Unleashing the power of the social enterprise sector in Saudi Arabia

Viewpoint

Saudi Arabia has embarked on an extensive program of economic transformation through its Saudi Vision 2030 development plan. As part of Saudi Vision 2030’s goals, the country aims to boost entrepreneurship, promote the founding of more small and medium-sized enterprises (SMEs), and support the development of the not-for-profit sector. A promising way to reach these goals is to encourage the social enterprise sector. This sector sits between philanthropy and private enterprise, using commercial methods to address social needs in innovative, financially sustainable ways.

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In developed economies, the social enterprise sector leads to economic activity. In the U.K., the social enterprise sector accounts for 3 percent of GDP. Globally, social impact investing was worth US$502 billion by the end of 2018, according to the Global Impact Investing Network. Although the social enterprise sector is in its infancy in Saudi Arabia, it presents a significant opportunity. We estimate that financially sustainable social enterprises in Saudi Arabia could contribute an additional 2.5 percent to GDP per year and create more than 250,000 jobs by 2030.

To promote the social enterprise sector, the government should create an ecosystem in which these kinds of organizations can thrive. This means clearly defining social enterprises, and understanding their challenges and their need to be financially sustainable. The government can provide support in five areas that will enable people to start social enterprises, grow them, and then scale them up: awareness and promotion, infrastructure, funding, access and networks, and education and training.

Social enterprises and their global impact

The social enterprise sector has had a tremendous impact globally over the past 20 years. The sector has led to appreciable economic gains and employment in multiple developed economies such as Singapore, South Korea, the U.K., and the United States. Social enterprises straddle the line between philanthropic pursuits and for-profit private enterprises. They make use of commercial methods to address social needs in innovative, financially sustainable ways (see Exhibit 1).

Conclusion

Social enterprises can play a key role in achieving Saudi Vision 2030 objectives because they can promote economic activity and employment in areas such as education, the environment, healthcare, and social services. Although the number of social enterprises in Saudi Arabia is small, with the right attention and support this core group can expand quickly and set an example for the entire GCC region and beyond. Monsha’at is well positioned to cooperate with private incubators and investors, and government funding programs, to support sector promotion, capability building, financial support, and research and advocacy.

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Hilal Halaoui

Hilal Halaoui

Partner, Strategy& Middle East

Aya Hallak

Aya Hallak

Engagement Manager, Strategy& Middle East

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