The purpose of this article is to provide the readers with background and information about social enterprises in Thailand. The data is mainly from the recent study “The State of Social Enterprise in Thailand” conducted by the British Council with the support of HSBC and in partnership with ESCAP, Social Enterprise UK, Social Enterprise Thailand Association and Thailand Development Research Institute.
Who are social enterprises and how many social enterprises are there in Thailand?
Although the concept of social enterprise was introduced in Thailand only a decade ago, it had been implemented long before that. The Master Plan for Social Enterprise Promotion 2010–2014 (the SE Master Plan) categorised social enterprises in Thailand into five types according to their establishment. The first type is a community organisation or network including co-operatives of which the very first establishment dates back over a century, and the more recent community enterprises. The unique characteristic of this type is that they are initiated, owned, and managed by the beneficiaries, mostly low-income communities in rural areas.
The second type is those that were initially established as non-profit organisations and later implemented business activities to ensure financial sustainability in delivering their social impact. The very first social enterprises in this type date back to as early as the 1970s. The third type which is quite rare is those established or owned by the government or state enterprises. The fourth type is businesses established by young social entrepreneurs which are growing in the past decade. This has been a result of the government’s policy to promote social enterprises as one of the main vehicles to drive an inclusive economy, coupled with the growing ecosystem (intermediaries, academic and international players) which exists to support social enterprises. The fifth type is subsidiaries of corporates, who spin off their Corporate Social Responsibility projects into social enterprises.
There is also a legal definition of social enterprise in Thailand. According to the Social Enterprise Promotion Act 2019, social enterprises are a juristic person under Thai laws who are registered with the Office of Social Enterprise Promotion. The criteria for registration include:
- have social purpose
- have no less than 50 per cent of revenue from selling products or services
- reinvest no less than 70 per cent of profit for social purposes and
- have good governance.
Registered social enterprises are entitled to four types of benefits – grants or loans from the Social Enterprise Promotion Fund; preferential treatment in government procurement; tax benefits including a corporate income tax exemption for social enterprises, and tax deduction for supporters of social enterprises; and less strict regulation in public offerings. There are currently 148 registered social enterprises as of February 2021.
The social enterprise ecosystem builders mostly view the legal definition as criteria to identify enterprises that meet requirements to earn certain benefits from the government, rather than the strict rules to follow when it comes to identifying who is or is not social enterprises and should get the support from such ecosystem builders. The ‘State of Social Enterprise in Thailand’ study also takes the inclusive approach by inviting all the five types of social enterprises according to the SE Master Plan to participate in the study. We also follow the SE Master Plan estimation of 116,298 social enterprises, with 1,915 operating in Bangkok and the rest in other provinces.
There were over 200 organisations participating in our survey, with 146 respondents meeting three criteria of social enterprises identified for this study including having a social purpose; generating part of their revenue from selling or trading; and reinvesting their profit for social purposes. The participating social enterprises were mostly from Type two to Type five, while Type one or community organisations were very few. This was due to two reasons – the survey was only available online because of the COVID-19 situation and most community organisations were in rural areas and had difficulty accessing the online survey; and more importantly most community organisations did not relate themselves with the concept of social enterprise. The data from this study thus reflects the characteristics of the Type two to Type five social enterprises in Thailand.
What do social enterprises look like?
Social enterprises in Thailand are often young and the numbers are growing. Over half of the social enterprises (53.4 per cent) were established between 2008–2017. This was because of the active government policy during that period to promote social enterprises, coupled with the growing ecosystem where we saw more and more intermediaries offering support in starting and growing social enterprises. The start-up rate has even accelerated in recent years. Those established during 2018–2020 accounted for 24 per cent of all social enterprises surveyed. The average start-up rate per year in 2018–2020 was 49 per cent higher than the start-up rate between 2008–2017.
Although there is a registration system for social enterprises in Thailand, such registration does not offer legal entity status for the enterprises. As a result, both registered and non-registered social enterprises take various legal forms. Most of them are registered as limited company (62.3 per cent). The rest are registered as a co-operative (8.2 per cent), foundation or association (5.5 per cent), partnerships (4.1 per cent), and community enterprise (3.4 per cent). Over 10 per cent have not acquired any legal status.
