Social Business
Entrepreneurs
Are the Solution
http://www.grameen-info.org/bank/socialbusinessentrepreneurs.htm
Preview of Muhammad Yunus: Building Social Business
Ventures ...
Watch video - 4 min 36 sec -
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Muhammad Yunus
Capitalism is Interpreted too Narrowly
Many of the problems in the world remain unresolved because we
continue to interpret capitalism too narrowly. In this narrow
interpretation we create a one-dimensional human being to play the role
of entrepreneur. We insulate him from other dimensions of life, such as,
religious, emotional, political dimensions. He is dedicated to one
mission in his business life ---- to maximize profit. He is supported by
masses of one-dimensional human beings who back him up with their
investment money to achieve the same mission. The game of free market
works out beautifully with one-dimensional investors and entrepreneurs.
We have remained so mesmerised by the success of the free market that we
never dared to express any doubt about it. We worked extra hard to
transform ourselves, as closely as possible, into the one-dimensional
human beings as conceptualised in theory to allow smooth functioning of
free market mechanism.
Economic theory postulates that you are contributing to the society and
the world in the best possible manner if you just concentrate on
squeezing out the maximum for yourself. When you get your maximum,
everybody else will get their maximum.
As we devotedly follow this policy sometimes doubts appear in our mind
whether we are doing the right thing. Things don't look too good around
us. We quickly brush off our doubts by saying all these bad things happen
because of "market failures"; well-functioning market cannot
produce unpleasant results.
I think things are going wrong not because of "market failure".
It is much deeper than that. Let us be brave and admit that it is because
of "conceptualisation failure". More specifically, it is the
failure to capture the essence of a human being in our theory. Everyday
human beings are not one-dimensional entities, they are excitingly
multi-dimensional and indeed very colourful. Their emotions, beliefs,
priorities, behaviour patterns can be more aptly described by drawing
analogy with the basic colours and millions of colours and shades they
produce.
Social Business Entrepreneurs Can Play a Big Role in the
Market
Suppose we postulate a world with two kinds of people, both
one-dimensional, but having different objectives. One type is the
existing type, i.e. profit maximizing type. Second type is a new type,
who are not interested in profit-maximization. They are totally committed
to make a difference to the world. They are social-objective driven. They
want to give better chance in life to other people. They want to achieve
their objective through creating/supporting sustainable business
enterprises. Their businesses may or may not earn profit, but like any
other businesses they must not incur losses. They create a new class of
business which we may describe as "non-loss" business.
Can we find second type of people in the real world ? Yes, we can. Aren't
we familiar with "do-gooders" ? Do-gooders are the same people
who are referred to as "social entrepreneurs" in formal
parlance. Social entrepreneurism is an integral part of human history.
Most people take pleasure in helping others. All religions encourage this
quality in human beings. Governments reward them by giving tax breaks.
Special legal facilities are created for them so that they can create
legal entities to pursue their objectives.
Some social entrepreneurs (SE) use money to achieve their objectives,
some just give away their time, labour, talent, skill or such other
contributions which are useful to others. Those who use money may or may
not try to recover part or all of the money they put into their work by
charging fee or price.
We may classify the SEs, who use money, into four types :
i) No cost recovery
ii) Some cost recovery
iii) Full cost recovery
iv) More than full cost-recovery
Once a SE operate at 100% or beyond the cost recovery point he has
entered the business world with limitless possibilities. This is a moment
worth celebrating. He has overcome the gravitational force of financial
dependence and now is ready for space flight ! This is the critical
moment of significant institutional transformation. He has moved from the
world of philanthropy to the world of business. To distinguish him from
the first two types of SEs listed above, we'll call him "social
business entrepreneur" (SBE).
With the introduction of SBEs, the market place becomes more interesting
and competitive. Interesting because two different kinds of objectives
are now at play creating two different sets of frameworks for price
determination. Competitive because there are more players now than
before. These new players can be equally aggressive and enterprising in
achieving their goals as the other entrepreneurs.
SBEs can become very powerful players in the national and international
economy. Today if we add up the assets of all the SBEs of the world, it
would not add up to even an ultra-thin slice of the global economy. It is
not because they basically lack growth potential, but because
conceptually we neither recognised their existence, nor made any room for
them in the market. They are considered freaks, and kept outside the
mainstream economy. We do not pay any attention to them, because our eyes
are blinded by the theories taught in our schools.
