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Fostering Social Entrepreneurship in the New Tunisia

By Ivan Pinto, Dinara Rafikova | November 21, 2012

A microloan startup. CREDIT: Magharebia (CC).

Democratic Transition Presents an Opportunity

Trying to understand a new phenomenon such as "social entrepreneurship" in post-revolutionary Tunisia is a challenging task due to the ongoing nature of the transformation, the emergence of new actors, and the changing power relations. Social entrepreneurship is not clearly defined in the Tunisian discourse: The private and informal sectors are on one side (the latter representing as much as 30 percent of the economy), the public and nonprofit sectors on another, with international organizations somewhere in between.

The Tunisian case is particularly interesting as it involves the three major motivations of social enterprise: business, society, and politics. There is a need to enhance economic development of the country, to establish more small and medium enterprises, and to educate people about entrepreneurship so that they can open profitable companies—all the while targeting social groups that are in need of jobs. The political dimension is particularly important in terms of participation. One of the biggest challenges of democratization is often the establishment of political institutions that will allow for accountability and grassroots participation, and Tunisia has a good toolbox to meet this challenge: educated and socially aware youth, and a political system still evolving.

As Najoua Bel Haj, Mohamed Jédidi, and Mahmoud Abdelmoula from the Regional Development General Commission put it in an interview last March, social entrepreneurship has an undeniable role in the emergence of civil society as a national actor, in boosting citizen participation in the national development project, and in moralizing public life. The combination of these factors—youth willing to advocate for their interests and an interim government willing to take participatory input—is conducive to reinforcing democracy. As professor Hugh Berrington writes, "The more such [political] activity is diffused amongst citizens, the more democratic rule and the rights of the individual will be safeguarded."

Awakening to a Nation's Poverty

Tunisia experienced growth rates around 5 percent on average between 1997 and 2010 due to stabilization and market-oriented reform programs of the International Monetary Fund and the World Bank. During those years there were several welfare and social policy programs supported by the European Union that preferred to keep the status quo rather than risk opening the political system. Furthermore, the increasing importance of security in EU foreign policy may have led to "a weakening of EU pressure for democratization in Tunisia." But the revolution and social unrest revealed the fallacy of the Tunisian development model and the regime in general.

It turned out that the poverty rates were being underestimated. The national poverty rate reported by the National Institute of Statistics (INS) was as low as 3.8 percent in 2005. That was the year the INS started using the World Bank poverty methodology in their five-year surveys—a methodology that calculates not only the poverty rate but also the vulnerability rate. Yet only the officially sanctioned 3.8 percent poverty rate was published while the 11.4 percent vulnerability rate was hidden from public scrutiny. A regional breakdown shows how national averages can hide even larger variations—5 to 7 percent vulnerability in the Center-East and Greater Tunis regions, and 29 percent in the Center-West. (It should be noted that the poverty methodologies are now being revised by the INS with technical support from the World Bank and the African Development Bank.)

According to Alia Mahmoud, managing director of the Maghreb Enterprise Development Initiative, a joint initiative with the Mediterranean School of Business, most Tunisians had a concept of starvation occurring in Sub-Saharan Africa but no idea that similar poverty existed in their own country. In February 2012, flooding from heavy rains and snowmelt was all over the national and international news with scenes of poverty in the background. "For the first time since the revolution people are seeing on TV the poverty that exists in our country," said Mahmoud. News and social media have changed the discourse on poverty and awakened concern on the national level.

Fertilizing the Innovation Ecosystem

Now Tunisia, with the assistance of international organizations, is trying to come up with a sustainable economic development plan and inclusive economic transformation that will create jobs for local entrepreneurs and opportunities for international investors, especially in the manufacturing sector. As Clemens Breisinger and his colleagues note in a recent International Food Policy Research Institute report, there is a lot of Tunisian potential to unlock by "improving the business climate, equipping young people with proper skills, and providing incentives for small- and medium-sized enterprises in urban and rural areas."

Tunisia has several top-down institutional mechanisms in place to promote entrepreneurial development and dynamism, to bring together training, research, and production, and to facilitate partnerships between the private sector, potential investors, and academic and research institutions. Centre d'affaires (business centers), pépinières (incubators), and technopoles (techno parks) are some of the different structures under the supervision of the Ministry of Industry and Technology.

