As I write this article, the storm in the financial markets continues — stock markets in Asia, Europe and the US all are going through roller coaster rides, people fear bank runs and governments are pulling together trillion dollars worth of rescue packages. In this sadly crazy historic moment, when every current option is looking bleak and governments are busy cleaning up the private sector mess, perhaps it is a good time to look some distance into the future toward a gleam of hope for a kinder and gentler form of capitalism. My suggestion for that is to put together effective regional ‘social stock exchanges’ in each continent that can spearhead social good through capital markets. I believe Asia is ripe to take the lead in meeting this challenge.

What is a social stock exchange? It is a stock market where investors who care about social and economic returns buy stocks and bonds of companies that have strong economic and social returns. Interestingly, in a social stock exchange both not-for-profit and for-profit companies can participate. For-profit entities can either issue shares representing ownership in their companies or issue bonds. Meanwhile not-for-profit companies can utilise the stock exchange to issue bonds an action in itself that can bring operational accountability to the not-for-profit sector (as opposed to carte blanch donations from foundations).

Although Professor Muhammad Yunus discusses the idea of a social stock exchange in his latest book, Creating a World Without Poverty, and has been promoting it in lecture circles, the concept is not a new one. There are already several Social Stock Exchanges in operation or in the works, albeit each uniquely different from one another.

BOVESPA in Brazil was the first social stock exchange in the world. It was launched in 2003 with the objective of bringing together non-profit organisations and the social investors who are willing to support their programmes and projects. For BOVESPA investors, the return is solely in ‘social profit,’ where the investment brings about a more just society with opportunities for the poor and neglected. By providing capital for the non-profit organisations that list on this exchange and the providing social value for the investors who participate in this exchange, BOVESPA aims to change the labeling of non-profit organisations to ‘Social Profit Organisations’. So far about 43 Social Profit Organisations have raised capital through this exchange. However, trading of stock in this exchange is still a distant goal.

Europe’s answer to social investing is the FTSE4Good. Set up by FT Stock Exchange in London, FTSE4Good is an index for socially responsible investment. The definition of ‘socially responsible’ for this index is very broad and covers topics such as: working towards environmental sustainability, developing positive relationships with stakeholders, and upholding and supporting universal human rights. There are about 25 companies in this index. Given FTSE financial requirements, these companies are large for-profit entities which in many cases have very tangential effects on positive social change. Their ‘social mission’ often springs from the defensive posture of CSR rather than from a genuine effort to make positive social impact.

In North America, Green Stock Exchange (GREENSX) is attempting to become the Social Stock Exchange for that continent (and Europe). This Canada-based social stock exchange is aiming to launch by end of the year to trade shares in social businesses. GREENSX’s definition of social business is a business that makes a profit but benefits society as well delivering a triple bottom line return (economic, social and environmental return). GREENSX’s goal is to provide small green issuers access to public equity capital efficiently while ensuring liquidity for the investors. The success of GREENSX remains to be seen.

There is obviously a budding global interest in the notion of social stock exchange. Recently, Rockefeller Foundation donated $500,000 to the UK government to pay for a feasibility study for a social stock exchange. The Foundation picked UK as the site for the feasibility study because of the UK government’s support for social enterprises. Existing UK government initiatives include legal reforms for separate incorporation for social businesses and plans for a social investment bank funded with unclaimed assets held by financial institutions.

All this is encouraging in a global perspective; now, how about Asia and, in particular, Bangladesh? Bangladesh is a country that continues to produce remarkable social enterprises, and given the state of the country and the world, it can be expected to keep the pipeline of social innovation flowing. The limiting factor is, of course, capital. Let us move a few degrees east in longitude, and there is a country, which — though a small dot on the map — is wealthy, is a player in the financial markets and is itching to make a mark in social business. This country is, of course, Singapore. Singapore is ready, able and perfectly positioned to be the home of Asia’s first Social Stock Exchange. Bangladesh is ready, able and perfectly positioned to pepper that exchange with very effective social businesses. This is a match made in financial heaven.

Now, what’s the next step? It is very simply for the Bangladesh government to have the vision and desire to initiate a ground-breaking discussion with the Singapore government. Bangladesh is well positioned to make its mark in the next economic revolution of conscious capitalism. It can take its rock star social entrepreneurs Yunus and Abed — and get them to perform the ground-breaking concert for the social stock exchange for its potential partner Singapore.

Thus, my request to the Bangladesh finance ministry use this opportune moment — initiate the courtship and get Bangladesh on the global financial map. We are all waiting.

The writer is the regional managing director of Asia City Publishing Group and adjunct associate professor at Lee Kuan Yew School of Public Policy at National University of Singapore.

Durreen Shahnaz in Business in Daily Star on 23 October 2008

Follow his writing in full:
Muhammad Yunus has already changed the world once, which is why he was awarded the Nobel Peace Prize. By creating the Grameen Bank and using microfinance to improve the lives of the poorest of the poor in Bangladesh, he demonstrated a transformational model for eliminating poverty.

Now he’s playing an even bigger game: Yunus wants to transform capitalism. Of course, he’d never be so confrontational as to come out and say that. A story he told me while we were recently together in Sweden describes not only Yunus’ mission but also his method.

(Illustration by Web Bryant, USA TODAY)

The way he tells the story, every time a new head of the World Bank is named, he calls Yunus. When James Wolfensohn became World Bank president, he welcomed Yunus to lunch and began to quiz him about his recently announced goal for reducing — and ultimately eliminating — poverty.

“I understand you intend to lift 100 million people out of poverty,” Wolfensohn said.

“That’s right,” Yunus told him.

“Don’t you think that’s a little overly ambitious?” asked Wolfensohn.

“No,” said Yunus. “We’ve looked at the numbers and we think we can do it. But,” Yunus went on, “if you think it’s too ambitious, what do you think is a better number?”

When Wolfensohn didn’t answer, Yunus offered a number.

“10 million?”

Wolfensohn shook his head. Too low.

“20 million?” Yunus offered.

From Wolfensohn’s reaction it was clear that number was still too low.

“How about 50 million?” Yunus asked.

Wolfensohn seemed pleased by that number.

“That sounds about right, ” he said.

“OK,” Yunus told him, “you do 50 million and I’ll do 100 million.”

And that’s how you win the Nobel Peace Prize: by making peace with the powers-that-be, the keepers of the status quo, rather than by declaring war on them.

Negate pure-profit motive

Yunus is using the same mild-mannered approach in his campaign to transform capitalism. On the one hand, as an economist and, now, a banker, Yunus embraces the discipline of the market. On the other hand, he believes that profit-maximizing companies turn complex human beings into one-dimensional creatures, devoted only to making as much money as possible. Pure-profit maximization is bad for people, for the environment and, ultimately, he argues, for capitalism, since it places unsustainable demands on the system.

But if unfettered capitalism has its shortcomings, so does out-and-out charity. Yunus sees charity as a bad bargain for both those who give it and those who get it. Rather than providing a path to self-improvement, charity relieves recipients of the responsibility for their own betterment. And those who give charity find themselves writing a check every year for the same problem, without any expectation that it will ever be solved.

Finally, Yunus takes a hard look at corporate social responsibility and finds little to love there, either. In fact, it is the worst of both worlds. It gives companies permission to operate as pure-profit maximization enterprises, then allows them to feel a little better about themselves by writing checks for charity. Nothing fundamental happens to improve the lives of billions of people who are doomed to living in poverty.

Which is not to say that there isn’t a solution — a brilliant solution as proposed and already tested by Yunus. The answer to the profit maximization vs. charity dilemma is to create a new hybrid option: the social business. A social business must operate in the marketplace and earn the support of real customers who pay real money to buy a real product. At the same time, a social business has a social cause, not just a financial goal.

