About the enlarging income inequality gap

The current state and trend of global wealth concentration stand at 10 percent of the wealthiest global population owning 85 percent of the worldwide household wealth, while the poorest 50 percent of the worldwide population, only holding one percent of household wealth. The risks this poses need practical mitigations to deal with it.

Over the years, the government of Uganda has come up with various wealth creation projects to help mitigate this widening gap. I, however, believe that the social business model can do a lot in helping us narrow the aperture.

Social businesses are companies with a social mission at their core. These are set up to solve a specific problem to benefit poor or disadvantaged members of society; social businesses operate precisely like regular companies except for a few minor differences.

Unlike a charity, social businesses generate profit and aim to be self-sustaining financially. Removing the need for fundraising allows social enterprises to invest in sustainable social impact.

To narrow the increasingly widening gap between the haves and have nots, the have nots need to feel a sense of ownership. At the primary level, I would recommend the use of social businesses as the major vehicles for solution delivery.

This is because social businesses are either created by the disadvantaged population they serve or as their primary customers.

In most cases, 100 percent of the company profits are reinvested in continuing the company’s social mission.

At the secondary level, there should be well designed support interventions provided to the social businesses in order to achieve their primary objective, and these support interventions (which are largely provided by Impact Investment Funds like YSB). Uganda’s unemployment rate currently stands at 2.44 percent with the majority of the population having poor quality (i.e., low paid or precarious) jobs that limit access to a decent income and cut people off from social networks. This means that frequently people find themselves in the vicious cycle of chronic poverty hence needing practical social solutions to get themselves out of this cycle.

Provision of finance to facilitate growth and development of these social businesses set up by the unemployed youth is, cognizant of the fact that most of them are unable to qualify for financing from the commercial financing institutions.

 Ensuring that the finance provided is at rates below the exploitative market rates being offered by commercial financing institutions- banks, saccos, etc would help social businesses survive.

Ensuring that the finance provided is appropriately structured, where the facility’s repayment structure is designed to match the cash flow pattern of each social business so that they repay when there are sales coming in and don’t when they have no sales, rather than use a fixed periodic repayment structure that has no regard to the cash flow pattern of the social business.

Low levels of education and skills limit people’s ability to access decent jobs to develop themselves and participate fully in society. This ultimately means that the decisions concerning the poor are made by a select few who have no idea of what the have nots go through.

Provision of traditional technical assistance support to the social businesses, in form of financial management training, setting up of internal control systems, governance trainings. These would go a long way in professionalizing their operations order to survive in the absence of founders and key management staff.

Provision in training of soft skills, values and virtues so that the Social Business owners, staff and other major stakeholders develop and practice the right soft skills and values that would ensure the resilience and sustainability of their business in a highly competitive and rapidly changing world.

Income is and continues to be a significant factor in managing quality of life, as it serves as a means to access healthcare, education and housing. Therefore, managing the ever-increasing income inequality gap is important in managing this.

Mr Richard Tugume, is the Country Director for YUNUS Social Business