SOCIAL enterprises are businesses that apply market-based approaches to deliver social, environmental, and economic benefits. Their goal is to generate social impact while earning revenue, with profits frequently reinvested into their missions. While social enterprises play a vital role in advancing inclusive growth and achieving the Sustainable Development Goals (SDGs), the sector in Malaysia has faced a slower pace of development for more than a decade since resources were first allocated to support it. This slower progress could be linked to changing accreditation policies that have made it challenging to establish clear legitimacy and a stable, long-term support for the sector’s growth. To promote the sector’s sustained growth and resilience, the policy framework could shift from the current non-binding recognition towards a more formal, statutory backing that provides enduring legitimacy and clarity for social enterprises.

The Malaysian Social Entrepreneurship Blueprint 2030 (SEMy2030) defines a social enterprise as “[a] registered entity under any written law in Malaysia, purpose-driven and has a financially viable business model that addresses social and/or environmental challenges, aiming to achieve positive impact to its beneficiaries and to the economy.”

The social and/or environmental missions encompass broad goals like social equality, education for all, affordable housing, food sufficiency, healthcare for all, environmental preservation and climate action. Target groups of beneficiaries similarly cover a wide range, including persons with disabilities, victims of natural disasters, disadvantaged youth, indigenous peoples, and vulnerable populations.  

Social enterprises that are registered/ accredited by the Ministry of Entrepreneur Development and Cooperatives (KUSKOP) can be formed under various business structures, such as a sole proprietorship, partnership, a company, registered society, and a co-operative society. Presently, accredited social enterprises are classified into three categories, namely, Aspiring Social Enterprises (Aspiring SE, catering for new or emerging ventures with no requirements for registering with authorities such as the Companies Commission of Malaysia, the Registrar of Societies and etc.), Basic Social Enterprise (SE.B, to cater for growing social enterprises that are registered legal structures and are in operation for at least six months), and Accredited Social Enterprise (SE.Ac, established social enterprises that have a registered legal structure and in operation for at least two years). As of Nov 15, 2025, there are 510 accredited social enterprises operating nationwide, comprising 191 Aspiring SE, 285 SE.Bs, and 34 SE.Acs. 

Over the last decade, the Malaysian government has implemented several policies to support the growth and sustainability of social enterprises. This began with the establishment of the Malaysian Global Innovation and Creativity Centre (MaGIC) in 2014. MaGIC rolled out the first accreditation policy known as the Impact Driven Enterprise Accreditation (IDEA) in September 2017. MaGIC, an agency originally under the Ministry of Finance (MOF), was later transferred to the Ministry of Entrepreneur Development (MED) in 2018. Following MaGIC’s subsequent merger with Technology Park Malaysia (TPM) to form Malaysian Research Accelerator for Technology and Innovation (MRANTI), the administrative task of formulating an accreditation policy for social enterprises is now under KUSKOP, assisted by Institut Keusahawanan Negara Berhad (INSKEN).

However, despite these efforts, the government’s effort to promote social enterprises has not yielded significant results. To date, social enterprises lack public visibility, and many Malaysians remain unaware of what a "social enterprise" is. While many may correctly associate a social enterprise with a venture pursuing a social mission, few know about the official accreditation policy to "recognise" social enterprises in Malaysia. 

Recent developments in the social enterprise ecosystem include the launch of the 2nd Blueprint (or more commonly known as the Malaysian Social Entrepreneurship Blueprint 2030, or SEMy 2030) in April 2022, a new Social Enterprise Portal in January 2024, and a subsequent double-badged verification from the Social Enterprise World Forum (SEWF) in June 2024. 

A possible cause of the sector’s slow growth is the frequent changes made to the accreditation policy since its inception in September 2017. This includes shifting ministries and agencies oversight (from MaGIC under MOF to KUSKOP with INSKEN), as well as ongoing amendments to the accreditation policy and to the classification of social enterprises. [The accreditation changed from the initial IDEA framework in 2017 to three categories under the SE.A Guidelines in 2019, then to two-stage classifications (SE.ASAS and SE.AC) in 2022, and finally to the current three categories (Aspiring SE, SE.B and SE.Ac)]. 

Furthermore, the criteria to obtain accreditation, presented in tabular form, contain some ambiguities. For instance, determining the categories of beneficiaries (e.g. who are vulnerable groups, which category of elderly and children are deemed beneficiaries) and how the profit allocation is to be computed requires more detailed explanation. 

A key question is the rationale behind the three categories (Aspiring SE, SE.B, SE.Ac) when there is limited benefit attached to them. The principal benefit distinguishing between these categories is tax incentives, currently limited only to the SE.Ac, which must have been in operation for at least two years. This incentive is provided in the Garis Panduan Permohonan Pengecualian Cukai Pendapatan bagi Perusahaan Sosial yang diluluskan 2.0 issued by the MOF. As of November 2025, only 34 SE.Acs exist, according to the Social Enterprise Directory published on the Social Enterprise Portal. Although the Budget 2026 extends this tax incentive for another three years until 2028, its impact is insignificant given the small number of SE.Acs. No specific tax incentives are currently available to Aspiring SEs and SE.Bs. 

Beyond these tax benefits, there appears to be no apparent benefit to the categories. Intermediaries (namely, entities providing financial support to social enterprises through grants, financing, or capacity building such as Hasanah, SME Bank) offer programmes such as the Hasanah Social Enterprise Fund, the SME Bank Social Enterprise Financing Scheme, and the Malaysia Co-investment Fund (MyCIF) to all social enterprises, accredited or not. Only SME Bank restricts its scheme to social enterprises accredited by KUSKOP and even then, all categories of social enterprises (Aspiring SE, SE.B or SE.Ac) are entitled to apply for the financing. The Hasanah Social Enterprise Fund does not distinguish between accredited and non-accredited social enterprises, though it notes that accredited social enterprises are preferred. Furthermore, MyCIF replaced its Social Enterprise Scheme with the new Environmental and Social Impact (ESI) Scheme in July 2024, and no longer limits its services to accredited social enterprises. This trend undermines the motivation for a social enterprise to navigate KUSKOP’s complex accreditation process.

Additionally, transparency and accountability remain major gaps. In January 2024, reporting obligations in the form of an impact assessment report requirement was removed as a criterion for an SE.Ac (a change tied to the shift from two-stage classifications to the current three categories). Thus, it appears that the submission of impact assessment reports by social enterprises is not mandatory. Social enterprises must be accountable to their social mission pledge to avoid “social washing” or “green washing”. Without mandatory disclosure in the form of reporting, the public has no avenue to verify whether an accredited social enterprise is delivering on its social/environmental mission. Transparency and accountability are critical to maintaining the trustworthiness of the accredited social enterprise brand.

To legitimise the recognition of accredited social enterprises in Malaysia, it is suggested that statutory backing is needed. This could be achieved by introducing a dedicated legislation such as a “Social Enterprise Act” to confer statutory recognition and align the efforts of the various ministries and intermediaries in promoting and supporting social enterprises’ growth. This approach may prevent fragmented initiatives and ensure alignment with the sector’s original intent. A clear legislative mandate will help Malaysia’s social enterprise sector grow and thrive.         

Lai Chooi Ling is a lecturer at Tunku Abdul Rahman University of Management and Technology (TAR UMT), and a PhD candidate at the Faculty of Law, Universiti Malaya. 

Dr Sujata Balan is an associate professor at the Faculty of Law, Universiti Malaya.