Focus on underserved communities

Yunus can identify myriad such causes; they exist wherever there is an unserved population. A social business could provide health care to those currently left out, feed malnourished children, provide clean drinking water to communities, or offer insurance to the uncovered.

Social businesses have investors — but they’re neither hoping to maximize their profits nor writing off their investment as a charitable gift. The first profits from a social business go to paying back the investors. Once they’ve recouped their investment capital, investors forsake additional returns. Instead, profits from the social business go back into the business, to help even more people. Think of it as capitalism with a human face.

Yunus has test-driven the idea of a social business in a partnership he forged with Danone, the French food producer called Dannon in the USA. A joint venture between Grameen Bank and Dannon has produced a yogurt social business producing a tasty product for the children of Bangladesh. Yunus reports that, in less than 18 months, two cups of the fortified yogurt per week dramatically improves the health of malnourished children.

What’s particularly exciting about Yunus’ campaign for social businesses is how timely it is. Americans, in particular, are hungry for this kind of hybrid thinking. Foundations are looking for social entrepreneurs to whom they can give grants. But social businesses offer foundations something beyond grants. Social businesses will offer solutions that work in addressing societal problems and, at the same time, create solutions that are self-sustaining.

Statistics show that in the USA, 115 non-profits are formed every day, as young people look for ways to go beyond making a living to making a difference. Americans want a new option for making real change, one that runs like a business and delivers real help to needy people.

Muhammad Yunus’ social business idea offers a vehicle for doing both. It’s the kind of creative economic thinking that could earn Yunus a second Nobel Prize — this time in economics.

Alan M. Webber is founding editor of the business magazine Fast Company and a member of USA TODAY’s board of contributors.

Posted on May 21, 2008 .

To see the comments please follow the original article in USA Today.

Muhammad Yunus At Vancity, where I work, we recently created a division called Social Finance. This is where our Business Banking department now resides, as well as Commercial Mortgages and our amazing Community Business Banking team, where many of our most innovative and socially relevant products and services are generated.

Creating and naming this new division was an interesting risk, and as soon as I heard the name Social Finance, I thought to myself: Holy crap I can’t believe I get to work here.

What’s even more amazing is that our executives created this new name and division based on an understanding of what Social Finance could be, but without a nailed-down definition of what it means for us. That’s the work of whoever gets the gig of SVP Social Finance.

Last night we at Vancity brought Nobel Peace Prize winner Muhammad Yunus to town. He received an Honorary Doctor of Laws degree from the University of British Columbia for his amazing work as Banker to the Poor at Grameen Bank, which he founded in his native Bangladesh specifically to help the poor. He spoke about the power of small amounts of money to transform people’s lives, and the role private businesses can play in creating change in the lives of our poorest citizens. In the past he has endorsed Vancity’s Microcredit Toolkit, and we recently announced that our own microfinance-driven term deposit would now be funding local initiatives.

He calls it Social Business, and it’s the subject of his new book, Creating a World Without Poverty: Social Business and the Future of Capitalism. We call it Social Finance. It’s something that has to be framed for many people, because we have it ingrained in us that there are two options in life: charity and profit.

But there is room for a strong middle ground. Businesses can have as their focus socially responsible goals as their main driver and still sell their products and services in a business-savvy way, repay their investors, pay their employees well and thrive in the business context, and drive their profits back into the work they do. Their work can be of tremendous social value and significance, and yet be no less business-like.

As we deal with issues of climate change and social equity, these kinds of business are cropping up. They could be used to solve the health care crisis in America. To clean up the Downtown Eastside in Vancouver, reduce our carbon emissions, provide inexpensive and nourishing food for poor families to feed their children, vaccinate the third world.

The money invested could be reinvested and continue to solve our most pressing problems, rather than giving money away which has no lifespan beyond the initial donation.

Last night was an amazing time. I was so fortunate to be invited to a small private reception to meet Professor Yunus, and then go to hear him speak to several hundred people about his work serving the poorest people on the planet. His work is actually reducing poverty in Bangladesh by significant amounts. He has opened specialized services focused on beggars, and creating Social Finance opportunities such as Grameen Danone and Grameenphone, Bangladesh’s largest mobile phone company owned in part by the 7.5 million co-operative owners of Grameen Bank.

A Vancity board member asked me at the reception why I had come down to hear Muhammad Yunus speak, and I replied that this kind of activity is the very reason I initially chose to do my banking at Vancity, and why I later decided to work there. Banking is really only marginally interesting to me, but using the platform of banking to solve social problems that we face in our communities is a powerful draw for me. Exploring that intersection where money and community come together is extremely powerful and much needed.

Last night Muhammad Yunus proved how true that is.

Labels: corporate responsibility, credit union, microcredit, politics, poverty, underbanked, vancity, yunus

posted on Saturday, March 15, 2008

Follow the comments on the posts in azaroff.com

SINGAPORE is a global business centre with room for ‘social business’, according to Nobel laureate Muhammad Yunus.

That is what the Bangladeshi economist and a pioneer of micro-credit calls not-for-profit businesses and programmes set up to generate jobs and other opportunities to help those trapped in poverty.

‘Social business’ is not charity, but more in keeping with the adage: It’s better to teach a man how to fish than to give him fish.

Speaking to The Straits Times here yesterday, Professor Yunus said: ‘The business proposition is for the poor to pay a tiny amount of money for you to take care of their needs.

‘You can, for example, provide health insurance to the poor, who pay a little bit every year for it. And I know if Singaporeans design it, it will be of world-standard quality because you have the highest standards.’

Two or three Singaporeans, he added, could start such businesses just by pooling, say, their year-end bonuses.

In fact, he pointed out, with Singapore’s reputation for quality, other countries would soon want to replicate its schemes since they would probably be the ‘most efficient’ by far.

Doing so, he added wryly, would also make society here ‘more balanced and humane’.

Prof Yunus, who won the Nobel Peace Prize last year for lending tiny sums to the destitute so they could go into business, was on a whistlestop here yesterday as the keynote speaker at a panel discussion on development in Bangladesh and Singapore, at the National University of Singapore’s Bukit Timah campus. It was organised by the Lee Kuan Yew School of Public Policy, NUS and the Institute of South Asian Studies.

In 1974, the unassuming man started a social revolution when he took US$27 out of his pocket and lent it to 42 Bangladeshi basket-weavers.

After years of dispensing small loans to the desperate, in 1983, he set up the not-for-profit Grameen (Bengali for ‘rural’) Bank in Bangladesh to help even more needy folk, whom he made part-owners of Grameen and who paid it back in weekly instalments.

Today, Grameen is owned by 7.5million Bangladeshis, most of them women, who previously held no purse strings because their culture entrusts money to men.

With 98per cent of all borrowers repaying loans totalling more than US$5 billion (S$7.2 billion) today, his successful ways with micro-credit are now followed in, among other countries, China, Canada, Thailand and India. His goal is now to get Bangladesh’s total population of 150million owning the bank by 2013.

Grameen has also branched into more not-for-profit ventures such as Grameen Shakti (to light up most Bangladeshi homes with solar power for people to read at night) and GrameenPhone (giving villagers solar-powered pay phones so they can run businesses). The bank also gives out 30,000 scholarships a year to poor students, now known as ‘Grameen Children’.

Which begged the question: How to get materialistic non-Grameen children to help the needy?

Prof Yunus smiled and said: ‘Children today are born with plenty. And what do you do with your life when you are born with plenty? You want to do something to put your signature on this planet.’

He added: ‘By having your own business with purpose, you can design things on your own and feel happy about it. This is not something that your dad or mum have done.’

Business Times 3 Nov 07
S’pore good place for social enterprise: Nobel winner
By CONRAD TAN

(SINGAPORE) Nobel Peace Prize laureate Muhammad Yunus believes Singapore is ‘a good place’ to start more businesses with a social objective.

