Opinion
How 'social business' can create a world without poverty
By
Muhammad Yunus
Fri Feb 15,
I
see traditional capitalism as a half-developed structure. It ignores the
humanity within all of us.
Moneymaking is an important part of humanity, but it is not the only
part. Caring, concern, sharing, empathy – all of these aspects also must
be considered when developing an economic framework that takes the whole
person into account.
Enter the missing piece of the global development puzzle: social
business.
Social business – not a charity
A social business is not a charity. It is a nonloss, nondividend company
with a social objective. It aims to maximize the positive impact on
society while earning enough to cover its costs, and, if possible,
generate a surplus to help the business grow. The owner never intends to
take any profit for himself.
As evidenced every day by religious ministers and practitioners, social
activists, and philanthropists, making money is not always the only
driving force. They may be a special group of people who makes it
visible, but the desire to help others exists in various degrees in
every human being.
Capitalism's limits
Traditional capitalism doesn't tap into that universal desire.
Capitalism delivers limited results because it takes too narrow a view
of human nature, assuming people are one-dimensional, concerned only
with maximizing profits.
Capitalism has long been a source of prosperity, spurring industrial,
technological, and social progress in North America and
While free markets have ushered in many benefits, these gains have
bypassed too many of the world's people, especially the poor.
And yet, in recent decades, powerful tools have been developed that
leverage capitalism's strengths to enrich the lives of those who get
left behind.
Take microcredit. It has been a powerful tool in combating poverty,
enabling the poorest of the poor to change their lives and provide for
their families. Through these small, collateral-free loans with a nearly
100 percent return rate, borrowers – mostly women – have been able to
harness entrepreneurial abilities inherent in them.
Microcredit is just one example of how a business approach can help
alleviate poverty when we move beyond the idea that business by
definition has to mean making financial profit for the owner.
We need social businesses to couple the human heart to the capitalist
system. This is a sure way of meeting needs that either remain unmet or
are met extremely inadequately through the efforts of philanthropy,
charity, or welfare.
Traditional philanthropy and nonprofits generate a social gain, but they
do not design their programs as self-sustaining business models. A
charitable dollar can be used only once. A dollar invested in a
self-sustaining social business is recycled endlessly.
A
social business is designed to be both self-sustaining and to maximize
social returns like patients treated, houses built, or health insurance
extended to people who never had this coverage. An investor in a social
business retains an ownership interest to hold management accountable
and to get the investment back over time, but no dividends are expected,
and any profits should be reinvested in the business or used to start
new similar businesses.
Social businesses could be viewed akin to investment accounts, where the
money is returned over time but the interest is paid in social
dividends, rather than in economic profit.
Bottom line: affect on society
While both personal entrepreneurship and social businesses need to be
profitable, the bottom line for a social business is how much impact it
makes on society,not how much money it returns to the investors. This
represents an opportunity for the extension of capitalism to meet the
social needs that are not currently met.
As an investor in a social business, I expect my investment money to
come back to me, but the real reason for my investment is to see that it
benefits society, as opposed to my pocketbook.
A
profit-maximizing business owned by the poor can be considered a social
business. The Grameen Bank is an example
of a social business that is both owned by its poor borrowers and that
seeks to maximize the benefits for those borrowers.
Another well-known example of social business is Grameen Danone Foods
(known as Dannon in the
Groupe Danone produces and distributes Danone yogurt and Evian bottled
water throughout the world. The mission of Grameen Danone Foods is to
manufacture nutrient-rich, fortified yogurt in small local plants that
minimize the need for expensive refrigeration and to sell it at a low
price to improve the diets of rural children in
By investing in this joint venture with Grameen Group, Groupe Danone can
help to eradicate malnutrition in
The experiment is a win-win situation and the first of many
multinational social businesses that Grameen would like to partner.
The current capitalist framework does not allow us to fully mobilize
mankind's will to do good.
Tap into the urge to do good
Because we are creatures who are motivated to solve the problems of the
world, we need to add a new component. Capitalism has the capacity to do
good in the world, provided we recognize that the motivation for the
entrepreneur need not be exclusively economic and personal.
The urge to do good exists in all of us – right along with
self-interest. We can harness that urge to do good in addition to human
ingenuity to help the world's poor become self-sustaining with dignity
and self-respect.
Thirty-one years ago, when I launched the Grameen microcredit program,
no one in the banking world thought low-cost loans for poor people would
be viable on a large scale. I was not sure myself how large it could
grow.
Just as microcredit has proved to be a success, so, too, can social
business. Working together, we can expand the predominant view of
capitalism and enterprise to include social business.
This new perspective will move us one step closer to bringing all people
into prosperity, and one step closer to a world without poverty.
• Muhammad Yunus is the founder and managing director of Grameen Bank and the author of "Creating a World WithoutPoverty: Social Business and the Future of Capitalism." He won the Nobel Peace Prize in 2006 for his work on microcredit.