Where are social enterprises located?
Social enterprises in Thailand are most likely to be based in Bangkok – 56.2 per cent of the social enterprises surveyed have their head offices in Bangkok. This does not necessarily mean that they operate only in Bangkok. In fact, a lot of social enterprises that have their offices in Bangkok have their operations in other provinces, especially those that work in the agricultural field.
They work across a range of scales, meaning either the scale of their production locations or their market. Most social enterprises surveyed operate in the scale smaller than a province (31.5 per cent), followed by the national scale (30.1 per cent), and provincial scale (19.2 percent). Few of them operate at the regional and international scale (9.6 per cent for both).
Who leads social enterprises?
Leaders of social enterprises in Thailand come from all age groups. The youngest leaders at the age of 18–24 account for 1.4 per cent of all leaders. The number rises with the ages and peaks at the age of 35–44 which accounts for 27.4 per cent of all leaders. The number gradually declines after this age group. There are 6.9 per cent of social enterprises led by leaders after retirement (over 60 years old).
Social enterprises are more often led by women than general businesses are. Although female-led social enterprises account for only 39.4 per cent of all social enterprises surveyed, the figure is almost 11 per cent higher than female leadership in general business. They also provide employment opportunities for many women. Female employment accounts for 58 per cent of total full-time employment and 68 per cent of total part-time employment of social enterprises.
What are the key issues social enterprises address?
The top five social purposes stated by social enterprises in Thailand are to improve a particular community, protect the environment, promote education and literacy, improve health and well-being, and support other social enterprises/organisations. Social enterprises reported their beneficiaries to be coherent with the social issues they are addressing. The top five direct beneficiaries from their operations are people with low income, the elderly, children and youth, organisations (NGOs, MSMEs, social enterprises, self-help groups, community), and women. As high as 27.4 per cent of social enterprises reported that their operations were beneficial to over 1,000 beneficiaries.
To achieve these purposes, social enterprises operate within diverse industries – the top three are agriculture, fisheries, and livestock (15.8 per cent); education (12.3 percent); and health and social services (11.6%). Some social enterprises incorporate social purposes into the core of their business such as alleviating poverty among low-income farmer households through agri-businesses. Others operate in industries that might not directly involve the beneficiaries but deliver their impact through managing their profit for the beneficiaries.
I would like to give examples of social enterprises in Thailand operating in the three most prominent sectors – agriculture, education, and health to demonstrate how social enterprises are addressing different social issues.
Agriculture – Jasberry is a social enterprise that solves the problem of farmer poverty through innovative organic products with global appeal, starting with Jasberry® rice. Beginning with just 25 farmers’ families in the first year, Jasberry is now working with over 2,500 farmers’ families, affecting over 12,000 lives, helping them out of poverty. Their operation ranges from providing high-quality organic seeds for farmers, training farmers to ensure high yield and high-quality produce, purchasing produces from farmers at a price 200% higher than they normally receive growing conventional rice, milling, packing, and distributing their products to domestic and international customers. Their profit is reinvested in capacity building for farmers and developing technology for better organic production.
Education – Mechai Pattana School is a boarding school for deserving students from all over Thailand, supported by profits from social enterprises founded by Mr.Mechai Viravaidya including Cabbages and Condoms Restaurants and Birds and Bees Resorts. The famous restaurants and resorts were initially initiated to solve the challenges of a rapidly growing population and the spread of HIV-AIDS. Since both challenges were successfully mitigated, these social enterprises have shifted their mission to providing education. The Mechai Pattana School’s curriculum focuses on building social entrepreneurs from a very young age. It is also an incubation center for rural entrepreneurs in nearby communities, providing them with knowledge in entrepreneurship and access to capital through the village funds that offer loans to set up businesses.
