Brian Yeung writes that the SAR's talent for entrepreneurism can be put to use in creating dynamic welfare projects which will help ease discontent over inequality

Hong Kong is highly popular as a hub for entrepreneurship in Asia, leveraging on its strong access to global capital markets and its low corporate taxes. The city's favorable environment for businesses continues to drive the economy.

A recent survey of 184 economies by Global Finance Magazine indicated that Hong Kong ranks among the world's top six wealthiest economies. But contrary to the belief that wealth is equivalent to prosperity, the city's Gini coefficient - the most commonly used measure of inequality - increased by 25 percent from 0.43 in 1971 to 0.54 in 2011.

A question worth pondering is whether Hong Kong can harness its edge in entrepreneurship to benefit disadvantaged groups. The past decades have seen the birth of social enterprises globally, with entrepreneurs setting up businesses to tackle social problems in their communities. One Acre Fund, for example, educates groups of farmers in East Africa in business and agricultural knowledge in order to double their earnings. This social enterprise now takes pride in improving the lives of more than 135,000 farmers.

Social entrepreneurship is nothing new in Hong Kong. Our city has a higher social enterprise density than Singapore or South Korea. In 2013, we had 58 social enterprises per 1 million inhabitants, whereas Singapore had only 32 and South Korea a mere 19. Further, some of these social enterprises have proved to be markedly successful. For instance, My Concept hires deprived young people who lack motivation, professional skill sets and high academic credentials and so empowers them with the skills to provide event management services for corporate clients. Thanks to this social enterprise, job opportunities have been provided for more than 200 youths, gaining My Concept the Home Affairs Bureau's Social Enterprise Award.

In the recent Youth Entrepreneurship Forum organized by the Hong Kong General Chamber of Social Enterprises, Undersecretary for Home Affairs Florence Hui cited research by the Fullness Social Enterprise Society, which found that the social return per HK$1 investment in social enterprises is HK$7, compared to only HK$0.97 for Comprehensive Social Security Assistance.

Despite higher cost-effectiveness, the major challenge in Hong Kong is that nearly one-third of such enterprises operate at a loss, as shown in a survey by the DBS Social Enterprise Advancement Grant 2014. One possible reason is that 80 percent of our social enterprises are owned or run by non-profit organizations, and these organizations may not be familiar with an entrepreneurial approach to tackling social problems.

The private sector is trying to fill the gap. In 2009, HSBC partnered with the Hong Kong Council of Social Service and founded the Social Enterprise Business Center to provide pro bono consulting services to social enterprises. Still, whether there is a natural fit between the expertise of a coach and the business needs of a social entrepreneur presents another challenge.

In addition to education on social entrepreneurship, the government can play the role of customer. In Britain, for example, an average of 26 percent of the income of Britain's social enterprises comes from government merchandising.

A second challenge is that consensus has yet to be reached regarding what defines social enterprise. Academic J.A. Banks first coined the term social entrepreneur in his book The Sociology of Social Movements, defining a social entrepreneur as one "who saw the possibility of using managerial skills directly for socially constructive purposes". Based on this definition, a primary social mission is what differentiates a social enterprise from a business start-up.

But the theoretical approach is not specific enough to avoid the situation of "bad money driving out the good", allowing businesses to take advantage of the brand "social enterprise". In a survey by Fullness Social Enterprise Society, respondents who considered themselves "ethical customers" were willing to pay a premium price 16 percent higher than the average just to support enterprises with a social mission. But the question remains: How can we make sure that the mission of a social enterprise is not hyped?

In 2014, the Hong Kong General Chamber of Social Enterprises launched the Social Enterprise Endorsement Mark Scheme to certify social enterprises based on a set of criteria from evaluating the social mission to ethical consumption and community engagement. But only 20 social enterprises have participated in the scheme so far. The scheme clearly needs to gain wider acceptance.

Making a business viable is never easy, but tackling a social problem with a profitable social enterprise is perhaps even more difficult. Nevertheless, the number of social enterprises here has increased almost threefold from 187 in 2007 to 527 in 2015. The entrepreneurial flair of the city may offer a good reason to stay positive. A clearly defined social enterprise with the right business model will pay off in the end. But the concept of social enterprise is still in its relative nascence locally, and deserves the support of both government and the business community.

The author is a consultant on entrepreneurship and innovation. He organizes conferences and training programs for overseas executives and entrepreneurs in Hong Kong, Singapore and the mainland. He was the first social and digital media executive of The Economist's Events and Thought-Leadership in Asia-Pacific.

(HK Edition 07/29/2015 page9)