THE SOCIAL ENTERPRISES IN ETHIOPIA: CRITICAL ANALYSIS OF LEGAL AND INSTITUTIONAL FRAMEWORKS

Abstract

Nowadays, in Ethiopia, the private business sector and the non-profit sector are becoming more intertwined with one another. The concept of social enterprise (SEs) is one manifestation of this overall pattern. A social enterprise can be broadly defined as businesses that trade for social purposes or addressing social problems. It may set up in forms of non-profit, for-profit, and a hybrid entity form. Such a socially conscious business (social capitalism) is a new horizon of hope for the majority of Ethiopian people who are suffering from multifaceted social problems. However, it needs to be nurtured with supportive policy and law. Globally, different states have adopted a special policy and law that create a special legal form or legal status as well as a separate regulator for SEs. Unfortunately, in Ethiopia, SEs are subjected to the existing legal regimes designed for conventional for-profit and non-profit organizations. This triggered the researcher to explore the suitability and adequacy of the existing legal regimes to address regulatory concerns of SEs, challenges they have suffered, the need for a special legal regime as well as the design thereof. Accordingly, the researcher has conducted a qualitative analysis of the existing legal and institutional framework in light of foreign jurisprudence and major regulatory concerns of SEs. As the finding has revealed, the traditional forms of doing business and its legal regimes are each designed for either end of the economic spectrum i.e. nonprofit and for-profit. Hence, the legal regimes of neither conventional for-profit nor non-profit offer much room for hybrid activities of SEs which typically have characteristics of both. Indeed, the existing legal regimes do not prohibit the operation of both for-profit and non-profit organizations as SEs but found inadequate and unsuitable in many respects, mainly lacks system of recognition of social enterprise as a distinct organizational or business model. Besides, it is unsuitable and inadequate to ensure the social mission integrity of for-profit organizations and to facilitate earned income strategies of non-profit organizations. Social enterprise are suffering many challenges. Maximizing the benefits of SEs requires addressing the regulatory concerns and challenges of SEs. Hence, the researcher called for the introduction of a special policy, legal form, legal status as well as a separate regulatory body to regulate SEs as the fourth sector of Ethiopian Economy.