By Dr. Atef El Shabrawi
International Expert in Development and Innovation
In 2021, Sir Ronald Cohen, founder of Apax Partners—a venture capital firm managing $80 billion in investments—published his book “Impact”. After more than three decades in traditional venture capital, Cohen decided to dedicate himself to a greater mission: reimagining capitalism to prioritize environmental and social impact. He aimed to redirect investments toward companies creating tangible positive change in society, sparking a global conversation about the purpose of finance beyond profits.
Saudi Arabia’s Social Economy Model
Listening to Dr. Yousef Al-Hazim, Secretary-General of the Princess Al-Anoud Foundation, at the Fourth Social Economy Forum in Riyadh, it became clear that Saudi Arabia is actively shaping a national model for social economy. This model is not purely economic—it is social, political, and cultural.
At its core, it emphasizes safeguarding communities and the environment over mere capital accumulation, promoting collaboration, reciprocity, self-management, and solidarity.
A New Legal Framework for Social Enterprises
The Kingdom has established a comprehensive system to support social economy initiatives through the new Companies Law, which introduced new company types, including nonprofit organizations. Today, non-profit organizations have surpassed 62,000, with an annual growth rate of 57%, contributing approximately 3.3% of Saudi Arabia’s GDP.
This sector is expected to reach 5% of GDP ahead of Saudi Vision 2030, thanks to institutions like the National Endowment Authority, the National Center for Nonprofit Support, and modern digital platforms such as “Ehsan” for crowdfunding and donations.
Linking Social Economy with Entrepreneurship
Saudi Arabia’s entrepreneurial ecosystem, including micro and small enterprises, is the primary engine of innovation. Integrating social economy into this ecosystem requires advanced financing instruments and venture capital firms willing to assume risks, particularly in startups tackling social and environmental challenges.
Venture capital plays a dual role:
- Providing early-stage capital to high-growth potential startups.
- Offering strategic support, including mentorship in entrepreneurship, management, marketing, and partnership facilitation.
Social venture capital, in particular, shifts the focus from financial returns alone to creating meaningful social impact—measuring success by the lives improved, challenges solved, and environmental benefits achieved, rather than solely by dollars invested.
Measuring Impact Beyond Profits
Impact investment asks a fundamental question: Has the funding made a tangible difference in communities? It moves the focus from traditional metrics of investment success to social and environmental outcomes, ensuring that both capital and purpose align.
Saudi Arabia Leading in Venture Capital
For the second consecutive year, Saudi Arabia has led the MENA region in venture capital, capturing 40% of total regional investment, followed by the UAE with $613 million. According to Magnitt, Saudi venture capital totaled $750 million in 2024, with 178 deals—a 16% increase year-on-year, driven by early-stage investment activity.
This growth supports the social economy, accelerating the integration of impact into investment strategies and fostering new institutions designed to fund socially conscious startups.
Four Pillars for Strengthening the Social Economy
- Regulatory and legislative framework: Enhancing governance and oversight of the social economy.
- Social venture capital: Expanding funding sources and nurturing the growth of startups with social missions.
- Market integration: Incorporating social economy entities into government procurement and strategic partnerships.
- Impact measurement: Providing decision-makers with the knowledge and tools to assess social outcomes effectively.
Saudi Arabia’s approach demonstrates that venture capital and social economy are complementary. By embedding impact into investment strategies, the Kingdom is fostering an ecosystem where entrepreneurship drives both economic growth and societal value.
As Dr. Cohen envisioned, capital can be a force for good, and Saudi Arabia is increasingly proving it on the global stage.
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