Unmasking the barriers to financing social enterprises

Abstract

The institutional complexity of social enterprises (SEs) often hinders their access to financing from conventional investors. To align the interests of SEs and their investors, innovative investment instruments of social finance are emerging. However, there is evidence of a mismatch between the financial needs of SEs and the instruments offered by social finance entities (SFEs). The analysis of 34 SEs and 6 SFEs through the lens of agency theory shows that some barriers are caused by contradictory agent—steward models of behaviour, whereas others are deficiencies of the SE sector in general. The study demonstrates that the SE financing gap is a complex problem that requires multifaceted solutions.