‘When the bottom line is ending poverty’
May 24, 2008
Businessweek reviews the book
Muhammad Yunus is a humble man who would resist being compared to Mahatma Gandhi. But the two have much in common as campaigners for social progress. While Gandhi’s goal was the end of colonialism, Yunus’ is Yunus won the Nobel Peace Prize in 2006 for his work as founder and managing director of Grameen Bank, the pioneering microcredit organization in Bangladesh. He launched Grameen 31 years ago to help poor people start businesses. Since then the microcredit movement has gone global, with copycat organizations springing up in Asia, Africa, and Latin America.
Now Yunus is back in the public eye with a concept he calls social business. This form of capitalism, he believes, can make progress against poverty in ways that governments and traditional charities have not done. He lays out the concept in his new book, Creating a World Without Poverty: Social Business and the Future of Capitalism. It’s an inspiring volume, full of practical information for people who are motivated to try out his ideas.
So what exactly is a social business? One designed mainly to accomplish a social goal. In most ways, social businesses operate just like any other well-run enterprise. They’re supposed to be smoothly managed, efficient, and profitable. But in their case, profits are invested back into operations rather than being returned to investors or shareholders. So it’s a form of capitalism that does not reward the capitalist in the traditional way. Yunus hopes that rich people, nonprofits, and corporations will back social businesses for the good they do. Corporations or other “investors” might eventually get back their original stake, but their reward mainly would come through brand-building and identifying new markets.
Skeptical readers might call this a pipe dream. Who would invest without the prospect of a return? And where will the social-business entrepreneurs come from? But in the book, Yunus supports his theories with a real-life example of a social business that’s up and running: a joint venture between Grameen Bank and France’s Groupe Danone (DA) called Grameen Danone. The company, formed two years ago, sells fortified yogurt for pennies a serving to malnourished children in Bangladesh. The milk used to create the yogurt is produced on small farms owned by poor people, and the products are distributed by members of the Grameen Bank collective—so the project helps people in a variety of ways. The joint venture is just getting off the ground, so it’s too early to tell if it will succeed, but this is no small experiment. The business plans on producing 6,600 pounds of yogurt per day this year and boosting production to 22,000 pounds a day two years from now.
The original deal with Danone provides a 1% annual dividend for the company. Yunus agreed to that in deference to Danone’s position as a publicly traded corporation. But he hopes to eliminate the dividend at some point so the joint venture satisfies his strict definition of how a social business should operate. He argues that it’s too messy to mix the drive for profits with the desire to do social good. He points to abusive micro lending practices in which profit-seeking banks charge interest rates in excess of 100% per year. “I say as long as people are poor, don’t make money off of them. That delays their exit from poverty,” Yunus recently told this reviewer.
Grameen already operates about 30 social businesses, and Yunus plans more. One is a hospital that will provide cataract operations for the poor at a fraction of the usual costs, while well-off people pay full price. But his primary goal is to establish a new form of capitalism and inspire others to set up social businesses all around the world.
The book even has an intriguing idea for what Yunus calls a “social stock market” that would list only such businesses. This public exchange would provide transparency and offer donor-investors the ability to shift their money from one enterprise to another. It’s hard to imagine the concept really taking off. But Yunus has proved doubters wrong before, and his unfettered creativity gives hope that, at long last, real progress can be made against poverty.