November 29-30, 2010, Seoul Chull -Young Lee Social Enterprise Network

1. Financial Intermediaries For Social Enterprises: Korean Case Plenary Session 3: Impact Investing and Finance Asian Social Entrepreneurs Summit 2010 November 29-30, 2010, Seoul Chull-Young Lee Social Enterprise Network

2. Social Enterprise Network • Purposes: (1) Study & education of Social Enterprise at business school • (2) To grow responsible business leaders of the future • Partners: Nine(9) business schools, KDI, Work Together Foundation and • some corporations in Korea • Programs: (1) Social Venture Competition Korea • (2) Social Enterprise Forum • (3) Impact@Work (Student’s Internship at Work Places) • Related Topics: Social Entrepreneurship, CSR&SRI, Environmental Sustainability, • Global Poverty & Emerging Markets(BOP), Social Capital Market, • Strategic Philanthropy, Non-Profit Management

3. Contents • Landscapes of Today • Suggestions for Tomorrow

4. I. Landscapes of Today • Social Enterprises in Korea are dominantly(99%) Social Service Providers. • 99% of 300 Social Enterprises, certified by Ministry of Employment and Labor, Dec. 2009, are Social Service Providers. • Ex: WeCan [Social Service Provider] WeCan produces cookies to employ forty(40) • mentally handicapped youths. • No Social Innovator, and accordingly no social venture capital, is existent in Korea. • Ex: EcoFaeBrick [Social Innovator] • EcoFaeBrick, made by Indonesian business • students, uses cow dung to produce high quality, • low cost bricks in 22 emerging countries.

5. [Landscapesof Today] • Ministry of Employment and Labor is the leading and dominant financial supporter: 고용 노동부 • For the 300 Certified Social Enterprises (or 1,000 planned by 2012)as Social Service Providers. • By Social Enterprise Promotion Act, 2007

6. [Landscapesof Today] • Micro-Finance is a Charity in Korea: Under Government’s policy guide and funded by business conglomerates and commercial bank groups, eleven(11) Smile Micro-Finance Foundations (미소금융재단) were launched in December 2009. Their interest rates are 2-3% below the average bank loan’s. Their financial sustainability is a concern.

7. II. Suggestions for Tomorrow • Develop Financial Intermediaries, instead of Government’s direct involvement. • Develop Social Innovator Model of Social Enterprise, along with Social Service Provider Model.

8. [Suggestions for Tomorrow] • Develop Financial Intermediaries, instead of Government’s direct involvement. [Funders] [Social Enterprises] • Micro Finance • Institutions • Social Banks • Social Venture • Incubators • Social Venture • Capital Funds • Gov’t Central Fund • Civil Foundations • Commercial Banks • SRI Mutual Funds • Individual Donors  Social Service Providers (Grant, Subsidy & Loan) Funding (Capacity Building)  Social Innovators (Grant, Loan & Equity Investing) (Grant, Equity Investing & Loan) [Financial Intermediaries]

9. [Suggestions for Tomorrow] • For Development of Financial Intermediaries: • Make Government’s Central Fund under MOSF(Ministry Of Strategy & Finance). Ex: CDFI Fund(Central Fund) at U.S. Treasury Dep’t certifies CDFIs (financial intermediaries) and provides funds to them.

10. [Suggestions for Tomorrow] • (2) Raise interest rate for Micro Finance to • 3%(ex) over average bank loan’s: Globally, interest rates for Micro Finance are 12-24%. Hope Seed Loan, Korea(희망홀씨대출): Last twelve(12) months, six(6) commercial banks have successfully provided micro loans to 260,000 micro entrepreneurs on interest rate of 3.5% over average bank loan’s, with default rates of 1.0-1.3% only.

11. [Suggestions for Tomorrow] • (3) Encourage(ex: tax incentive) SRI mutual funds to deposit or invest 1-5% their net assets in Financial Intermediaries. Ex: Pax World’s Community Investing: Pax World, a SRI Mutual Fund in NY, deposits 5% its net assets in social banks or micro finance institutions. In Korea, twenty two(22) SRI mutual funds’ net assets(485 Billion Won) shares 0.24% total mutual fund’s net assets (Apr, 2009), compared to 12% in U.S.

12. [Suggestions for Tomorrow] • (4) Survey Philanthropic Funds in Korea to encourage them to behave “Strategically”. Ex: Columbia Business School, NYC, released Social Capital Market Report in 2003 under RISE(The Research Initiative in Social Entrepreneurship) survey project.

13. [Suggestions for Tomorrow] • Develop Social Innovator Model of Social Enterprise, along with Social Service Provider Model: • To develop and activate Financial Intermediaries and • Consequently, to develop Social Enterprises as a whole.

14. [Suggestions for Tomorrow] • For Development of Social Innovator Model: • Include Social Enterprise in Business School Education. • Ex: Seminar on Education of Social Enterprise at Business School, • May 28, 2010, Seoul • Take Environment & Energy and Health Care as opportunities for Social Enterprise. • Take Global Poverty (ie Emerging Markets) as opportunity for Social Enterprise, as well as for large corporations & MNCs. • Ex: “Out of Poverty”, Paul Polak • “The Fortune At The Bottom of The Pyramid”, • C.K. Prahalad Treadle Pump

15. Conclusion: • Innovation is the key. • No Innovations, No Investments.