Do we really understand social entrepreneurship?

Sep 14, 2010

Extremely disappointing news this month for social entrepreneurs of the world: The FDIC has closed down ShoreBank, the bank that invented the category “community development financial institution,” according to the American Prospect’s Robert Kuttner. The idea of “too big to fail” needs to be shored up with a corollary idea of “too good to fail.” ShoreBank wasn’t another Wall Street penitent, and our government’s failure to understand the difference means we in the social entrepreneurship world have our work cut out for us to prove why our institutions, hybrids of nonprofits and private companies, matter to America. ShoreBank embodies the very core of social entrepreneurship, the idea of using creative business tactics to address social problems. According to Kuttner’s recent Huffington Post story, its founder Ron Grzywinski “had seen the effects of racial redlining first hand as a banker and community activist, and resolved to create a bank that could help the depressed South Shore neighborhood of Chicago.” In its thirty-plus years of operation, ShoreBank served its community with honest banking—a beacon amidst the predatory lenders. “It was a model bank that earned a modest profit by delivering on a social mission,” said Kuttner. Isn’t that exactly the kind of bank we want to be saving, if not replicating in every city in the country? I fear that “too big to fail,” originally a recognition of how many people’s financial fates were wrapped up with those of major banks, has become “too big to question,” a resignation of our innovative powers in the face of the status quo. The end of ShoreBank won’t spell the end of Main Street America, but it doesn’t bode well for South Cottage Grove Avenue in Chicago. And what’s more, the bank is being reopened under new ownership, albeit with several of its current executives remaining in place. But the difference in the treatment and fate of ShoreBank, and, say, Citigroup, seems evidence enough that our government still doesn’t differentiate between business as usual and social-purpose business. The bottom line is that we need to widen our understanding of what is the bottom line. A bigger bank ledger doesn’t mean people have a better chance of buying—and keeping—a home. Those businesses—they could be public parks, local banks, or even your video store—which contribute to their community ought to be held apart from those which only contribute to their own well-being. Held to high standards, yes, but also valued differently. Social-purpose businesses must be seen as businesses too good to fail, and we must give them our full support whenever possible.

Sara Horowitz

As the founder of Freelancers Union, Sara has been a voice for freelancers for over two decades.