Within a supportive environment for the development and success of any business, including social enterprises, there are critical pillars of support that are needed for success. Two of these pillars are business acumen and access to finance. To provide this support, governments for many years have provided programs to meet this need. This includes programs like Business Development Bank of Canada (BDC), Futurepreneur, and Community Futures.
While for years these programs have been serving and supporting traditional for-profit businesses, social enterprises wondered why, when they looked for support, there was a striking lack of engagement with and outright exclusion of social enterprise. The question was, “were social enterprises excluded by rules or regulations from accessing federal and provincial government business programs?”
In 2011 the Enterprising Non-Profits Program (ENP), with funding from Employment and Social Development Canada (ESDC), conducted research on why there was a gap in access for non-profits and social enterprises to existing government-funded business development services. The research “confirmed a critical concern: the inaccessibility to small- and medium-sized enterprise (SME) services for social enterprises are in a few cases real, but in most cases, access is unclear, ambiguous, or perceived as inaccessible.”
Essentially, there is no policy or regulatory framework that excludes government-funded business development programs from serving non-profit social enterprises. Excluding social enterprises is a biased decision based on the culture of the program delivery system and the expected delivery goals.
One major source of capacity building ($49 million a year) and financing ($50 billion in assets) is the Business Development Bank of Canada (BDC). BDC is a federally-owned crown corporation. BDC’s 2023 required ten-year internal review submission to parliament defined their purpose:
“Through the BDC, which operates as a complementary actor in the market, the Government of Canada is committed to providing entrepreneurs the services they need to unleash their full potential and maximize their contributions to inclusive economic growth.”
BDC was one of the federal business development and investment programs identified in the 2011 ENP research as underserving social enterprises. In BDC’s ten-year review, BDC itself confirmed that the problem persists to this day.
“The BDC provides support to certain underserved business models, although investments in these areas remain limited. Specifically, social enterprises and co-operatives comprise a small segment of the BDC’s client base and loan portfolio.”
The report actually states that “between 2017 and 2022, the share of financing clients served by the BDC that were co-operatives and social enterprises remained relatively consistent at approximately 0.1% and 1%, respectively.”
Recent social enterprise research by Buy Social Canada, Sell with Impact: Stories and Research from the Canadian Social Enterprise Sector, indicates the value created by social enterprises and identifies key gaps that limit the growth of social enterprise impact. Enhancing social enterprise business capacity and expanding their financing opportunities will increase the value they create for Canadians.
The Social Enterprise Council of Canada and Buy Social Canada encourage and recommend that the Minster of Small Business, Minister Valdez, require the implementation of BDC’s own recommendations from the 10-year review:
“The BDC should play a more pronounced role to address systemic barriers facing equity-deserving groups and underserved market segments and improve overall market participation. This should include new market strategies, more targeted initiatives, and awareness-building activities. Further, the BDC should continue to shift its lending to support more new businesses to address key market gaps, including by focusing on SMEs that require low-value loans. Consideration should also be given to expanding and clarifying eligibility requirements to better meet the needs of new businesses, co-operatives, social enterprises, and other businesses.”
A level playing field with access for all business models including social enterprise is vital for a vibrant and inclusive economy. Along with BDC, every business development program such as Futurepreneur and Community Futures should be examined for current levels of support to social enterprises. New goals should be set, and delivery outcomes measured and reported.
We need BDC support for social enterprises to move from .01% to 10% in the next 10 years!