Economically feasible, but not financially sound? Charity and/or business in rural development

Instead of presenting a business approach or a community (NGO) approach towards development as an either-or alternative, these two in actual fact constitute a continuum. This is particularly the case if the bottom of the pyramid is targeted, like smallholder farmers. Social enterprises often cannot avoid building the social and institutional conditions for proper functioning as a business. That may take investment costs (including social investment costs, time and energy) that cannot be integrated into a revenue model. This analysis is corroborated by examples and cases from a minor and internship program from the Delft University of Technology on international entrepreneurship and development. The paper adopts a civil society approach whereby a well-functioning civil society is understood as a condition for doing business. This entails free association, shifting memberships of individuals and organizations, lack of confinement to specific ethnic groups or strict state authority, and disentanglement from patrimonial systems. Then there are requirements for a universalist state (rule of law, law enforcement, transparency) and capable citizens. Where such an institutional framework is lacking either NGOs or social enterprises have to fill the gap. And since the costs of these activities cannot be covered by the revenue model, a bottom of the pyramid approach can be designed more effectively by including civil society partners and by understanding the roles of the different stakeholders. Thus cooperation between social enterprises and NGOs will be more effective if they have a better understanding of their mutual contribution and role in development.