Business Can Solve Some of Society’s Most Pressing Problems
By Tyler Collins
Nobel Laureate, Muhammad Yunus, founder of Grameen Bank, was a keynote speaker at The SRI Conference in early October, produced by First Affirmative Financial Network. In his inspirational presentation, “Social Business: A Way to Solve Society’s Most Pressing Problems,” Yunus shared some of the experiences that have helped position him as a global advocate for “social business.”
Yunus uses the term “social business” to describe businesses created with the intention of solving a social or environmental problem. Making money is necessary in order for the business to be sustainable, but profit is not the primary motivation. He explained his beginnings with social business through his creation of Grameen Bank.
What became Grameen Bank started with Yunus loaning $27 among 42 people in his village as an experiment—and a way to circumvent the loan sharks who charged between 50 and 500 percent interest on very small loans. The experiment was successful. The borrowers used the money to enhance the well-being of their families and paid it back.
Since its inception in 1983, Grameen Bank has grown dramatically; having worked with 8.5 million borrowers and lent $1.5 billion (average loan: $250). The Grameen Bank model has become the global model for what is now commonly called “microfinance.”
Rejecting many of the “normal” bank loan practices in developing nations, Grameen has always focused on women; 97% of borrowers are women. Of course, conventional wisdom was that women would be poor borrowers because of lack of money management skills. Here are Yunus’ thoughts on this topic:
“Since she was born, she was told she was no good… She grew up in a very apologetic way. ‘Sorry I was born and I happen to be a girl. You were looking for a boy but…’ She doesn’t have any confidence in anything. That is why it is our job to go back again and again; build some confidence in her, and show examples of what others are doing. The idea is to peel off all of the fears that she has accumulated over the years… someday the real person will emerge.”
Muhammad Yunus spoke of how traditional corporations can become involved in social business practices. As an example, he told the story of a joint venture with Dannon. Recognizing the serious problem of malnutrition in Bangladesh (50% of children are malnourished), he approached Dannon with a social business concept. He proposed that Dannon create a yogurt that included all the vital nutrients for children, while still being delicious and, most importantly, very inexpensive.
He agreed to split the €1cost of funding this venture, but Dannon ran into legal issues with providing their share of the capital. As a publicly traded company, the board of directors were fearful of using shareholder capital for non-dividend bearing activities.
Eventually the company decided to send a letter to shareholders, as well as employees, asking if they would voluntarily contribute a portion of their dividend payments or paychecks toward this social business venture. An amazing 98% of shareholders signed up and €65 million was raised—substantially more than needed.
Subsequently, Dannon created a social business fund focused on jump-starting new social businesses around the world. To date, they have founded twelve social businesses in six different countries with €92 million invested.
Yunus is truly an inspiration to millions of companies, investors, and entrepreneurs looking to harness the power of business to create a better world.
Posted: October 25, 2012