Costa Rica’s revolution: from wayward non-profits to flourishing social enterprises

-A small country with the potential to become the regional hub for social enterprises in the Americas-

Costa Rica was considered a pioneer of social innovation when its first non-profit sector umbrella organization was founded in 1969. The Voluntary Organizations Federation (FOV), a national body for NGOs, developed and conducted projects with the support of international donors. US AID, in particular, provided a lot of support during the Cold War period which was a times of great cooperation for Latin America.

During those years, there was a boom in the non-profit sector in the country, with hundreds of foundations and associations created every year. However, the boom took place with little regulation and supervision and led to a kind of jungle-law paradigm. Hundreds of NGOs were doing the same thing, fighting the same cause, in the same place competing for the same resources and without any added value on the process. More than 12,000 foundations and associations were legally registered.

Recently the FOV has seen a much needed transformation. It was relaunched in 2015 as The Social Organizations Federation – FOS as the national platform for NGOs and Social Enterprises. Having been declared a middle income country, Costa Rica is seeing a sectorial revolution. There is less international aid on offer and CSR is gaining ground with strategic philanthropy efforts and a focus on company value chains. Public funds given to some organizations by special laws or agreements (more than $86 millions to finance around 263 organizations during 2016) are no longer viewed as a model of income and need to be put to good use.

In this scenario, non-profits have being looking for new ways of assure a sustainability model, and this is where Social Enterprise has come to the forefront. The #SocEnt concept is a relatively new trend in Costa Rica but the country has some great examples of organizations founded during the 80’s and 90’s that did not call themselves “social enterprises” but have in fact been sustainable social enterprise models since they were founded. For example, FUPROVI – The Housing Promotion Foundation, was founded in 1987 with the mission to improve the quality of life of low-income sectors, through management and development of housing projects and community building for low-income groups. Now after 29 years of work, FUPROVI has served more than 25 000 families with more than 109 built projects. It is running projects around the country, and has become an authority on the housing situation in Costa Rica. publishing the National Report on Housing and Urban Development every year.

There is no special law in the country for social enterprises, however in 2013 the Government approved an executive order to promote social enterprises and have defined a set of characteristics that help identify social enterprises:

• A sustainable innovative production model, self-funded and whose objective is to help solve social problems.
• The purpose is not to generate profits for partners or investors.
• Utilities seeking to meet the needs of the poorest or vulnerable population.
• Reinvestment of profits in the project to help reduce poverty and social inequality.
• Generate employment for people with many limitations to enter the labor market; and produce goods and services that are sold at affordable prices for the benefit of families in poverty.

There are still a lot of things to do in the country to develop a strong social enterprise ecosystem. It is necessary to empower young social entrepreneurs wishing to develop innovative models to solve social or environmental problems by creating new organizations, as well as encourage intrapreneurs that really want to make changes within their own non-profits or in NGOs where they work.

Costa Rica has the key ingredients to become a regional hub for social enterprises, catalysing resources and know-how from around the world to impact Latin America. A few weeks ago the country became one of the first countries to sign a national-multisectorial agreement to accomplish the Sustainable Development Goals, and FOS was a key actor in the process representing NGOs and the Social Enterprise sector, together with business chambers and the Government. Public institutions are more and more interested in developing public-private alliances to promote social enterprises as a model to reduce extreme poverty and solve social problems, private companies are more aware of the importance of win-win long-term relationships with NGOs that can demonstrate sustainability in their models, and regional institutions such as the Inter-American Development Bank (IDB) are looking for ways for Costa Rica to showcase its recent success story.

A strong social performance and a rich history in democracy and peaceful (pura vida) lifestyle are two crucial conditions that have allowed social enterprises to develop and grow in Costa Rica. It is a model that should be replicable across the Latin American region.

This blog is part of the October 2016 series on Exploring the social enterprise landscape, in partnership with the World Bank Group and endeva. Read the whole series for insight and opinion on policy, business models and definitions from social entrepreneurs, policy makers and facilitators around the world.