Written by Shanjida Hossain
Top Half of the World Population Owning 99% of Global Wealth
Social business refers to a non-loss, non-dividend company system with a purpose of only achieving one or more social objectives. It is an idea that has been conceptualized and championed by Professor Dr. Muhammad Yunus, who believes that it has the capacity to solve critical problems of the underprivileged sector of the society. Social Business has been claimed to possess the ability of addressing the sustainable development goals in the spheres of social, economic and environmental issues.
According to Professor Dr. Muhammad Yunus, the current capitalist system justifies that money is the only source of happiness for human beings. He claims how this model disregards the core essence of being human and challenges it using an altruistic business approach.
Social business is in no way a non-profit making business. In fact, it believes in making profits but in an economically and financially sustainable manner, the decrease in profit margin being filled with non-monetary components like personal satisfaction and ‘super happiness’.
An investor of any social business will only get back the amount they invested initially without gaining any dividend beyond that point. The profits made by the business are solely for the purpose of reinvesting in its operations for upscaling.
Model of Social Business (According to Reaching the Rich World’s Poorest Customers, Harvard Business Review)
Customer Exclusivity: Social businesses do not typically produce similar products like profit-making businesses (PMBs). The socially-driven company, from the beginning, determines the target market, eligibility criteria (e.g. people over the age of 60 who have mobile phones) and designs products specifically for this niche.
High-quality products and services: Unlike PMBs who often manufacture low-quality products at a lower price for financially disadvantaged people, social businesses produce same-quality products at a lower price.
Carefully designed solution: Social businesses identify the social problem first and design solutions keeping this problem at the core unlike PMBs.
Social Businesses are claimed to have hidden payoffs, with spillover effects on the company’s reputation, work environment and hence profits. The payoffs include-
Highly motivated employees
A tight-knit ecosystem of trust with stakeholders
Soaring public image
Social Business in the Context of Bangladesh
Grameen bank already demonstrated that the poor people can do business with financial institutions, creating jobs not just for themselves but for other people too- a huge boost to the economy of Bangladesh. And if the entrepreneurship spirit of all the poor is ignited, there will be zero unemployment in the future.
Drawbacks of Lending to the Poor
However, lending loans to the poor is not as simple. During the 1980s in India, lending was mostly staged on the basis of political priorities rather than economic needs. For instance, hefty loans were made to farmers in districts right before elections where competition was perceived to get tough. Additionally, despite a proper agreement between financial institutions and the poor, it is easy for the poor from opting out, leading to a multiplier effect, where the interest rate of the loan continues to go up giving the borrower more reason to not pay.
How sustainable do you think the non-dividend model of social business is for addressing global poverty, considering investment wholly depends on trust with the investors and distributors?
Do you think that the social business model will be effective in solving health and education-based poverty traps, especially in developing countries like Bangladesh? Why or why not?
Do we keep on designing solutions for the poor people’s lives or do we leave these decisions to them, only supplying services to them when they demand?
Muhammad Yunus et al., Reaching the Rich World’s Poorest Customers, Harvard Business Review
Muhammad Yunus, Redesigning Economics to Redesign the World
Abhijit V. Banerjee & Esther Duflo, Poor Economics