‘Creative ideas are thriving here, but for personal reasons… now widen it for the common good of the people,’ said the founder of Grameen Bank, famous for its successful business of making small loans to poor people in Bangladesh to reduce poverty.

He was speaking at the Lee Kuan Yew School of Public Policy yesterday, ahead of a panel discussion among top personalities from the private and public sectors in Bangladesh and Singapore on the development of the two countries since independence.

In his wide-ranging speech and a discussion with the 200-strong audience afterwards, he repeatedly stressed the need for ‘defiance’ of established ideas, particularly in the conventional banking system and modern economic theory.

‘Sometimes conventional wisdom is also conventional stupidity,’ he said.

‘We’ve made a big mistake in interpreting human beings in a very limited way within the financial sphere.’ To see people as nothing more than ‘profit-maximisers, all yearning after personal gains … is a travesty of the truth.

‘Human beings are much bigger. They are not created to spend their lives making money.’

Asked by an audience member what Singapore could do, he said: ‘Run water companies, healthcare programmes, nutrition programmes for the children, address diseases that are curable but no one pays much attention to.’

Venture capital funds that channel money into such social enterprises are another possibility, he added.

‘There’s plenty of money here to start social businesses for Singapore and for other countries.

‘Singapore can be a much broader society than currently … its image is that this is a society which is always running for economic success – personal success, mostly.’

His experiment with Grameen Bank, which started with him making a US$27 loan from his own pocket to 42 women in a village in Bangladesh in 1976, showed that extending micro-credit or small loans to poor people can be a sustainable business model.

Today, the bank lends more than US$500 million a year. It has 7.3 million borrowers. Almost all are women – a deliberate strategy started after Prof Yunus found in the early days of Grameen Bank that lending to women had a much bigger social impact than lending to men.

Within Bangladesh, he estimates that about 80 per cent of poor families now have access to micro-credit.

‘This is a methodology which should become part of the mainstream banking system, not a footnote, because two-thirds of the world’s population have no access to the conventional banking system,’ he said.

‘People used to ask me, how much money do you need to start a micro-credit programme? If you’re earning money, take one month’s income – that’s good enough.

‘With your income you can probably give loans to 10 or 20 people. And if you can recycle this, you’re in practice.

‘You don’t have to work with thousands. You can work with five. If you can do it with five and you’re successful, you can find another 10 who would like to put in their one month’s salary or income to add another five, and that’s it.’

The difference between charitable giving and a social business – which he defines as ‘a non-loss, non-dividend company with a social objective’ – is that a social business is self-sustaining.

‘Charity money has only one life,’ he said. ‘You can use it only one time.’

From Wild Singaporepublished on 3rd November 2007

Liam Black

I’m a social entrepreneur and have been running a busy restaurant chain called Fifteen, which was set up by one of our top chefs, Jamie Oliver. We take on young homeless people and those coming out of prison and turn them into chefs. We invest in their business ideas when they leave us. Before that, I ran a charity called the Furniture Resource Centre in Liverpool, which we turned into a social business, so I knew all about you. We grew from a small, very traditional charity, but moved into selling products and services to enable poor people to furnish their homes. I have just given up the Fifteen role and set up a business which banks on the same idea as you. People say they love the social business idea, but really it’s crap, isn’t it? Capitalism’s not going to change. Danone could afford to do it. There are people out there who believe in it though. The challenge you have is how to turn people onto it. I believe in it.

Muhammed Yunus

At least we have one.

LB

The future of the world depends on it, doesn’t it?

But my questions are more specific. What if I ran a social business and I go to commercial businessmen, but they say ‘that’s great Liam, but how are you going to prove a social return on my money?’. It’s a big debate in the UK. What’s your thinking on how to prove it?

MY

Once you accept this idea, it all follows. For a profit maximising company, the bottom line is how much money you make. But when you run a social business, it’s about impact. Ours was about impact on malnutrition in children. But you need to have measurement and we needed to understand the measurement of nutrition. If you have 100 units and you reduce it by one unit, it’s still a reduction. Measuring your success is different between a social business and other businesses. It is purpose driven and objective driven, not money driven. Measurement is a process and you have to build up to these things, but it can be done. If there’s a problem, it has to be measured. If we can’t measure it, we can’t do anything about it.

LB

I’m a great believer in social reporting and accounting and we (Fifteen) have just published our report. I have found a lot of people in the social enterprise sector reluctant to engage with reports and provide them. It’s where the cynicism from capitalism comes from.

MY

This leads us to talk about the social stock market. It has to be measured to gradually define the improvement.

LB

You have a very exciting power and vision, but social businesses can be very small and vulnerable.

MY

But they are the starting point. For me it was easy. Danone put on a meeting and said here’s a million dollars. For me, it was a question of how seriously they took this idea. If it’s not taken seriously, how are those flood gates going to open? Luckily, I know how to do it now. But you have to think, ‘we are a nutritional dairy company, we can provide nutrition, or we are a water company, we can bring water to the people’. They make a lot of money from their products and now they can do something good with it.

LB

Is it all about the innate goodness of people?

MY

The point I make is it’s everybody’s heart, not just special people. Even the most greedy businessmen who make every pound for themselves feel that way. But there is only one road and the only thing we do is make money or charity. The companies making money are the big lorries speeding up the road and overtaking the small farmers pulling their carts. Now that I have built a new road, people say to me ‘here I am’. Social business will come with an unexpected amount of enthusiasm. People like doing things for other people and they want to do it, so why deprive them of that enjoyment. Life is about enjoyment and I am depending on that. These who take the first step are the ones at the front line.

LB

I have set up a company called Wavelength, where we are bringing together people from the sector. I enjoy that we all have this desire to do good, but we also have the desire to compete. What if I went to Nestle and asked them to compete in social businesses in Bangladesh; take these women you give loans to and pay them a little bit more?

MY

Yes, there will be competition, but if Nestle is competing with Danone, and they are on the same side of the road, it is fine. In a social business we are purpose driven, not money driven. If I am trying to bring water to these people and they are trying to bring water to these people, then we are friends. We reach more people and we can provide even cheaper water.

LB

But what if we have a payroll to meet every month? I have seen it in the social businesses I have been involved in.

MY

What is the competition? If I am a charity and I go to a donor and don’t get the money, I close the shop, but in social business, you never close the shop. In the charity world, I go to the donor, spend the money and then go back to the donor. In social business, the money is recycled. There are thousands of people that need help. Why should microcredit compete if we are not interested in profit?

LB

But we need the profit to innovate, don’t we?

MY

If we are recovering the cost, we can repeat endlessly. This is a great year because we have reached another 20,000 people. They are safe and they don’t have to drink nasty water. On the financial side, we made a five per cent surplus, but the owners can’t take dividends, so no one can take that away.

LB

Innovation is driven by making money. Do you think the good heart of a chief executive of the social business is enough to drive innovation and create good products and services?

MY

My assumption is making profit is a driving force to push us into lots of things, like expansion. Similarly, doing good is a strong driving force. Can I make it easier? Do people have to walk a mile to get their water? Could I bring it closer than half a mile? Can I do it near their home?

LB

But you also have staff saying ‘I want a pay rise’.

MY

That is exactly like any business. If it’s a qualified person and we need him, we will give him a raise. He is bringing enough revenue to pay for himself. It doesn’t come from my pocket. You show me that I can keep you and raise your salary. You work hard to make it work.

LB

Not everyone will be lucky enough to win a Nobel Peace Prize though. They might not be that successful. How easy is to going to be for them to succeed?

MY

You’re hitting me below the belt now! The Wright Brothers designed the first plane. They had to work hard to make sure it worked, but once it flew, everyone said ‘oh, it’s easy. All you’ve got to do is this’. The first one is always the most difficult.

