Social Business

Social business, as the term is commonly used, was first defined by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business—The new kind of capitalism that serves humanity’s most pressing needs. A number of organisations with which he is involved actively promote and incubate social businesses. These include the Yunus Centre in Bangladesh, the Grameen Creative Lab in Germany, the Yunus Social Business Centre University of Florence, and Social Business Earth.

Dr. Muhammad Yunus

In Yunus’ definition, a social business is a non-loss, non-dividend company designed to address a social objective within the highly regulated marketplace of today. It is distinct from a non-profit because the business should seek to generate a modest profit but this will be used to expand the company’s reach, improve the product or service or in other ways to subsidise the social mission.

In fact a wider definition of social business is possible, including any business which has a social rather than financial objective.

Seven Principles of Social Business

  • Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization
  • Financial and economic sustainability
  • Investors get back their investment amount only; no dividend is given beyond investment money
  • When investment amount is paid back, company profit stays with the company for expansion and improvement
  • Environmentally conscious
  • Workforce gets market wage with better working conditions
  • Do it with joy

Microfinance: Q&A with Marilyn

What are microcredit loans?

Microcredit is the extension of very small loans (microloans) to those in poverty, designed to encourage entrepreneurship. These loans are used to fund enterprise in agriculture, livestock, handicraft, retail, hospitality, food, and education. Recipients lack collateral, steady employment, and a verifiable credit history, and are unable to meet even the most minimal qualifications to gain access to traditional credit. Microloans are offered as a proactive approach, allowing the opportunity for self-determination and a means to sustain themselves and their families.

Do microloans work?

Numerous research studies have proclaimed the benefits and advantages of microfinance systems being at the core of developing micro-enterprises, which have contributed to individuals lifting themselves and their families out of poverty.

You have been involved in numerous humanitarian aid projects and often evaluate them; what does a successful project look like?

Yes, I have looked at many projects and have come to realize that the successful ones do share certain commonalities. Among the components to success are:

  • The project gave voice and listened to the intended beneficiaries. With the voice and listening came empowerment, dignity, and respect for the people, their traditions, and their culture.
  • The project provided an opportunity for the beneficiaries to resolve their own issues of poverty and develop a sustainable model that was unique to their environment.
  • The project managers and donors considered the beneficiaries as major stakeholders and integrated them into all four stages of the project: ideas/concept, planning, implementation, and evaluation.
  • The continuance of the project was not dependent on attracting the goodwill of long-term donors.
  • The project had an ongoing evaluation process at each stage of the project management cycle, not just at the end.
  • The project had an exit strategy for those external influences such as resources from non-governmental organizations.
  • The project was driven by the request of the potential beneficiaries rather than imposed on communities by well-intentioned donors that identified the needs of the community and imposed their values on the beneficiaries.

Is microfinance the way forward in the effort to alleviate poverty?

Microfinance is changing the paradigm of helping others without creating a chronic dependency on donors thereby causing harm. By helping others through opportunity, so they can find their own path out of poverty, we will contribute to programs that have the potential to be sustainable, resilient, and thrive.