Determinants of financial sustainability of social enterprises established by public benefit organizations in Kenya
Abstract
In today’s world economies, the third sector or social (sector) pillar is a key component
of sustainable growth and development. Social investment is the provision and use of
capital to generate social, environmental as well as financial returns. In developing
countries, social investment strategy is a good strategy for sustainable growth and
development as it cautions public benefits organizations (PBOs) from dependency
syndrome, donor fatigue and eventual collapse. The monumental contributions of the
nonprofit organizations in Kenya’s development agenda is well articulated in academic
literature, however, are scanty documented studies on financial sustainability of these
social enterprises. This descriptive study based on primary and secondary data sources
therefore sought to investigate the factors that determine the financial sustainability of
social enterprises established by nonprofit organizations in Kenya. The study finds that
the currently, PBOs rely on foreign grants and donations to a high extent as they source
social enterprise income, corporate or private companies support to a moderate extent.
Further, for financial sustainability, the PBOs apply the social enterprises and
volunteerism to moderate extents. The study establishes that 13.1% of variations in
financial sustainability of the PBOs is explained by variations in the study variables.
There is a statistically significant positive relationship between income generated by the
social enterprises and financial sustainability. There is also a statistically significant
negative relationship between training costs and the financial sustainability of the PBO’s.
It is also noted that project duration, project financing, project corporate governance and
social innovations positively influence financial sustainability. The study recommends
that PBOs should be encouraged to be socially innovative by establishing enterprises that
support their course. The Government should also put in place policies to encourage
social entrepreneurship while at the same time streamlining the volunteering framework.
Publisher
University of Nairobi