LB

Your book got a hostile review in the Financial Times. The reviewer said that funding a social enterprise proposition relies on people giving up a return on thier money, on the kindness of strangers. If the heart of the Grameen proposition is that a woman needs money to unleash her entrepreneurial drive and make money for herself, then it’s proposing a social business model that retains the profit. Isn’t that a contradiction?

MY

It’s different profit. It’s about her profit. She is making a profit to lift herself out of poverty and make a better life for herself and her family. When I brought this yoghurt to the children I didn’t say ‘we must get your parents to pay for it’. I said ‘this is a delicious yoghurt. Are you going to pay for it?’. It’s our conspiracy that whether they enjoy this lovely yoghurt or not, I give them some medicine. I didn’t create the Grameen Bank or Grameen Danone Foods to make money, I did it for the good of others. But why does it work? Is it because Danone wants to make money out of it? No, there’s no profit to be made.

LM

Well, I’m talking to the master here.

If there is a recession, what impact will it have on this?

MY

Some adjustment will have to take place. If we are looking for someone who makes a lot of money, they will be concerned about their money. They might wait until the next year to invest in something. Everyone will be cautious, but that will be everywhere in charity, business and social business. It will not mean everything closes down. The businessmen might say ‘I could lose millions on the stock market, so I might as well put my money in a social business’. At least they get back what they put in.

LB

It’s dependent on someone with enough money waiting to invest in social business. Will it be that that part of social business will always be dependent on capitalism?

MY

What’s wrong with that? This is supposed to be the means to an end. The real picture is here we make money and this is our money to do good for the world. That will stay in tact. People say ‘what am I going to do with these millions?’. Look at Bill Gates.

LB

We are sat in Kensington, one of the richest regions of London, if not Europe. People worry about what to do with their money. They don’t want to pay tax and some don’t want it to just go their children. Some don’t want to just write a cheque for charity. Is social business good because people can see their money recycled?

MY

Of course. Their children can take that money away anytime if they need to. But until then, that money could make a difference. One little change can make an explosion.

LB

But people get suspicious if you’re not making money. Even Corporate Social Responsibility started with good intentions, but then the businessman took over.

MY

It’s true. Companies say they are doing good, when really, they could be contributing to the problem. It’s things like investing in concerts for the environment, with all the stars arriving in private jets. It’s just PR. It’s not the same as a social business.

LB

You have become very well known in the west, the poster boy of microfinance. Did you deliberately say ‘I am going to become a spokesman for this’?

MY

People were attacking me all the time. They said I was only helping marginally poor people and not the bottom line of the poor. But we have more than 100,000 beggars in our group. That’s the most interesting part because we see amazing things happen to these people from giving them just $10. Eighty per cent of poor families have benefited from microcredit, but people always misinterpret it.

LB

I think the answer to all that is here’s our social report and you can read it for yourself.

MY

If that’s what they’re saying, then maybe.

LB

What are the plans for the future of Grameen Danone Foods and do you welcome competition?

MY

If Nestle came along and tried to use me, I’d say yes, and I would use them. If I can set it up and had their money to spend, then why not? What’s wrong with that?

LB

What I like about your approach is a hard headed pragmatism.

MY

I said ‘are the cups in the company biodegradable’ and they said ‘no’. I said ‘this has to be biodegradable because we are a social business. We don’t want plastic cups’. They found corn-starch in China and it was very exciting. I needed edible cups. A poor person is paying for this. Why make them pay for something that has no use to them? I asked why they couldn’t design something like that? The cup itself should be nutritional. They said it was not possible, but why not? It could be possible. We have a huge research department. I told them to find it in six months and now they are scurrying around to find these edible cups. They are selling this yoghurt all over the world in the same cups. If they can come up with edible cups, they will soon be used.

LB

That mutuality and level of intellectual property creation – if that does not happen, is there a future for it?

MY

As long as you are a profit maximising business, your thinking process is about how to make money. Imagine you came to a business where you don’t have to make money, you just do good. Your thinking changes completely. A lot of things become relevant and irrelevant. If you are not making money, the packaging becomes irrelevant for example. You do not need to promote it. You use that money saved. You just think about delivering the real thing. People think that if they are not making money, they will not be interested in investing. It’s a common question I am asked. But they are not giving me money, they get it back.

LB

Bangladesh, from what I know, is very poor and the public sector does not exist. We have to be focused to be innovative. In Europe and America, is there a role for social business?

MY

If I am poor and I lived here, then wouldn’t a social business help me? In America, what about health insurance, which is a good sector to start with. We understand what it is, not being covered by health insurance and living in the US. I don’t have to tell you. You can do it because you don’t want to make money from it. Millions of people in the US don’t have a bank account because banks don’t see them as big enough. When they get their cheque from work, they don’t put it in a bank, they have to get it cashed. There’s a series of all these cheque-clearing shops and they rip them off. Loans are another one. Your car breaks down and you need it to get to work. For some, the only option is going to loan sharks, who charge you an extra 50 or 60 per cent. These are all uses of social business You have to look at the problems around you and be innovative.

LB

If it works with yoghurt, why not try it with other products?

MY

These are multi-national companies. Let them speak out. Taking a shed load of money home every year is not enough for some. But they have to want to do it.

LB

If you had a magic wand and there was one thing you could do, what would it be?

MY

To have social business recognised as a businesses entity and define what are the norms and standards. As soon as social business becomes established, the fake people will get involved. They think secretly it will bring them money. The future needs to be innovative. Ask students to enter competitions to design packaging. Everytime I speak to students I see overwhelming numbers who want to set up social businesses.

LB

Hopefully, you have helped bring some sanity to the world.

MY

I hope so.

Published in Social Enterprise

Good Morning:

It as a very special privilege for me to speak at the commencement ceremony of this prestigious institution.

What a wonderful feeling to be here today. To be with all of you, some of the brightest minds in the world, right at a moment when you decide the path you will embark on in life. You represent the future of the world. The choices that you will make for yourself will decide the fate of mankind. This is how it has always been. Sometimes we are aware of it, most of the time we are not. I hope you’ll remain aware of it and make an effort to be remembered not simply as a creative generation but as a socially-conscious creative generation. Try it.

I had no idea whether my life would someday be relevant to anyone else’s. But in the mid-seventies, out of frustration with the terrible economic situation in Bangladesh I decided to see if I could make myself useful to one poor person a day in the village next door to the university campus where I was teaching. I found myself in an unfamiliar situation. Out of necessity I had to find a way out. Since I did not have a road-map, I had to fall back on my basic instinct to do that. At any moment I could have withdrawn myself from my unknown path, but I did not. I stubbornly went on to find my own way. Luckily, at the end, I found it. That was microcredit and Grameen Bank.

Now, in hindsight, I can joke about it. When people ask me, “How did you figure out all the rules and procedures that is now known as Grameen system ?” My answer is : “That was very simple and easy. Whenever I needed a rule or a procedure in our work, I just looked at the conventional banks to see what they do in a similar situation. Once I learned what they did, I just did the opposite. That’s how I got our rules. Conventional banks go to the rich, we go to the poor; their rule is — “the more you have, the more you get.” So our rule became — “the less you have higher attention you get. If you have nothing, you get the highest priority.” They ask for collateral, we abandoned it, as if we had never heard of it. They need lawyers in their business, we don’t. No lawyer is involved in any of our loan transactions. They are owned by the rich, ours is owned by the poorest, the poorest women to boot. I can go on adding more to this list to show how Grameen does things quite the opposite way.

Was it really a systematic policy æ to do it the opposite way ? No, it wasn’t. But that’s how it turned out ultimately, because our objective was different. I had not even noticed it until a senior banker admonished me by saying : Dr. Yunus, you are trying to put the banking system upside down.” I quickly agreed with him. I said : “Yes, because the banking system is standing on its head.”

I could not miss seeing the ruthlessness of moneylenders in the village. First I lent the money to replace the loan-sharks. Then I went to the local bank to request them to lend money to the poor. They refused.

