With its Vision 2030, Saudi Arabia encouraged companies to get involved in its development and address national challenges – particularly in critical sectors such as healthcare, education, housing, and cultural and social programs – rather than focusing solely on making profits. Among other things, Vision 2030 calls for a more effective third sector for non-profits.
Social entrepreneurship in Saudi Arabia is an evolving phenomenon. In June the Council of Ministers authorized the establishment of the National Center for the Development of the Non-Profit Sector (NCNP), which will regulate the sector. The center is one of the initiatives of the National Transformation Program in Vision 2030 and aims to empower the nonprofit sector to make a deeper social and economic impact.
According to academics Sophie Bacq and Frank Janssen, social entrepreneurship is this process Identify, evaluate and use opportunities for social value creation through commercial, market economy activities or other resources. Social entrepreneurship has existed in Saudi Arabia for many decades. An early example was a school in Mecca that would cost the equivalent of less than a dollar today. Saudi Arabia currently shows a low level of social entrepreneurship activity compared to other countries, but this may be due to the lack of social enterprise data in the country. There is currently one estimated a non-profit social organization per ten thousand people in Saudi Arabia compared to about fifty per ten thousand in Canada and the United States.
According to experts I spoke to, the number of social enterprises in the country has increased over the past decade. This increase is partly due to the work of international foundations (e.g. Ashoka and Acumen), local foundations (e.g. King Khalid Foundation), corporations (e.g. Abdul Latif Jameel Group), some higher education institutions (e.g. Effat University and Dar Al-Hekma). , charitable foundations, such as for housing and women’s empowerment, and personal initiatives by Saudi entrepreneurs. The community shares a commitment to create positive social impact through innovative and financially sustainable methods.
One of the best-known examples of social entrepreneurship in Saudi Arabia is Glowork, a social enterprise that promotes the participation and inclusion of women in the Saudi workforce. It was founded by Khalid Alkhudair, who launched the online platform Glowork in 2011. By 2017 it had placed 27,000 women in the workplace in Saudi Arabia and found home employment for over 500 women living in rural areas.
Social entrepreneurs use problem-solving skills and local knowledge in search of innovative solutions. Innovation is the building block of entrepreneurship and opens up new ways to create wealth. Social innovation focuses on creating social value as part of the mission. In order for Saudi Arabia to create an enabling environment for social entrepreneurship and unleash social innovation and impact investing, it may wish to address three main issues: government regulation and policy, societal perceptions, and the education system.
Government Regulations and Funding
The formal institutional environment is essential when it comes to innovation. A challenge for Saudi social enterprises is the nature of the registration and the profit model. Founders had to choose between for-profit and non-profit options—there is no middle ground. As a result, some social entrepreneurs integrate without fully understanding the implications of the regulatory environment related to their company’s registration type. Sometimes social entrepreneurs join a particular model only to discover new business models that might better serve their interests. However, this issue should be resolved over time with the creation of the NCNP in June.
Funding is another difficulty that social entrepreneurs face. Given their social mission, it is crucial for social entrepreneurs to find access to capital market financing. This is not a specific problem for Saudi Arabia; For most social entrepreneurs, it’s a global one. It is difficult to measure social impact or key performance indicators that apply to all types of social enterprise, especially when the legal structure and regulations for that country’s sector have not yet been developed. In addition, the social impact generated by a social enterprise may not be directly observable and therefore may be difficult to measure and prove to potential investors and sponsors.
As such, the Saudi government may want to focus on developing specific regulations for social enterprise while offering fee and duty exemptions and opportunities to tender for government contracts. The government can also support the establishment of incubators and accelerators for social entrepreneurship. Existing incubators and accelerators have contributed a lot to the entrepreneurship ecosystem in Saudi Arabia, but currently there are not many for social entrepreneurship.
The Perception of Social Entrepreneurship in Saudi Society
Entrepreneurship can be facilitated or hindered by certain socio-cultural practices, values and norms. In fact, a social entrepreneur’s motivation is partly influenced by societal perceptions of the desirability of pursuing entrepreneurial ventures.
A society must value creativity and the implementation of new ideas in order to thrive economically and culturally. Therefore, raising awareness of social entrepreneurship in society should be one of the most pressing priorities for the newly formed NCNP. Currently, Saudi society may not clearly understand the differences between standard work, charity work, social entrepreneurship and social responsibility. However, improving the perception of social entrepreneurship is more difficult than simply creating an appropriate regulatory environment. Involving the media to profile local heroes and formally recognizing social entrepreneurs will go a long way in improving societal perceptions of social entrepreneurship.
The 12 Saudi social entrepreneurs I interviewed for my research Over the course of four years, expectations were built from their training, including examples of successful foreign social entrepreneurship case studies. At the beginning of their efforts, they also believed that Saudi Arabia’s normative environment provides favorable conditions for social entrepreneurship. In my research, I found that they later recognized the gaps in the environment but were still able to adapt to some of the issues they faced in the field.
Despite operating in non-institutionalized contexts, the social entrepreneurs I studied were optimistic, confident, resilient, and hopeful—all important traits for leaders and visionaries seeking to make change and solve social problems. When these strengths are combined with the right regulations and societal support from the start, social entrepreneurs could thrive even more and increase their chances of success. Furthermore, if social entrepreneurs begin their ventures with greater awareness of the institutional environment, they may be better equipped to deal with the challenges they face.
Social Entrepreneurship in the Saudi Education System
Education can prepare social entrepreneurs to identify barriers and develop strategies to overcome them. Social entrepreneurship is currently being integrated into the curriculum of some Saudi universities, with major events and workshops held to promote the concept, for example at Dar Al-Hekma University and Effat University. However, Saudi social entrepreneurs often turn to educational resources from abroad to learn more about the concept of social entrepreneurship. This reliance on foreign material can be problematic as it does not take into account differences in local contexts, such as cultural norms and evolving regulations from different government departments.
It is important to promote formal and informal learning about social entrepreneurship by offering modules in Saudi universities and schools as well as social entrepreneurship courses and webinars and Arabic material. Educational institutions can host workshops and competitions, provide technical support to social entrepreneurs, and connect social entrepreneurs with a wider audience, including public, private and international organisations. Educating citizens about social change and social entrepreneurship will help them generate ideas to address pressing social issues and provide them with positive role models.
Social entrepreneurship is an evolving phenomenon and is by far the most important form of entrepreneurship to enable citizens to play an active role alongside the government in solving environmental and social problems in Saudi Arabia. The government has taken a first positive step towards creating a supportive regulatory environment with the establishment of the NCNP. The next step would be to increase positive societal perceptions of social entrepreneurship, provide educational opportunities for students and aspiring entrepreneurs, and highlight case studies and role models in the Saudi context. The goals of Saudi Vision 2030 will require innovation on all fronts, and social entrepreneurship can be a leading engine for the country’s progress if properly nurtured.
DR. Ghadah W. Alharthi is Associate Director and Lecturer at Central Saint Martins, University of the Arts London. She is also Middle East Specialist and Cultural Advisor at Barker Langham. Follow her on Twitter: @GhadahWA.