Forty-two People, Twenty-Seven Dollars
Muhammad Yunus was not a banker, he was an economics professor who felt the emptiness of the economics theories and “wanted to do something immediate to help” the poor around him. He talked to many of the poor people and found out, to his shocking surprise, that they needed just a little credit to escape the exploitation of the moneylenders and start their own small businesses. As it turned out, 42 people needed a total of $27.
Driven by this discovery, Yunus founded the Grameen Bank, a bank specifically designed to help the poor, especially women, to become self-sufficient through self-employment. Millions of people freed themselves from the bondage of poverty, and Yunus and the Grameen Bank were awarded the Nobel Peace Prize in 2006 for their contribution. Yunus wrote about his experience in the bestseller “Banker to the Poor”.
Problems with the Current Business Framework
“We’ve designed concepts that are too narrow — our concept of business (which makes profit the only viable human motive), our concept of credit-worthiness (which automatically eliminates the poor), our concept of entrepreneurship (which ignores the creativity of the majority of the people), our concept of employment (which relegates humans to passive receptacles rather than active creators).”
“My work with Grameen Bank has brought me into close touch with the poorest of the poor. This experience has given me an unshakable faith in the creativity of human beings. None of them is born to suffer the misery of hunger and poverty. Each one of those who suffer this misery has the potential to be as successful a human being as anybody else in this world.”
In this book, Yunus expands the horizon and introduces the readers to a world of social businesses. Businesses that set the social good as the primary goal while maintaining profitability.
The book tells the story of how Yunus, Franck Riboud, the chairman and CEO of Group Danone, and a dedicated group of people from Danone, in collaboration with Grameen Bank, started Grameen Danone, to provide fortified yogurt to the poor children in Bangladesh.
The business was purposely designed to serve the local people. The production plant was small, so as to “bring food production, retailing, and consumption as close to one another as possible”. They used milk produced by local farmers, employed local people in the production plant and delivered the products to the local markets. The plant was perfectly integrated into the lives of the local people. On the other hand, business was carried out in exactly the same way as a profit-oriented business. It’s interesting how Yunus and Riboud first intuitively seized the opportunity without rigorous analysis, how the Danone team conducted extensive market research to determine the necessary ingredients and the preferred taste of the yogurt, and how they even invited the soccer star Zidane to Bangladesh to promote the product.
Essential Features of a Social Business
Profits are reinvested for business expansion and growth only (or given to those who are most disadvantaged). This is what distinguishes a social business from a profit-maximizing business, whose bottom line is to generate profits for the shareholders. “No one can serve two masters”.
This is the difference between a social business and a charity or a non-profit organization. A social business creates value whereas a charity simply redistributes it.
3. Achieve social benefits
Some questions remain about how social businesses should be evaluated, regulated and/or audited. How can the social businesses compete with the profit-maximizing businesses? Should the government subsidize or provide tax incentives to social businesses?
“Poverty doesn’t only condemn humans to lives of difficulty and unhappiness; it can expose them to life-threatening dangers. Because poverty denies people any semblance of control over their destiny, it is the ultimate denial of human rights.”