After months of deadlock I persuaded them by offering myself as a guarantor. This is how microcredit was born in 1976. Today Grameen Bank lends money to 7.5 million borrowers, 97 per cent women. They own the bank. The bank has lent out over $ 7.0 billion in Bangladesh over the years. Globally 130 million poor families receive microcredit. Even then banks have not changed much. They do not mind writing off a trillion dollars in a sub-prime crisis, but they still stay away from lending US $ 100 to a poor woman despite the fact such loans have near 100 per cent repayment record globally.

While focusing on microcredit we saw the need for other types of interventions to help the rural population, in general, and the poor, in particular. We tried our interventions in the health sector, information technology, renewable energy and on several other fronts.

Since we worked with poor women, health issue quickly drew our attention. We introduced health insurance. We succeeded in developing an effective healthcare program based on health insurance, but have not been able to expand this program because of non-availability of doctors. Doctors are reluctant to stay in the villages. (It has become such a big bottleneck that we have now decided to set up a medical college to produce doctors.) Under the program a villager pays about US $ 2.00 a year as health insurance premium, to get health coverage for the entire family. Financially it is sustainable.

I became a strong believer in the power of information technology to change the lives of the poor people. This encouraged me to create a cell-phone company called Grameen Phone. We brought phones to the villages of Bangladesh and gave loans to the poor women to buy themselves cell-phones to sell their service and make money. It became an instant success.

Seventy percent of the population of Bangladesh do not have access to electricity. We wanted to address this issue by introducing solar home system in the villages. We created a separate company called Grameen Shakti, or Grameen Energy. It became a very successful company in popularising solar home system, bio-gas, and environment-friendly cooking stoves. It has already reached 155,000 homes with solar home systems, and aims to reach one million homes by 2012. As we started creating a series of companies around renewable energy, information technology, textile, agriculture, livestock, education, health, finance etc, I was wondering why conventional businesses do not see business the way we see it. They have different goals than ours. We design our businesses one way, they design theirs in another way.

Conventional businesses are based on the theoretical framework provided by the designers of capitalist economic system. In this framework ‘business’ has to be a profit-maximizing entity. The more aggressively a business pursues it, the better the system functions æ we are told. The bigger the profit, the more successful the business is; the more happy investors are. In my work it never occurred to me that I should maximize profit. All my struggle was to take each of my enterprises to a level where it could at least be self-sustaining. I defined the mission of my businesses in a different way than that of the traditional businesses.

As I was doing it, obviously I was violating the basic tenet of capitalist system æ profit maximization. Since I was engaged in finding my own solution to reach the mission of my business, I was not looking at any existing road maps. My only concern was to see if my path was taking me where I wanted to go. When it worked I felt very happy. I know maximization of profit makes people happy. I don’t maximize profit, but my businesses are a great source of my happiness. If you had done what I have done you would be very happy too! I am convinced that profit maximization is not the only source of happiness in business. ‘Business’ has been interpreted too narrowly in the existing framework of capitalism. This interpretation is based on the assumption that a human being is a single dimensional being. His business-related happiness is related to the size of the profit he makes. He is presented as a robot-like money-making machine.

But we all know that real-life human beings are multi-dimensional beings æ not uni-dimensional like the theory assumes. For a real-life human being money-making is a means, not an end. But for the businessman in the existing theory money-making is both a means and also an end.

This narrow interpretation has done us great damage. All business people around the world have been imitating this one-dimensional theoretical businessman as precisely as they can to make sure they get the most from the capitalist system. If you are a businessman you have to wear profit-maximizing glasses all the time. As a result, only thing you see in the world are the profit enhancing opportunities. Important problems that we face in the world cannot be addressed because profit-maximizing eyes cannot see them.

We can easily reformulate the concept of a businessman to bring him closer to a real human being. In order to take into account the multi-dimensionality of real human being we may assume that there are two distinct sources of happiness in the business world æ 1) maximizing profit, and 2) achieving some pre-defined social objective. Since there are clear conflicts between the two objectives, the business world will have to be made up of two different kinds of businesses –1) profit-maximizing business, and 2) social business. Specific type of happiness will come from the specific type of business.

Then an investor will have two choices æ he can invest in one or in both. My guess is most people will invest in both in various proportions. This means people will use two sets of eye-glassesæ profit-maximizing glasses, and social business glasses. This will bring a big change in the world. Profit maximizing businessmen will be amazed to see how different the world looks once they take off the profit-maximizing glasses and wear the social business glasses. By looking at the world from two different perspectives business decision-makers will be able to decide better, act better, and these decisions and actions will lead to a dramatically better world.

While I was wondering whether the idea of social business would make any sense to the corporate world I had an opportunity to talk to the chairman of Danone Group Mr. Franck Riboud about this subject. It made perfect sense to him right away. Together we created Grameen Danone company as a social business in Bangladesh. This company produces yogurt fortified with micro-nutrients which are missing in the mal-nourished children of Bangladesh. Because it is a social business, Grameen and Danone, will never take any dividend out of the company beyond recouping the initial investment. Bottom line for the company is to see how many children overcome their nutrition deficiency each year.

Next initiative came from Credit Agricole of France. We created Grameen Credit Agricole Microfinance Foundation to provide financial support to microfinance organizations and social businesses.

We created a small water company to provide good quality drinking water in a cluster of villages of Bangladesh. This is a joint venture with Veolia, a leading water company in the world. Bangladesh has terrible drinking water problem. In a large part of Bangladesh tubewell water is highly arsenic contaminated, surface water is polluted. This social business water company will be a prototype for supplying safe drinking water in a sustainable and affordable way to people who are faced with water crisis. Once it is perfected, it can be replicated in other villages, within Bangladesh and outside.

We have already established an eye-care hospital specializing in cataract operation, with a capacity to undertake 10,000 operations per year. This is a joint venture social business with the Green Children Foundation created by two singers in their early twenties, Tom and Milla, from England and Norway.

We have signed a joint-venture agreement with Intel Corporation, to create a social business company called Grameen-Intel to bring information technology-based services to the poor in healthcare, marketing, education and remittances.

We also signed a social business joint venture agreement with Saudi German Hospital Group to set up a series of hospitals in Bangladesh.

Many more companies from around the world are showing interest in such social business joint ventures. A leading shoe company wants to create a social business to make sure that nobody goes without shoes. One leading pharmaceutical company wishes to set up a joint venture social business company to produce nutritional supplements appropriate for Bangladeshi pregnant mothers and young women, at the cheapest possible price.

We are also in discussion to launch a social business company to produce chemically treated mosquito-nets to protect people in Bangladesh and Africa from malaria and other mosquito-borne diseases.

Your generation can bring a breakthrough in changing the course of the world. You can be the socially-conscious creative generation that the world is waiting for. You can bring your creativity to design brilliant social businesses to overcome poverty, disease, environmental degradation, food crisis, depletion of non-renewable resources, etc. Each one of you is capable of changing the world. To make a start all that each one of you has to do is to design a business plan for a social business. Each prototype of a social business can be a cute little business. But if it works out, the whole world can be changed by replicating it in thousands of locations.

Prototype development is the key. In designing a prototype all we need is a socially-oriented creative mind. That could be each one of you. No matter what you do in your life, make it a point to design or be involved with at least one social business to address one problem that depresses you the most. If you have the design and the money, go ahead and put it into action. If you have the design but no money, contact your dean — he will find the money. I never heard that MIT has problem in finding money when it has a hot idea in its hand. MIT can even create a social business development fund in anticipation of your requests.

I can tell you very emphatically that in terms of human capability there is no difference between a poor person and a very privileged person. All human beings are packed with unlimited potential. Poor people are no exception to this rule. But the world around them never gave them the opportunity to know that each of them is carrying a wonderful gift in them. The gift remains unknown and unwrapped. Our challenge is to help the poor unwrap their gift.

