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Yunus and Social Business

Since publication of his book Creating A World Without Poverty: Social Business and the Future of Capitalism in 2008, Muhammad Yunus has been travelling the world promoting his concept of social business as the answer to the failings of free …

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Since publication of his book Creating A World Without Poverty: Social Business and the Future of Capitalism in 2008, Muhammad Yunus has been travelling the world promoting his concept of social business as the answer to the failings of free market capitalism.

In 2010 he published his follow up book Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs.  Yunus’s contention is that the profit driven business which distributes dividends to shareholders has not only failed to deliver anything to the people at the bottom of the pyramid but is a “half built structure” predicated on a false or partial view of what humans want and are:

“Capitalism takes a narrow view of human nature, assuming that people are one- dimensional beings concerned only with maximum profit. The free market is based on this one-dimensional human being… Things are going wrong not because of ‘market failures’. The problem is much deeper. Mainstream free market theory suffers from ‘conceptualization failure’, a failure to capture the essence of what it is to be human.”

People are not just units of labour in a free market. We are fathers, mothers, lovers, children; we want a better world, no-one wants people to starve or die of curable diseases. Yet they do, in their millions. Why? Because, argues Yunus, we have allowed this one eyed view of human-ness to create the architecture of business.

The world now urgently needs a business model which will address the problems of the world and appeal to the altruism of the full human being. “I argue”, Yunus has said, “that, given the opportunity, people will come into the marketplace to express their selfless urges by running special types of businesses specifically designed to improve the lot of humanity”.

The Seven Principles of Social Business

1. 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.

2. Financial and economic sustainability.

3. Investors get back their investment amount only. No dividend is given beyond investment money.

4. When investment amount is paid back, company profit stays with the company for expansion and improvement.

5. Environmentally conscious.

6. Workforce gets market wage with better working conditions.

7. …do it with joy.

Yunus sees a future in which there is a global social business economy thriving beside the for-profit world. There will be multi billion dollar social investment funds and a social business stock exchange as well as banks that just focus on social business development and support.

How will these businesses be funded? Take Grameen Danone Foods Ltd as an example. The “investor”, in this case Danone, puts in its €1 million to start up the business. Once the business is profitable it will get back its €1 million but no more. No share of profits. No interest. No adjustments for inflation or currency fluctuations.

The Economist magazine in London was unimpressed with this:

“Mr Yunus might argue that other non-profits rely on donors, not investors. But the difference is more apparent than real. 

A social business promises to repay its backers’ money after, say, five years, but with a 0% return. This is just another way of asking investors to donate the interest they would have received had they left their money in the bank instead. (www.economist.com 21/02/08)

Inevitably, Yunus has been criticised as being naïve, as dressing up what is in essence a charitable business model, as out of touch and so on. He points to the scepticism and disbelief he encountered when he first suggested thirty years ago that the poor would pay back loans.

Yunus acknowledges that it is early days. His books do little more than sketch out what this new global economic architecture could look like. One reviewer lamented the lack of “ … efforts to operationalize the concepts and a more detailed discussion on the role of the entrepreneur motivated by social passion would have given more weight to the argument”. But has said what he wants is debate, conversation, dialogue and action to make his vision real:

“If everything is money driven, what would happen to the world? If everything is social business what happens? Half and half? What happens? We can make those scenarios.”

His book is a call to recruit pioneers to his new economic frontier:

“Social business is the missing piece of the capitalist system. Introduction of it may save the system by empowering it to address the overwhelming global concerns that remain outside mainstream business thinking. Thus, generating ideas for social business is the most immediate challenge for today’s business thinkers. Once the ideas are circulating, it is only a matter of time before the best of them are translated into concrete actions for the betterment of humankind”.

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