A new model of business

Professor Muhammad Yunus, the man known as the ‘father of microfinance’, explains how the model of social business could relegate poverty, unemployment and other global problems to the history books

Traditionally we talk about business as a vehicle for earning money, to make profit, to benefit personally in a financial way. I conceived the idea of social business simply because it reflected my own approach to business; as a means to solve social problems. This type of company, which I initially called Social Consciousness Driven Companies, was an expression of the many dimensions of human beings. Put simply, I believe that people are not exclusively selfish beings; they are strongly selfless beings too.

Selfishness is a part of human nature; out of self-preservation, you protect yourself. This is how we have survived on this planet. But it does not exclude selflessness. We are a mixture of many different kinds of elements.

The theoreticians who designed economic frameworks did not pay attention to this diversity. They remained true to one track, and created one form of business to reflect this profit-motivated mentality. But could business operate on the basis of selflessness? Would it ever work?

Without being conscious of these questions I pressed ahead with creating businesses able to solve social problems. After creating many such companies, I realised that they fell into a new category of business that was not recognised in economic theory. These enterprises are not designed to generate individual profit, but to solve the problems of others. I named this business, based on selflessness, as a ‘social business’. These are non-dividend companies. They don't operate to allocate dividends or returns on the initial investment. They exist to solve a problem.

A social business has three basic features: one, it is a non-dividend company; two, it is a problem solving company; and three, it is a business, because it is sustainable. It runs on its revenue, not on the continuous inflow of donations. Once you invest in it, and once it is successful, it runs by itself.

Grameen-Jameel Microfinance was the Middle East and North Africa's first social business. The company is a joint venture between the Grameen Foundation, a not-for-profit organisation that I helped launch in the US in 1997, and a Saudi for-profit company, the Abdul Latif Jameel Group. Since its inception 10 years ago, the company has been able to extend capital and technical support to more than 20 microfinance institutions in 10 countries throughout the MENA region. The financing and capacity building of these institutions has allowed them to build a track record, so now they can approach traditional banks to secure capital and expand their own financing schemes to more and more small ­– or micro – business people.

Grameen-Jameel partners last year disbursed microloans to nearly 2 million poor clients, mostly women. It is remarkable. Still, much work remains to be done. It is estimated that in the MENA region alone there are approximately 82 million potential microfinance clients. To date, only 4 million have been reached.

Are people interested in social business? I very much think so. I was surprised that many people were not only interested in social businesses, but actively took steps to start them. When we rolled out the model in Bangladesh, we were contacted by large corporates from Europe, Japan and the US. We did not approach them; nor did we try to explain to them the benefits of social business or urge them to invest in the model. It just made sense to them. They volunteered.

The first big company to come forward was the French food group Danone.Together, we created the Grameen Danone Co, which now produces a yogurt called Shokti Doi. The objective of the company is to supply nutritious food to Bangladesh’s poorest children, using a product specifically designed to help malnourished children.

Danone does not want to turn a profit from this company, as its entire purpose is to solve the problem of massive malnutrition among the children of Bangladesh. If it is successful, we will all be delighted that it worked. If it is not successful, we can say it is a step on the road to solving the country’s malnutrition problem. We will keep trying until we find a social business solution.

A study has been conducted on the impact of Shokti Doi in combating malnutrition and its findings were very positive. It has already made an impact on the health of many children. When the impact is established and the company is able to break-even financially, it will become a successful social business.

Today, the Grameen Foundation has established partnerships with a raft of large businesses. We have joint ventures with the German sportswear brand Adidas, the chemical company BASF and with Uniqlo, the Japanese clothing retailer, among others. Our joint venture with Veolia Water Company aims to bring safe drinking water to the arsenic-affected areas of Bangladesh. We did not know our partners before they contacted us. The fact that they took the initiative to do so means that the idea of social business created resonance in their mind.

The concept of social business is growing. Universities are creating institutes, chairs and centres for social business. Courses are being offered. This is a very encouraging development.  And based on my conversations with  business leaders in the Arab world, I sense that Grameen-Jameel will be joined by a wave of social businesses in the years to come. The Yunus Centre in Bangladesh stands ready to help get these off the ground and promote progress and learning.

Making profit is good, but changing someone’s life is great. Let’s use business methods to relegate poverty, unemployment, environmental degradation, and other social problems into museums for good.

About the writer

Professor Muhammad Yunus is a Nobel Peace Prize-winning economist credited with developing the concepts of microfinance and microcredit