Marginalised groups find barriers to social enterprise funding

The playing field is not level for all social entrepreneurs who seek funding, according to a new report examining barriers in the social impact funding landscape.

The State of Social Entrepreneurship 2019 report, from not for profit Echoing Green, used data from more than 2,000 social enterprises across 161 countries to observe global trends in the sector.

Barriers to funding were found at both the market and individual or organisational level, and included biases in decision-making that disadvantaged people of colour and women in particular.

The report said rather than avoiding these realities, it was important to acknowledge them and work together to alleviate them.

“Minorities, women, and black women specifically, are the driving force of entrepreneurship. It is okay to not understand or relate to our ventures, but it is not okay to look over us because of that,” social entrepreneur Brittany Young said.

“We want equal financial contributions for solving our own problems.”

The report noted that funding was heavily concentrated in a small percentage of organisations, while a majority of groups had not yet raised any funds for their work.

Just over half of social enterprises reported receiving no funding, while the top 10 per cent of organisations received US$193 million (A$275 million) of the total US$238 million (A$339 million) in funds.

The data – collected through applications to Echoing Green’s social entrepreneur fellowship program – further highlighted intersectional inequality in funding decisions along gender, race and geography lines.

For example, men were more likely to raise funds than women, while Caucasian and European applicants were more likely to raise funds than African, African-American, and black applicants.

“The median funds raised by black applicants is $0, compared to $12,245 (A$17,433) [for] their white counterparts,” the report said.

“When funds have been raised, organisations led by African, African-American, or black applicants report median funding $25,000 lower than their Caucasian, European, or white counterparts.”

Caucasian and European women also had a median fundraising level US$25,000 (A$36,000) lower than male applicants.

Using the Human Development Index (HDI), the report found discrepancies in fundraising opportunities between citizens of the top two-thirds of countries such as the United States and Vietnam, compared to bottom third countries such as South Sudan and Myanmar.

On the whole, social entrepreneurs from lower HDI nations reported significantly less funding to work in their own countries than social entrepreneurs from higher HDI nations who proposed work in those same nations.

Farmerline co-founder Alloysius Attah said this was an area funders needed to be more transparent around.

“We need funders to better explain the ‘why’ of what they’re looking for, find creative ways of assessing candidates, and be willing to take more risk,” Attah said in the report.

Social Change Central co-founder Anne Lennon agreed the playing field was not always level when it came to attracting social enterprise funding.

She told Pro Bono News part of the reason why Social Change Central was set up was to democratise access to funding opportunities.

“We saw that for many social enterprises, whether a social entrepreneur received support was often based on personal networks as opposed to the potential of an idea,” Lennon said.

She also agreed funders needed to be more transparent about their decision-making processes, and said it was important for funding bodies to analyse their grant making to see where there may be gaps in terms of diversity.

“Funders should embed diversity and inclusion principles in their governance documents and train their own board and staff on diversity and inclusion,” she said.

“They should also consider the diversity of their own staff and board and consider including grantees or beneficiaries on their decision-making panels.”

Lennon added that funding bodies should ensure the application process is as simple as possible for social entrepreneurs to minimise the burden on applicants and make it easier for smaller, less-well resourced, grassroots organisations to compete.

She also called on funders to go above and beyond so a wide variety of social entrepreneurs could have their voices heard.  

“They should themselves carry out more research to vet organisations and short online expressions of interest should be used where possible,” she said.

“To ensure that applications are received from a broad range of organisations, funding bodies should invest in promotion and actively include outreach to a wide range of applicants.”