Why Social Business?

• Miscellaneous
• 22nd July 2019
• YC

-Professor Muhammad Yunus

In 1976, when I began the Grameen Bank project, I was merely trying to help a handful of people in Jobra, a small village next to Chittagong University where I was teaching.

I had found that the poor men and women there remained slaves to the local money-lenders for tiny amounts of money to support their income generating activities. It was then that I decided to lend 42 people an amount $27 dollars of my own money to free themselves from the loan sharks. I was astounded to find that not only they did that, but eventually they were also able to pay me back.

From this tiny experiment, the Grameen Bank was born and now lends to more than 9 million poor women in Bangladesh. Unlike banks in the conventional system, Grameen works on the assumption that even the poorest of the poor, when given access to financial services on reasonable terms, could make use of them to change their lives for the better. Micro-credit, as we called it, is now a global phenomenon reaching more nearly 300 million people. It has affected the lives of about 1 billion people around the world. It has proven beyond any doubt that the poor are credit-worthy.

During my journey to build up Grameen Bank, I created many other enterprises, to address the problems faced by the rural poor. Each enterprise I created focussed on a particular need. I made sure that the enterprises I built were sustainable. I recognized that key to ensuring meaningful long-term development is sustainability.

Many international businesses became interested in collaborating with us including Danone, Veolia, BASF, Uniqlo and Intel. We set up joint ventures with them, coupling their world-class technological expertise with our own local knowledge and networks, to solve social problems faced by the rural poor. These social businesses are tackling malnutrition, creating access to clean drinking water, fighting mosquito borne diseases, tackling unemployment, addressing maternal health issues, among many other issues.

The essence of social business is that it is a business to solve problems. I define a social business as a non-dividend company designed to address a social objective. A social business charges a price for the service or product that it provides. But it does so in order that it can cover the cost of providing that product or service, as well as to expand and improve on those products and services. The investor recoups only his or her original investment from a social business, but nothing beyond that. I realized that the global marketplace that we live in only has room for conventional business, which is aimed at the single-minded maximization of profits for its owners. The profit-maximizing world measures success and happiness with the amount of personal profit one makes from the business.

In creating the new type of business, I was actually doing something radically opposite. I was engaged in aiming single-mindedly to maximize social impact, rather than private profits. I realized that maximizing social benefit could be a great source of success and happiness . After all, people are both selfish and selfless at the same time. I keep arguing that while making personal money is a source of happiness, making other people happy, is a super-happiness. Social businesses in Bangladesh attracted attention in many other countries. They started their own social businesses, and introduced courses in the universities. France, Germany, and Japan took the early lead. In 2013, it has spread to many countries around the world. We came up with a simple structure for each country. In order to respond to the interest in each country, we create two companies to establish the base for launching social business movement - a social business fund and an incubation company. The incubation company trains and gives guidance to social business entrepreneurs, and the fund invests in the social businesses which are designed by local people to solve local problems in a sustainable way. Any profits will be reinvested into the business or used to benefit the local people. The fund itself is created as a social business. Besides Yunus Centre in Bangladesh, the international expansion is undertaken by a company headquartered in Berlin. It is called Yunus Social Business (YSB) – Global. It has created country-level YSBs in each country where it operates. It has grown rapidly and is operating in Brazil, Colombia, India, Uganda , and Kenya. These experiences have shown that social business is a viable proposition, like microcredit before it, no matter what the context and setting.

With the major economic and financial crises all over the world, it is more critical than ever that we re-evaluate the concept and practice of capitalism. We have seen that conventional business has created jobs and prosperity around the world like never before in history. At the same time, it has failed to solve the problem of unemployment even in the rich countries, let alone the poor countries. The problem of healthcare remains unresolved in all countries, rich and poor. The problem of environmental degradation gets worse every day. Is it that difficult to create a world without poverty, without unemployment and where we do not inflict harm to the planet? I don’t think so. We have the creativity and the technology to make it happen. We need the right conceptual framework. Our existing framework is grossly flawed. It cannot take us there. We need to fix it quickly.