Tunisia needs to improve circulation of innovative ideas and civil society networks.

Alia Mahmoud, who is "conducting strategic research projects to analyze the ecosystem of entrepreneurship in Tunisia and the Maghreb countries," provided a brief overview of these structures during a personal interview. It seems that there are some connections between the structures although they are not organized: "These pépinières are based in universities and some of these universities are even based in techno parks. The result is that you have these two structures that are competing with each other. It is not really clear what the difference in their work is. When one thing does not work, instead of reviewing it they add a new structure."

Initiatives from "the bottom" also exist. Some of them are rather successful, but they are quite dispersed, and there is a need to improve the circulation of innovative ideas and the network of civil society organizations, particularly through the sharing of private sector business skills. Policy makers could then get feedback from the bottom and understand better what is working and what needs to be improved. This is already happening in the context of CGDR's Integrated Development Program, which allows for inputs from local actors regarding the choice of priorities, target locations, and beneficiaries.

One way to understand social enterprise and its place in the ecosystem of the Tunisian economy is to look at the regional development programs that target disadvantaged areas (government initiatives that are often supported by international funds) and other government initiatives such as the Tunisian Solidarity Bank, which had a role of financing micro-projects and micro-enterprises before the revolution and continues to do so now. Another way is to look at the organizations that emerged shortly before or in the wake of the Arab uprisings, such as the Maghreb Enterprise Development Initiative, which seeks to foster innovative entrepreneurship.

Similarly, the Tunisian Center for Social Entrepreneurship (TCSE) identifies prospective social entrepreneurs and coordinates them with local and international stakeholders. It also advocates for the creation of a legal status specific to social enterprises—one that encompasses the revenue generating and the social impact maximization aspects of the model—as well as other legislative changes that would encourage social innovation and promote public-private partnerships. TCSE also hopes to increase awareness of "impact investing"—social investment funds allocating their money into economic activities that generate positive social and environmental benefit.

Social enterprises are likely to emerge when social programs are weak, due to poor functioning of the state, and when employment opportunities are limited, according to Janelle Kerlin of Georgia State University. The force that can drive future development is youth—highly educated and desperately searching for employment opportunities. "Young people are really aware of the social issues that have affected their communities, cities, and villages," said Hatem Mahbouli, cofounder and president of Tunisian Center for Social Entrepreneurship. He and his team conducted a tour of universities across the country in March 2012 to talk about social entrepreneurship and gather ideas about what's wrong. "Young people now are more driven by business with social needs than just purely for-profit businesses," said Mahbouli. "They were really surprised by the fact that you can generate revenue and only focus on social issues."

A lack of legal status and tax exemption creates an additional challenge for social entrepreneurs.

Since the public sector is unable to provide jobs at a large scale, Tunisians have to rely on their skills and become more entrepreneurial. One could even say that increased awareness of social issues is an important milestone of democratization. In fact, many of our interviewees identified social entrepreneurship as an important force for democratization of the country.

A lack of specific legal status and tax exemption creates an additional challenge for social entrepreneurs. The current period is the best time for new initiatives, when the political scenario still allows for change and when the governmental agencies, encouraged by international organizations, are ready for a dialog with economic actors. As Pitch Johnson wrote in 2005, "Entrepreneurs are revolutionaries because they use economic freedom to challenge existing economic, social, and political structures… Democracy works best when there is this kind of turbulence in the society, when those not already well-off have a chance to climb the economic ladder by using brains, energy, and skill to create new markets or serve existing markets better than their older competitors."

We believe there is great potential for the social enterprise model in Tunisia despite current obstacles. Plus, there are factors in the landscape that favor it. There is a general understanding of social needs and a desire to help people. There is a solid educational system with a strong emphasis on business. There is human capital that is mainly comprised of young educated people who might lack financial resources but have entrepreneurial ambitions. And there is a growing initiative from civil society to support entrepreneurship.

As a tool of social inclusion, social entrepreneurship can lead in the long run to a new development model and sustainable economic growth for reborn Tunisia.

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Read More: Business, Democracy, Development, Economy, Jobs, Poverty, Tax, Youth, Tunisia, Africa, Middle East

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