Starting a business, conventionally, is largely driven by the need to make profits, and the higher the margins the better for the proprietor.
Downcast often occurs when companies report slump in profit, as this is considered not good enough to create investor confidence and attract more shareholders.
And every time a listed company announces its performance, what dominates in the minds of investment and financial analysts is if the key data released guarantees them handsome return.
However, there is a growing focus that seeks to balance the desire for profit but more importantly, focuses on improving the living standards of the society.
Industrialist, Manu Chandaria, believes that there is a huge potential for social entrepreneurship to create far-reaching economic impact in Kenya’s social fabric rather than focusing only on profit making.
“The wealth you create is not yours, but you are a trustee of that wealth so as to improve the social environment,” he explained.
Chandaria’s thinking is that earning extraordinary profits cannot create the desired impact on society and such institutions are doomed to fail in the long-term.
“Business, social responsibility and understanding the plight of the people must be the focal point,” he said adding that to serve the society is not just writing cheques, but being part of the pain they go through.
In a society where, health, water, environment and education remain key challenges, harnessing the positive power of enterprise is what inspires Nicholas Sowden.
Sowden, the founder of Penda Health, a Kenyan company, argues that a good business is one that aims at solving societal problems and in the process makes profit, which it can use to expand to other regions.
“On health, the opening up of many health centres using the profits to reduce the suffering of the people is what impact investing is all about,” he reckons.
Speaking on the sidelines of a one-day workshop on impact investing in Kenya at the Strathmore Business School, Eme Essien Lore of Rockfeller Foundation observed that impact investing is where a company seeks to make profit that is below the market rates or good enough to compensate capital.
“This is a robust business model capable of improving the living standards of the community,” she argued. Lore, a senior associate director in the Africa region underscores that a business engaged in impact investing by making reasonable profit, above the return on capital, but able to sustain the company to expand tend to offer services to more people.
George Njenga, dean at Strathmore Business School also argues that impact investing or social entrepreneurship remains key to assisting the Kenyan economy grow and assist a good number of people get employed and acquire wealth, rather than few getting richer at the expense of majority.
“Enhancing the productivity of more people by enabling them perform their functions is the key to starting a business,” he stated.
Some of the areas where improved productivity can be found and where there are numerous challenges, include health, water, farming, agribusiness and renewable energy.
“A profit margin of eight per cent to 15 per cent or just above market rate by a business to improve the living standards is considered an impact investing,” he explained.
However, he reckons that profit margin should be good enough to sustain the business and ensure that it does not collapse.
He, however, argues that majority of the listed companies are driven by the desire to make higher profits to satisfy their demanding shareholders, as impact investing is least of their concern.
Participants of the workshop strongly felt that it’s upon the government to create policies that favours impact investing by offering incentives to corporates and in the process more of its citizens stand to benefit from the opportunities created.
He argued that his firm imports solar panels from Germany at a cheaper rate compared to the ones assembled locally that is heavily taxed.
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