Poverty is not created by the poor. It is created by the system. Poverty is an artificial imposition on people. Once you fall outside the system, it works against you. It makes it very difficult to return to the system.

How do we change this? Where do we begin ?

Three basic interventions will make a big difference in the existing system : a) broadening the concept of business by including “social business” into the framework of market place, b) creating inclusive financial and healthcare services which can reach out to every person on the planet, c) designing appropriate information technology devices, and services for the bottom-most people and making them easily available to them.

Your generation has the opportunity to make a break with the past and create a beautiful new world. We see the ever-growing problems created by the individual-centered aggressively accumulative economy. If we let it proceed without serious modifications, we may soon reach the point of no return. Among other things, this type of economy has placed our planet under serious threat through climatic distortions. Single-minded pursuit of profit has made us forget that this planet is our home; that we are supposed to make it safe and beautiful, not make it more unliveable everyday by promoting a life-style which ignores all warnings of safety.

At this point let me give you the good news. No matter how daunting the problems look, don’t get brow beaten by their size. Big problems are most often just an aggregation of tiny problems. Get to the smallest component of the problem. Then it becomes an innocent bite-size problem, and you can have all the fun dealing with it. You’ll be thrilled to see in how many ways you can crack it. You can tame it or make it disappear by various social and economic actions, including social business. Pick out the action which looks most efficient in the given circumstances. Tackling big problems does not always have to be through giant actions, or global initiatives or big businesses. It can start as a tiny little action. If you shape it the right way, it can grow into a global action in no time. Even the biggest problem can be cracked by a small well-designed intervention. That’s where you and your creativity come in. These interventions can be so small that each one of you can crack these problems right from your garage. If you have a friend or two to work with you, it is all the more better. It can be fun too.

You are born in the age of ideas. Ideas are something an MIT graduate, I am sure, will not run out of. The question I am raising now — what use you want to make of them ? Make money by selling or using your ideas ? Or change the world with your ideas? Or do both ? It is upto you to decide.

There are two clear tasks in front of you — 1) to end poverty in the world once for all, and 2) to set the world in the right path to undo all the damage we have done to the environment by our ignorance and selfishness. Time is right. Your initiatives can produce big results, even lead you to achieving these goals. Then yours will be the most successful generation in human history. You will take your grand-children to the poverty museums with tremendous pride that your generation had finally made it happen.

Congratulations, for being part of a generation which has exciting possibilities, and advance congratulations to you all for your future successes in creating a new world where everyone on this planet can stand tall as a human being.

Thank you.

From MIT News, June 6, 2008

It was March 2005 and Muhammad Yunus, the microcredit pioneer who recently won the Nobel Peace Prize, had just agreed — over a handshake during lunch at a Paris restaurant — to start a “social business” with the head of Groupe Danone, the French food company.

Mr. Yunus’s Grameen Bank and Danone would recoup only their original investment and a 1 percent profit, reinvesting the rest into the enterprise. But unsure that his new partner, Franck Riboud, Danone’s chief executive, completely comprehended the unusual concept, Mr. Yunus dashed an e-mail message from the car to spell out what they had discussed and asking for a confirmation.

“I still couldn’t believe he understood what I said, because his English is not very good and my English is not very good, either,” Mr. Yunus recalled during a recent visit to New York. “So, I said we should put it on record and a few minutes later I got the confirmation.”

Last month, Grameen Danone, as the new company is named, opened the first of what are to be 50 fortified-yogurt plants in Bangladesh. Zinédine Zidane, the French soccer star who is an “ambassador” for Danone’s programs for children, attended the opening and drew frenzied media attention to the venture.

Over the last year and a half, officials from Danone and Grameen met in Dhaka, Bangladesh’s capital, under Mr. Yunus’s direction to plan the business to suit the needs and challenges of the country, said Laurent Sacchi, senior vice president at Danone, who sits on the joint venture’s board.

For instance, upon Mr. Yunus’s insistence, the company agreed to build 50 small, labor-intensive plants rather than one large and highly automated one as it does in the rest of the world, so more workers and suppliers would benefit from it.

As Mr. Yunus accepts the Nobel Peace Prize tomorrow, the anecdote serves as an example of his persistent and tireless efforts on behalf of the poor. Mr. Yunus, a former professor of economics, met recently with reporters and editors of The New York Times. Following are excerpts:

Q. Microcredit has been in operation in Bangladesh, India and many other places for some years, yet poverty remains entrenched in these countries. What are the most fundamental barriers to alleviating poverty in your mind?

A. My position has been that poverty has not been created by the poor people. The system has created them. The system being institutions, the concepts or framework of living. That’s where the seed of poverty is. Either we pluck them out so that poverty disappears or if this is so involved that you cannot pick them out, you have to create an institution which is free from this virus.

So we go step by step, concept by concept and institution by institution. We picked one institution that is banking. There may be something wrong there that we can fix. So we created another kind of banking — banking which doesn’t depend on collateral.

That’s what my interest is. I’m not stopping at what I’m saying is microcredit. I’m saying information technology is a very important thing. And there are other issues.

Q. Can you talk a little about the relative merits of nonprofit microcredit versus it as a business model and whether that is more sustainable, perhaps?

A. First of all, I’m not in favor of nonprofit things. These are charities. I’m not involved in that. I don’t particularly get excited about it. I’m talking about the business part of it where you do things so that you get your money back.

And there you have a distinction between two kinds: one, to make personal gain out of it. The other one, the way we run the business, for the results we want to produce in people. So one is a profit-maximizing business. The other is a social business. I’m on the social business side of it. If somebody wants to run it as a profit-maximizing business, welcome. This is competition. My mission is to get the person out of poverty rather than how much money I’m making out of it.

Q. Is there any way for you to know, or to guess, how much difference your company has made? What would your country be like without it?

A. One way to look at what we have done is to look within our families, the seven million families that we have worked with. We monitor it every day, every year, to see how many of them have gotten out of poverty, how many of them are coming close to getting out of poverty. We have 10 indicators. If a family fulfills all the 10 indicators, then we declare that the family has gone out of poverty.

Fifty-eight percent of the borrowers of Grameen Bank who have been with Grameen Bank for five years or more have gone out of poverty, according to these 10 indicators. The indicators are: How is the roof? Is it a solid roof? Can it protect from the rain? Do they have a sanitary latrine? Do you have a mosquito net? A blanket for the winter with warm clothing is another. Do they have enough savings in the bank account? Access to pure, safe drinking water? Are all children attending a school?

Studies after studies show that income level is rising, people are getting out of poverty. A World Bank study done in the mid-90s shows their conclusion is that 5 percent of Grameen borrowers get out of poverty every year. Also, 100 percent of the children of Grameen families are in school, 100 percent. And many of them are in high schools, now in universities, medical schools, engineering schools.

Q. Do you track the children of the women whom you have financed through the bank, how far do girls go in school or how well they do professionally?

A. So far as primary education is concerned, 100 percent stay in family education. We have no problem. Now this is also true for the whole country. Our worry in Bangladesh was exactly your worry, that girls will be dropping out, mothers or fathers will keep them home and boys will go out. Secondary education presents a very interesting case in Bangladesh. Girls outnumber boys.

We give scholarships. This is grant money from the bank. We give nearly 30,000 scholarships per year. The scholarship policy is very straightforward. Fifty percent of the scholarships are reserved for girls so that they don’t have to compete with the boys. The remaining 50 percent is open to both boys and girls. As a result, about 63 to 67 percent of the students who got the scholarships are girls.

Our interest is to bring them to higher education. In higher education, girls’ participation is still very low. Although it’s a 100 percent guaranteed student loan, but that’s where parents get into the dilemma of getting them married. So they don’t want to push them into the higher education. We are encouraging them.

Q. In some countries, there’s been a problem that education has created more graduates of colleges than in fact the economy needs.

