a barrier to supports
Roundtable participants felt that one of the greatest
such as funding, tax relief/exemptions, corporate
challenges to financial sustainability was because
engagement, and bank loans.
they lacked business acumen.
Suggestion: Participants suggested that there be
Suggestion: Participants suggested seeing more
Suggestion: Participants wanted to see a new

registration option that lay between a society and
a Sdn Bhd. This new hybrid model would provide
programs by social enterprise intermediaries.
difficult, and of those who agreed, 60% of them say
Suggested
programs
included
accelerators,
it is due to difficulty in hiring good quality manpower
incubators,
and
trainings
for
financial
or the right people to do the job. 27% says is hard
sustainability and management. British Council also
to reach the salary demand, and 13% says people
reiterated this stating that there needed to be more
are skeptical of the nature of work.
more
intermediaries to assist social enterprises in financial

training, business plans/models, marketing and
Suggestion: Participants felt that larger public
communication, market research, and developing
legitimacy
products or services that reach a market.
in funding. Participants suggested that social
of
social
enterprise
would
assist
enterprises themselves needed to provide effective
Challenge 4
human resource support. Remuneration should be
Lacking resources such as funding and talent - Over
at market rate, career growth potential, personal
21% of social enterprises in the MaGIC national
and professional development, and social purpose
survey identified a lack of resources being one of
needed to be articulated in employment. Externally,
the key barriers to running their venture. Roundtable
they suggested better public awareness and
participants echoed this, highlighting that there was
government incentives might attract talent and
insufficient capital to help their ideas material.
resources into the social enterprise sector.
Additionally,
participants
stated
that
their
enterprises and the sector at large had trouble

attracting and retaining talent. They stated that
reasons for this included a lack of awareness in
regards to how to get involved and a poor public
awareness of the sector. According ot the national
survey, 75% of social enterprises agree that hiring is
87
88
What kinds of changes in Malaysias Legal or Policy Framework could help Malaysian social enterprises?
Participants outlined the following the suggestions for Malaysias legal or policy framework, which can be
categorized into three: awareness, legal or financial incentives, and government enforcement.
Suggestion
Description
Official recognition of social enterprise
Participants were keen to see a specialized label or brand in order to generate awareness, similar to the
B-Corp brand in the United States. Participants felt that recognizing social enterprise accomplishments
and showcasing the results that social enterprises have made would improve public awareness.
Participants also suggested requiring social enterprise education in school curriculums. Setting a national
vision for social enterprise would be helpful.
Provide tax incentives to make it

easier for donors and corporate bodies
to contribute to social enterprises
Participants recognised that there needed to be a new structure for social enterprise, one that would
recognize and assist their dual social mission and business models. Tax incentives (relief or exemption)
were brought up multiple times as a tool to support social enterprises. Legal suggestions included giving
social enterprises a pioneer status to be relieved from tax for a permitted period of time, and perhaps to
receive tax-exemption for the portion of income reinvested back into the enterprise.
A legal framework to prevent abuse
However, participants also voiced concerns that tax incentives might bring companies masquerading as
social enterprises into the sector. Participants also felt that benefits for social enterprise staff would assist
them, especially in the start-up phase.
Some participants believed that a specific legal structure could also necessitate a governance body that
would require that social enterprises have an explicit social mission, transparency, as well as financial
and impact measurement systems. This could build trust amongst the public of the legitimacy of social
enterprises.
The concept (of social entrepreneurship) may be quite new in Malaysia

but we already have several resourceful social entrepreneurs. These
people are special because they see opportunities rather than problems
and apply fundamentals of business to create a sustainable model,
without depending on charity, that leads towards equitable society.
YAB Dato Sri Mohd Najib bin Tun Haji Abdul Razak
Prime Minister of Malaysia

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What are the primary and secondary characteristics of a social enterprise according to the document?

What are the primary and secondary characteristics of a social enterprise according to the document?

What are some of the challenges faced by social enterprises in Malaysia?

What are some of the challenges faced by social enterprises in Malaysia?

Malaysian Social Enterprise Blueprint

Johor Area Rehabilitation Organisation

Les Petits Chefs

Malaysian Social Enterprise Blueprint

Malaysian Social Enterprise Blueprint

Primary: A social enterprise is an entity which

balances both impact and business in order to

areas of education, poverty, rural development,

solve a legitimate social or environmental issue

environmental sustainability, employment for the

through its offerings, which are driven by market

marginalised, and at-risk youth.

to be unlocked to unleash the full potential of social

operates by being inclusive and transparent in

entrepreneurship. These include:

Having evolved from the traditional for-profit,

its activities, while being fully accountable to its

Rigidity and lack of institutional awareness

non-profit, and public sectors, impact-driven and

shareholders and beneficiaries.

Lack of legal recognition and policy structure

entrepreneurial individuals have been pioneering

model unleashes value not only through economic

wealth creation but also by creating beneficial

Singapore, Myanmar and Australia regard social

impact to society and the environment.

entrepreneurship as a key national agenda and have

Lack of access to quality human capital

set up agencies to champion the growth of social

The Malaysian Social Enterprise Blueprint is a three-

Social entrepreneurship is a unique sector; currently

enterprises in the country. For example, in Thailand,

year roadmap that describes the strategic thrusts

one without a succinct, accurate description of what

there are now over 120,000 social enterprises. In

needed to accelerate the development of the sector.

is a social enterprise. This lack of a definition has

the United Kingdom, there are over 70,000 social

By the year 2018, we aim for the Malaysian social

led to confusion among stakeholders and potential

enterprises. They employ over a million people and

entreprise sector to be self-sustaining, equitable,

entrepreneurs. While there may not be a universal

contribute more than 5% to national GDP.

and people-centric in order to empower impactdriven entrepreneurs.

definition, social enterprises have primary and

In Malaysia, it is estimated that there are 100

Malaysian Social Enterprise Blueprint

To achieve this, the blueprint identifies three

to encourage the development of more partnerships,

Social entrepreneurship is still embryonic in

fundamental building blocks to develop the sector:

collaborations, and intermediaries. This can result

Malaysia. This is the perfect opportunity for us to

I) social enterprises and social entrepreneurs