Social businesses usually produce things which are not produced by traditional businesses, or it targets areas which are not served by other type of businesses, or the prices for the products are very different than the prices of the products of the profit-making businesses (PMBs) Social businesses encourage the PMBs to new areas of business, discover new businesses. Social businesses can compete with PMBs by offering lower prices. For example, a social business may sell drugs at lower prices than the PMBs. In the market place social businesses will offer additional options to people and strengthen the market.
A social business is a business. A donation program is a charity program of a profit-making business.
An NGO is a voluntary, non-profit organization that operates, contributes to, or participates in, various projects on education, training or other humanitarian, progressive, or watchdog activities. They usually collect donations for running programs for disadvantaged or distressed people. The difference is that NGOs operate on donations, whereas a social business is a self-sustaining business.
Corporate Social Responsibility (CSR) programs are the philanthropic programs of companies. CSR is part of a corporation, which is a profit-maximizing company. A social business is a company by itself which is dedicated to social impact-maximization.A common way of practicing CSR is by donating money for social causes.
Type II social business functions as a profit-maximizing business, except that all of the net-profits are placed into a trust, which will help a disadvantaged group of people. Or a profit making business owned by the poor people.
Type I refers to social businesses that create a product which has a direct social impact. For example, Shakti doi, the fortified yogurt, directly fights malnutrition.
A social business is a non-loss, non-dividend company designed to address a social problem. The profits are used to expand the company's reach and improve the product/service.
Somebody invests $100,000 in a social business. He will get back a total of $100,000 in 5, 10 or 20 years, and cannot take any dividend beyond that. Isn't it unfair? He should at least get back the real value of $100,000. Why not compensate for inflation? Or give some return on investment. You are right. In social business, investor gets back exactly the same amount money he invested, no inflationary adjustment or any other compensation is allowed.First, in social business we have taken out the idea of getting personal monetary benefit, such as, profit. Secondly, we want to get rid the notion of compensation for financial sacrifice. Once we open the flood gate of compensation, we'll have to deal with many such compensations, such as, inflationary adjustment, opportunity cost adjustment, present value adjustment, risk adjustment; one can keep making this list longer and longer.If you yield to one type of compensation, it will be extremely difficult to defend yourself why you cannot agree to allow the next type of compensation.Best thing would be to the keep the concept free from all types of compensations.On the question of return, two principles of social business are: a) No financial benefit in...