Health – Buddy HomeCare (BHC) is a social enterprise in Chiang Mai, Thailand, working on an innovative intergenerational approach to solve the dual problems of older people in need of care services and ethnic youths living in poverty with limited educational opportunities. BHC provides a three–month training course on elderly nursing for ethnic youths. To date, 35 hill tribe youths have been trained. Fifteen of them have gone on to assist BHC as caregivers for the elderly while the rest have all stayed in the healthcare field, working as healthcare volunteers and change agents in their communities. The work of BHC not only provides employment opportunities for ethnic youths in low-income households, but also ensures the elderly in middle-income households get specialised nursing service at an affordable price. Their profits are reinvested for social purposes through providing training for more youth and subsidising the healthcare service for low-income elderly people.
What are the challenges faced by social enterprises?
The study shows that the top three challenges for social enterprises in Thailand are cash flow (34.3 per cent); access to capital either debt or equity (23.3 per cent); and an understanding/awareness of social enterprises among the general public/customers (22.6 per cent).
Regarding the challenge in cash flow and accessing finance, this is in line with the finding on financial support from the same study. Social enterprises report that the three most common types of financial support they receive are grants from corporates (26%), funding from family and friends (25.3%), and personal income from another job or source (23.3%). This reflects that many social enterprises can only rely on informal financial sources, while some lack access to finance as seen from the 21.2 per cent of social enterprises who reported never receiving any financial support.
If we investigate the causes of this, the answers turn out different for early-staged and growth-staged enterprises. For early-staged enterprises, they identify unrefined business models as the cause of the difficulty to tap into capital. This can be solved with more governmental support in funding incubators to help social enterprises come up with more refined business models.
For the growth-staged enterprises, they mentioned two causes. The first is difficulty in accessing investors due to limited networks. Indeed, there exists a pool of domestic investors, but impact investment among them is still rare. There is still an opportunity for intermediaries to play a role in influencing domestic investors to commit parts of their portfolios for impact investment through bridging the gap between the investors’ expectations and social enterprises’ financial and impact performance, as well as bridging social enterprises with regional or international impact investors. The second cause is social enterprises not meeting requirements for bank loans, mostly due to not having collateral to guarantee the loans. During the COVID-19, the situation has become worse. Thanks to the vision of the Government Savings Bank, the Bank has collaborated with Social Enterprise Thailand on a special project which has offered special-conditioned loans to social enterprises. The collateral value is much smaller and past performance is less strict an issue, allowing easier access to loans for both the purposes of easing their cash flow and short or long-term investment. Such models once proved a success could be replicated by other commercial banks.
Awareness of social enterprises among the general public and customers is also a challenge. Raising awareness among wider audiences will be critical for the growth of social enterprises, which could also result in solving many other challenges such as lack of demand for social enterprises’ products or services, difficulty in recruiting talent and access to capital.
What more can be done?
The study provides recommendations for the government and ecosystem builders,
- To promote awareness and understanding of social enterprises, which could be done in a variety of forms such as competitions, an annual expo, or advertising campaigns;
- To encourage more information and research on social enterprises that will contribute to designing a more focused and responsive policy in developing social enterprises;
- To support social enterprises in demonstrating their impact, including making impact assessment tools and approaches more appropriate;
- To implement benefits prescribed in the law, especially the government’s preferential procurement scheme, and extend the tax benefit for individual supporters of social enterprises;
- To ensure that the Social Enterprise Promotion Fund from the beginning has a secured source of funding and can expand its pool in the future. This can also be done through inviting private investors to chip in their resources with tax incentives or dividends in return.
What can other countries learn from Thailand?
Like many other developing countries, the fast-paced national development has widened the gap between the rich and the poor. Social enterprises become an effective tool to bridge that gap. Thailand has a very vibrant scene of innovative business models to tackle such social challenges, ranging from traditional businesses with innovative products that respond to the need of niche markets to social start-ups that employ technology in delivering their services at large scale such as AI for agriculture or tele-health services.
The recently enacted law has introduced many mechanisms to promote social enterprises such as the Social Enterprise Promotion Fund, preferential treatment for government procurement, and less strict policies to ensure capital access. Once fully implemented, these policies and mechanisms may be a good example which other countries could look to replicate
We’re delighted that Da will be joining us, alongside Casper Ng from the Singapore Centre for Social Enterprise (raiSE) for a special webinar on what can UK social enterprises learn from the South East Asia perspective. This will take place on 17 March at 9am UK time. It’s open to the public and you can sign up here