A. This is a problem. Occasionally I go around and my colleagues go around and meet with these students, not their parents. These are bright young people. It’s not easy to get into higher education in Bangladesh and India. It’s highly competitive. And the seats are limited. So unless your performance is way above, you can’t get in.

And the question finally comes: You helped us a lot, Grameen Bank is something that we see as our family. But we always wonder, when we finish our education, where are we going to get the jobs. Will you help us to find the jobs? This is a question I cannot avoid.

I came up with my kind of response to that and I’m trying to build this thing up. My response is: “Yes, I understand your position, but I have a different view. As Grameen Bank children, you should have your own position, own pledge about your life. And the pledge you make, you repeat every morning: I shall never ask for a job from anybody. I will create jobs.”

They get shocked. They say, I’m asking for a job. He says I will create jobs? How am I going to do that? Some say we don’t know how to create a job. I said, if you don’t know, if you don’t find an answer, you look at your mother, what she has done. She didn’t apply for a job. Even if she applied for a job, she will never get a job. She’s an illiterate person.

She borrowed from Grameen Bank. That’s why you are here. And as a child she helped you to go to school, maintained you and brought you all the way. You are becoming a doctor, you are becoming an engineer. See what she did? You know it much better than I do. If an illiterate woman can create her job, what good is your education if you cannot do better than your mother?

Money is not your problem. And, as an executive of the bank, I’m guaranteeing you, whatever money you need, we have the money.

Compiled from New York Times, 9 December 2006

Along a dirt road in Bangladesh’s green, fertile heartland, 140 miles northwest of Dhaka, workers in flip-flops are hauling bricks, pouring cement and hammering boards. The object of their labor: a small yogurt factory being built by Danone, the French food company, on the outskirts of Bogra.

It may not look like much, but the one-story building behind a wrought-iron gate is the epicenter of a Big New Idea – one that Muhammad Yunus, the winner of last year’s Nobel Peace Prize for his pioneering work on microcredit, thinks can revolutionize a world still being transformed by his first big idea.
“I hope it will be an important landmark in the annals of business,” Yunus says a few days later in Dhaka, at the opening ceremony for the factory in early November. “The concept it represents is very powerful.”

That concept is called “social business enterprise.” It may not be as concise or as self-evidently defining a term as microcredit, but Yunus believes it represents the evolution of his old idea in a new direction. Yunus’s first idea started with lending $27 out of his own pocket and a belief that the poor, particularly poor women, could be empowered as entrepreneurs if only they had the means to start their own small businesses.
Tools for better living

The institution he founded to fund them, Grameen Bank, took three decades to receive worldwide recognition but has now transformed thinking in the banking, development, and nonprofit worlds – attracting the political left to the idea of poverty alleviation and the political right to the idea that entrepreneurialism, rather than charity, is the solution.

Even before winning the Nobel Prize, the self-effacing and charismatic Bangladeshi economics professor was becoming the equivalent of a rock star. He counts Bill Clinton among his close friends, has been hosted by princes and queens of Europe and was offered a private plane to Chicago to appear on “The Oprah Winfrey Show.”

Replicas of Yunus’s program have spread to nearly every part of the globe, including Africa, Latin America, even Harlem. The resulting $9 billion microlending industry, which has drawn names that include Citigroup (Charts), Deutsche Bank (Charts) and the Bill & Melinda Gates Foundation, hinges on the belief that people do not need the threat of seized assets to have an incentive to pay back loans. Grameen boasts an audited repayment rate of 98 percent, far higher than the industry standard for loans to those who have collateral.
Combatting poverty

But microcredit is only half of what Yunus wants to leave as his legacy. Social business enterprise, he says, is next. The idea marries the interests of corporations with economic development in a way that has never been tried before.

Companies would draw on microcredit-funded businesses to incorporate nonprofit models into their bottom-line operations, seeking not just revenue but social returns, and returning the profits to the communities where they operate. “If we can create this,” Yunus says, “the world will be a much better place.”

To put it simply, Yunus believes not that Adam Smith’s concept of profit-motivated, free-market capitalism is flawed, but that it is too limited. The conventional thinking that capitalism breeds wealth creators and competitors who spread that wealth by creating jobs and opportunities for the good of societies has not worked out very well for the majority of the world, Yunus says.

And indeed, a recent UN study concluded that the richest 2 percent of the world’s adults, mostly Americans, Europeans and Japanese, own more than half of global household wealth.
nd, Riboud adds, they can see social benefits, something he says may ultimately be reported on Danone’s bottom line along with the revenue from its Dannon and Stonyfield yogurts and Evian and Volvic mineral waters. “We’re saying that profit maximization is not going to be the only way to measure value,” says Emmanuel Faber, Danone’s former CFO, who now runs Asia-Pacific operations for the company and who arranged the lunch between his boss and Yunus. “There is a whole emerging area of picking stocks for social impact.”

Ideas along these lines are being discussed within corporations such as GE (Charts), Unilever, Coca-Cola (Charts), PepsiCo (Charts) and Cargill, says Marc Van Ameringen, executive director of the Global Alliance for Improved Nutrition in Geneva.

“The new wave in business is, forget corporate social responsibility and philanthropy – how do you integrate this into your core business?” he says. “The idea Danone has of creating a social dividend for shareholders – that’s cutting-edge. No one else has come up with this interesting a model. It supports your brand, returns your capital, you’re not going to lose money and you give your shareholders a vision of doing something good.”

Adds Antoine Hyafil, dean of faculty at the HEC School of Management in Paris, where the MBA program in sustainable development includes studies in social business enterprise: “This is the kind of thing that can change the mentality within business. Even if it replaces corporate giving, money given for philanthropy is often misused.” Rethinking the divide between profit motive and social good, Hyafil says, is an emerging trend for business, and Yunus is at the forefront of the movement.

Yunus says business schools should start turning out social-business MBAs trained in creating social returns: “People say, ‘Don’t be stupid.’ I say there are a lot of stupid people like me. I don’t want to make money. Lots of young people don’t want to make money, because their mother, their father made so much money. They don’t know what to do with their lives. There are many such kids in the U.S. They don’t have any challenge left. Give them the challenge: Fix the world. Create a social business enterprise.”
Nobel Peace Prize winner itching for a fight

On a peaceful Friday morning in November, during a lull between strikes and riots that have brought Dhaka to a standstill in advance of parliamentary elections, Yunus pays a visit to the village of Basta, a half-hour drive from the capital. He has come to check on Grameen Bank’s microlending programs.

In a country like Bangladesh, paralyzed by strikes and inept governance, it’s obvious why Yunus sees business rather than the state as the way to solve social problems. Without Grameen and other nonprofits, the situation in Bangladesh would be far worse.

While half the country still lives below the poverty line, Grameen says that 5 percent of its borrowers escape poverty every year, helping to double the country’s annual poverty-reduction rate from 1 percent to almost 2 percent since the beginning of the decade.
Fierce opposition

Yunus had to work hard to convince mullahs in the majority Muslim country that the Prophet Muhammad would have supported the idea of lending primarily to women. The idea of economically empowering women was a radical one, and Grameen branches in Bangladesh became the targets of occasional bomb blasts by Islamic fundamentalist groups.

Yet it’s the criticism from both left and right intellectuals that has hurt the microcredit movement most over the years. “They don’t throw grenades and firepower, but they throw intellectual grenades all the time, so it’s no less harmful,” Yunus says. “The grenades coming from the mullahs attack only one branch, but the grenades that the intellectuals and academics throw at us hit the whole system.”

Among the more frequent criticisms leveled at Grameen by these critics is that microlending is too small to make a difference – that it’s making poverty more tolerable rather than eliminating it. But after starting out granting small loans of $10 to $20, Grameen now allows members with solid repayment histories to up the ante and borrow as much as $18,000.

