(OCT 7): Social enterprises (SEs) are more than just a business model — they are a movement. Globally, their significance is undeniable.

According to the World Economic Forum, SEs generate a staggering US$2 trillion in revenue and are responsible for creating nearly 200 million jobs.

Even more striking is the fact that half of these enterprises are led by women, underscoring the pivotal role SEs play not only in driving economic growth but also in promoting gender equality and empowering communities across the world.

In Malaysia, the impact of social enterprises is equally vital, especially as we continue to rebuild and recover from the profound effects of the Covid-19 pandemic. The role of SEs in addressing socio-economic challenges has never been more urgent.

Malaysia has taken promising steps in this regard. Over the years, we’ve witnessed the growth of SEs supported by various corporate foundations and partnerships.

Organisations such as Shell Malaysia, Yayasan Hasanah, Yayasan Petronas, Yayasan Maybank and Yayasan Sime Darby, among others, have provided grants, capacity building programmes, and other crucial support to help SEs scale. These efforts have sought to complement government priorities by encouraging innovation and social impact, but much work remains to be done.

The number of social enterprises in Malaysia remains low compared to the sector’s potential. Despite this, we have shining examples like Sols Energy, PichaEats, Masala Wheels, Mereka and Epic Homes — enterprises that have not only demonstrated resilience but also made a tangible impact on the ground.

However, to realise the full potential of social entrepreneurship, there is a need for a more strategic and thoughtful approach to scale SEs across the country.

Efforts are not confined to the central region either. In East Malaysia, initiatives like the Sabah Creative Economy and Innovation Centre (Scenic) and Tabung Ekonomi Gagasan Anak Sarawak (Tegas) have emerged as key players in expanding the SE ecosystem, fostering innovation, and ensuring that the benefits of social entrepreneurship extend to all corners of the country. This is a crucial development—if social enterprises are to drive national transformation, they must be geographically inclusive, ensuring that both Peninsular and East Malaysia can benefit from the movement’s growth.

As Malaysia looks towards the future, Budget 2025 presents a critical opportunity for the government to solidify its commitment to fostering an inclusive and resilient social enterprise movement.

By creating a robust and enabling ecosystem, we can empower SEs to thrive, scale, and deliver sustained social and economic impact.

An enabling ecosystem begins with the right policies. While steps have been taken to offer accreditation and special financing, a more comprehensive regulatory framework is needed to guide the growth of SEs in Malaysia.

The government might consider establishing clear definitions, legal structures, and frameworks for SEs. This would not only enhance their credibility but also enable them to access resources more efficiently.

A legal definition is critical to ensure that support goes to businesses that are truly mission driven, with profits directed towards beneficiaries. Clear guidelines will not only help differentiate social enterprises from traditional businesses but also encourage and guide more businesses to adopt the SE model.

By providing a structured framework, businesses will be able to see the benefits of incorporating social and environmental missions into their operations, and be better equipped to align with the growing demand for purpose-driven enterprises.

Countries like the UK have led the way in this regard, creating a supportive legal environment for SEs to flourish. In the UK, social enterprises often operate under specific legal frameworks like Community Interest Companies (CICs), which ensure that they adhere to key principles. To qualify, these enterprises must generate at least 50% of their income from trading and reinvest at least 50% of any surplus (profit) back into the business or toward furthering their social or environmental mission.

This structure ensures that SEs remain focused on delivering long-term social impact rather than prioritising profit maximisation.

In Malaysia, social enterprises need similar recognition. By defining what constitutes a social enterprise in clear, legal terms, the government can create a stable foundation upon which SEs can grow.

Additionally, tax incentives for both social enterprises and investors in these businesses can spur greater investment into the sector, catalysing further growth.

A key barrier to the growth of SEs is access to capital. While grants and special financing programmes from institutions like SME Bank and Yayasan Hasanah have been helpful, these efforts need to be scaled up and diversified. In addition to grants, SEs require sustainable financing mechanisms — impact investing, social bonds, and venture philanthropy are examples of innovative financing methods that have taken root globally.

Government-linked investment companies (GLICs) should be encouraged to support social enterprises through their corporate social responsibility (CSR) programmes or foundations, or by incorporating SEs into their investment portfolios.

By backing enterprises that prioritise both profit and purpose, GLICs can play a critical role in driving social and economic impact, fostering a more equitable and inclusive economy in Malaysia.

At the heart of any social enterprise is its people. For SEs to succeed, Malaysia needs to cultivate talents equipped with the skills and knowledge to navigate this complex, hybrid space that merges business acumen with social purpose. This requires a deliberate focus on education, training, and mentorship to empower individuals and ensure the growth and resilience of the sector.

The government, in collaboration with educational institutions and industry stakeholders, should develop targeted programs to build the capacity of future social entrepreneurs.

Offering scholarships, training, and mentorship opportunities specifically tailored for those interested in SEs will be essential in nurturing the next generation of leaders in this space.

Furthermore, partnerships between private sector corporations and social enterprises can provide SEs with the expertise, mentorship, and resources necessary to grow.

Programmes that facilitate secondments or skill-based volunteering can enable corporate employees to transfer their skills to SEs, creating a more dynamic exchange of knowledge and fostering innovation.

Access to markets remains one of the biggest hurdles for social enterprises in the country.
 
SEs are often smaller and have fewer resources, making it challenging to compete with larger, more established companies. The government can play a pivotal role in levelling the playing field by integrating SEs into public procurement processes.

By mandating that a certain percentage of government contracts be allocated to social enterprises, the government can provide SEs with a reliable stream of revenue and the opportunity to scale. This practice is already common in several European countries, where public procurement policies are used as a tool to promote social value creation.

For example, the UK's Public Services (Social Value) Act 2012 requires public authorities to consider the social, economic, and environmental benefits that suppliers can offer when awarding contracts. This allows social enterprises to highlight their contributions to community development, job creation, and environmental sustainability, giving them a competitive edge in the procurement process.

Additionally, public awareness campaigns that encourage consumers to support social enterprises could help create a more socially conscious market, driving demand for products and services that contribute to positive social and environmental outcomes.

Finally, a thriving social enterprise ecosystem requires a shift in culture—towards one that values innovation, collaboration, and social responsibility. The government, alongside private sector partners and civil society, should work to create platforms that encourage dialogue, experimentation, and collaboration among SEs, corporations and the wider public.

Initiatives such as Shell LiveWIRE Malaysia, Petronas SEEd.Lab, Biji-Biji's Social Enterprise Accelerator Malaysia (SEAM), and the Satu Creative Hasanah Impact Challenge are essential and should be scaled for wider impact. These programmes provide valuable platforms for innovation, mentorship, and collaboration, helping to nurture a culture of social entrepreneurship that can address the country’s most pressing challenges.

In Malaysia’s journey toward becoming a prosperous, inclusive nation, social enterprises are not just  participants—they are drivers of change. The movement toward social entrepreneurship reflects the values we hold dear, such as fairness, equity and the belief that economic growth should benefit all members of society.

Through Budget 2025, we have a unique opportunity to lay the foundation for an inclusive, resilient, and impactful social enterprise movement. It is a chance to create a future where businesses don’t just seek profit but purpose—where entrepreneurship is a tool for both economic success and social good.

Ahmad Azuar Zainuddin is CEO of Satu Creative, an entrepreneur support organisation that supports impact-driven and innovative small and growing businesses.