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Don’t confuse mainstream private sector development and support for social enterprise

Written by Emily Darko

​ODI’s study 'Innovation - Social enterprise: challenges and opportunities' recommends that governments and donors make a clear distinction between mainstream Private Sector Development (PSD) activities and support for hybrid-model social enterprises. Both mainstream and modified business models can have positive social impact. However in mainstream PSD, external support is typically limited and time bound to enable a commercially viable enterprise to start up, or move into a new market, and make a profit. For social enterprises operating in more difficult markets with lower profit margins, support may need to be more intensive and longer term, with greater emphasis on grants and concessional finance, use of targeted subsidies and tax concessions, and tailored hybrid business development services and knowledge sharing communities.

It is important to be clear about when such support is justified and when it is not. Social enterprises addressing intractable social problems in marginal markets need preferential sources of support.