Ravia Khatun, a wizened woman dressed in black who gives her age as around 60, says she graduated from buying cows with her Grameen loan to buying a $6,000 Toyota pickup truck, which her sons use to ferry passengers and produce to the local market.
“Farming cows is a troublesome business,” she says, calculating her family’s daily profit from the taxi business at nearly $23 – more than the minimum wage of a garment worker for a whole month in Bangladesh. “This taxi business is better, and my sons can take care of it,” she says, “so I sold all my cows.”

Microlending also offers many families a way into the middle class. Take the case of Riziya Begum, who bought her first cow with a $30 loan from Grameen Bank. Before that, she and her husband were among the millions of poor farmers in Bangladesh, growing rice and living day to day.

“Sometimes I ate, sometimes I didn’t have food,” she says, sitting in her corrugated-tin house – the equivalent of a middle-class home in Basta. Begum, who is about 40 (she doesn’t know her birth date), bought land with the money she earned from selling cows. She sent her eldest son to work in Saudi Arabia with money she earned from selling some of her land. And he sent enough money home a few years ago for her to buy a TV.

Begum also has her own well for drinking water, a second plot of land on which she and her husband plan to build brick homes for their two sons when they get married, and an electric fan. “Even my cow has a fan now,” she says.

But her greatest pride is her 8-year-old daughter, Aklima, who attends school every day – the first girl in many generations of Begum’s family to have an education. Begum is considering taking out a Grameen higher-education loan to send Aklima to a university. Aklima, it turns out, wants to be a doctor. “I saw it on TV,” she says.

The women members of Grameen Bank rely on peer pressure to encourage one another to pay back loans, and few, if any, ever default – instead turning to relatives and friends to help them make their payments.

Yunus concedes that those really in trouble, such as victims of Bangladesh’s recurring natural disasters, may be allowed to take more time to pay by rescheduling their debts. In the case of death or incapacitation, an insurance plan paid into by all borrowers covers the loan principal.

Grameen is self-sustaining, charging interest rates of 20 percent on basic loans and lending only the money it takes in from members repaying loans (and the 33 percent of depositors who are not borrowers). Money lenders, to whom villagers would otherwise turn, sometimes charge up to 10 percent a day. Interest rates on Grameen home-improvement loans and mortgages are 8 percent.

Grameen also set up an interest-free loan program for beggars. There’s no obligation to pay back the loans, but the beggars are encouraged to use them to buy small trinkets or food to take on their rounds and try to sell. If they do pay back their principal, they can get another loan.
8 technologies to save the world

So far, the program has turned 78,000 beggars into merchants, and some 2,000 of them report that they have stopped begging entirely, breaking generations of tradition. Sajeda Begum of Ittahata village north of Dhaka, who gives her age as around 35, is an example. With a loan of 1,000 taka ($15), she started buying eggs from the market in the mornings, taking them home and boiling them, then selling them for a 2-cent markup to factory workers leaving their shifts.

Her 40-cent-a-day profit is enough to feed her family and make loan payments. “No more begging,” she says. “I hope to borrow another 3,000 to 4,000 ($45 to $60) to expand this business. It makes money.”

Grameen has provided Bangladeshi women the financial means to leave abusive husbands. They own homes in their own names, no longer pay dowries, live longer, have improved nutrition and hygiene and are better able to care for their families. They transcend the class status they were born into through entrepreneurialism and education.

“I am destroying the culture, yes,” Yunus says, beaming mischievously at the thought. “Culture is a dynamic thing. If you stay with the same old thing over and over, you don’t get anywhere.”

The same applies to Yunus’s concept of microcredit. Sticking with the same old idea over and over only gets you so far. To really get somewhere, Yunus says … well, there’s this Big New Idea.

Fortune : 15 March 2007

The way it works is that instead of giving money away to a non-profit charity, you help create businesses — in fact new business models. As little as a $25 can motivate an entrepreneur in the developing world, by funding a microcredit organization such as Kiva.org, which gives out small loans. This process allows that money to grow and be reused and help create true sustainability, unlike the charity dollar which must be raised each year. Now try the same thing on the corporate level and you can begin to see that it is truly possible to create a “world without poverty”, and that poverty is indeed an “artificial construction.” These words have been stated time and again by Professor Muhammad Yunus’, the 2006 Nobel Peace Prize winner, and they are put forth in his latest book, Creating a World Without Poverty: Social Business and the Future of Capitalism. Professor Yunus, also known as the “banker to the poor” is asking that the poor be poor no more and is inviting major international corporations to not make a profit off the poor, but actually create sustainable businesses which also provide a public service, be it in the areas of health, technology, infrastructure, communications, education, etc.

Microsoft’s Bill Gates is now also on board, and at Davos just the other day spoke about “social business” as “creative capitalism.” Interestingly enough, many at the Gates Foundation, and some retired Microsoft execs are already working with Yunus, such as Paul Maritz, chair of the Grameen Foundation and Grameen Technologies. In other words, slowly if surely, the leaders from the symbol of hyper-capitalist culture are becoming those dedicated to the cause of eliminating poverty, utilizing that same capitalist-friendly optimism and innovation. In fact, many of them are the biggest supporters of Yunus: former eBay chief, Jeff Skoll, Paul Maritz, Intel’s Craig Barrett, just to name a few. Arguably many of those deeply involved with the world of innovative technology have always had a utopian belief that advances would serve everyone…unfortunately the reality is that there has been very little “trickle-down” technology and business creation. There needs to be a revised business structure and capital which serves not just profit but human beings in order to create more than “trickle down” but rather a wave of sustainability and optimism. And not just in the developing world, but in places such as impoverished areas of the United States as well.

With two such influential people as Gates and Yunus focusing on innovation, capital-driven change-making and the world economy, there is nothing to stop the social business model from snowballing into a worldwide movement, which can indeed eliminate poverty. That Davos, the meeting place of the truly wealthy and powerful, should now come to include themes that were often spoken of at Porto Alegre and conferences, populated more by NGOs than executives means that the war has indeed been won. The words being used by Yunus are being spoken by someone who has seen both what great wealth can do, and what it could potentially do if harnessed in a more evolved way to help all the people of the planet.

There is nothing wrong with capitalism, simply that it can be put to better use than serving greed, speculation and that miniscule percentage at the very top. It does need to be distributed but in an intelligent way, one based also on human needs so that the social businesses created have a true purpose beyond simply profit. No one needs a billion dollars, and unfortunately, most billionaires and millionaires are not Bill Gates and Warren Buffett and Jeff Skoll, donating the bulk of their money to good causes, while still following what most would call ‘sound” business practices.

Yunus already has some major companies onboard such as Danone, building yogurt factories in rural Bangladesh, providing vitamin enriched food, at an affordable price for the poor. More announcements about other partnerships are in the works. One successful social business is Grameen telephone which has built the infrastructure of the largest phone company in Bangladesh. Social entrepreneurs are also an important part of this growth and sustainability and organizations such as Ashoka and its funder, Bill Drayton, are making sure that funds are channeled into the hands of “change-makers” who understand locally what kind of business is needed and how to make it truly sustainable. Others include David Bornstein,, whose powerful book, How to Change the World, continues to be taken down off my bookshelf in Paris by various friends.

Call it “creative capitalism” or “social business,” but it is all about believing in the potential of individuals to help themselves, and that they indeed want to be able to do so, to work and earn a living and be proud to look their fellow human beings in the eye.

We are more than just money making machines and do-gooders, we are part of a common humanity. And if someone else’s child is suffering, somehow, so is mine. And thank you Klaus Schwab at Davos for truly promoting public-private partnerships and creating a forum which is evolving into more than another CEO retreat , but rather a forum for opinion leaders, governments, business and many organizations serving humanity to gather and ask hard questions, while allowing for the opportunity to come up with concrete solutions

Vivian Norris in The Huffinton Post on January 24, 2008