Yunus' "Social Business"

By: Pemala Mejia, Women's Initiative Executive Projects Manager

Grameen Bank founder and microcredit guru Muhammad Yunus published an article in the Christian Science Monitor last week titled, "How Social Business Can Create A World Without Poverty."

The article lays out Yunus' ideas about "social business." The term might seem, at first glance, similar to what is described by the catchphrase popular in the US, "social entrepreneurship." But Yunus emphasizes that "social business" is not about profits; it only emulates the structures of profit-making businesses to become self-sustaining.

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.  

... 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.

I think this is a super-interesting discussion and falls in with the Pierre Omidyar philosophy of philanthropy.

For example, one could say that the City of San Francisco gets its money back from the lease grants it offers through taxes the new businesses are paying. The same is true of Women's Initiative's loan program: the revolving loan fund puts payments back out into loans immediately.

But how would we begin to get our money back from Women's Initiative's training program?
Becoming partners in the client businesses? How do you serve the very poor and become self-sustaining?

At first sight it seems that the “social business” model is limited in who and what can be served. This is a question that as time goes on would be important to resolve as more and more people are going to want to spend their philanthropy dollars where they can get them back.

Technorati Tags: microcredit, microenterprise, Muhammad Yunus, Pierre Omidyar, social entrepreneurship, women in business