If SBEs exist in the real world, it makes no sense why we should not make
room for them in our conceptual framework. Once we recognise them
supportive institutions, policies, regulations, norms, and rules will
come into being to help them become mainstream.
Market is always considered to be an utterly incapable institution to
address social problems. To the contrary, market is recognised as an
institution significantly contributing to creating social problems
(environmental hazards, inequality, health, unemployment, ghettoes,
crimes, etc.). Since market has no capacity to solve social problem, this
responsibility is handed over to the State. This arrangement was
considered as the only solution until command economies were created
where State took over everything, abolishing market.
But this did not last long. With command economies gone we are back to
the artificial division of work between the market and the State. In this
arrangement market is turned into an exclusive playground of the personal
gain seekers, overwhelmingly ignoring the common interest of communities
and the world as a whole.
With the economy expanding at an unforeseen speed, personal wealth
reaching unimaginable heights, technological innovations making this
speed faster and faster, globalisation threatening to wipe out the weak
economies and the poor people from the economic map, it is time to
consider the case of SBEs more seriously than we did ever before. Not
only is it not necessary to leave the market solely to the personal-gain
seekers, it is extremely harmful to mankind as a whole to do that. It is
time to move away from the narrow interpretation of capitalism and
broaden the concept of market by giving full recognition to SBEs. Once
this is done SBEs can flood the market and make the market work for
social goals as efficiently as it does for personal goals.
Social Stock Market
How do we encourage creation of SBEs ? What are the steps that we
need to take to facilitate the SBEs to take up bigger and bigger chunks
of market share ?
First, we must recognise the SBEs in our theory. Students must learn that
businesses are of two kinds : a) business to make money, and b) business
to do good to others. Young people must learn that they have a choice to
make --- which kind of entrepreneur they would like to be ? If we broaden
the interpretation of capitalism even more, they'll have wider choice of
mixing these two basic types in proportions just right for their own
taste.
Second, we must make the SBEs and social business investors visible in
the market place. As long as SBEs operate within the cultural environment
of present stock markets they'll remain restricted by the existing norms
and lingo of trading. SBEs must develop their own norms, standards,
measurements, evaluation criteria, and terminology. This can be achieved
only if we create a separate stockmarket for social business enterprises
and investors. We can call it Social Stock Market. Investors will come
here to invest their money for the cause they believe in, and in the
company they think is doing the best in achieving a particular mission.
There may be some companies listed in this social stock market who are
excellent in achieving their mission at the same time making very
attractive profit on the side. Obviously these companies will attract
both kinds of investors, social-goal oriented as well as personal-gain
oriented.
Making profit will not disqualify an enterprise to be a social business
enterprise. Basic deciding factor for this will be whether the social
goal remains to be enterprise's over-arching goal, and it is clearly
reflected in its decision-making. There will be well-defined stringent
entry and exit criteria for a company to qualify to be listed in the
social stock market and to lose that status. Soon companies will emerge
which will succeed in mixing both social goal and personal goal. There
will be decision-rules to decide upto what point they still qualify to
enter the social stock market, and at what point they must leave it.
Investors must remain convinced that companies listed in the social stock
market are truly social business enterprises.
Along with the creation of the Social Stock Market we'll need to create
rating agencies, appropriate impact assessment tools, indices to
understand which social business enterprise is doing more and/or better
than others --- so that social investors are correctly guided. This
industry will need its Social Wall Street Journal and
Social Financial Times to bring out all the exciting, as
well as the terrible, news stories and analyses to keep the social
entrepreneurs and investors properly informed and forewarned.
Within business schools we can start producing social MBAs to meet the
demand of the SBEs as well as preparing young people to become SBEs
themselves. I think young people will respond very enthusiastically to
the challenge of making serious contributions to the world by becoming
SBEs.
We'll need to arrange financing for SBEs. New bank branches specialising
in financing social business ventures will have to come up. New
"angels" will have to show up on the scene. Social Venture
Capitalists will have to join hands with the SBEs.
How to Make a Start
One good way to get started with creating social business enterprises
would be to launch a design competition for social business enterprises.
There can be local competition, regional competition and global
competition. Prizes for the successful designs will come in the shape of
financing for the enterprises, or as partnership for implementing the
projects.
All submitted social business proposals can be published so that these
can become the starting points for the designers in the next cycles, or
ideas for someone who wants to start a social business enterprise.
Social Stock Market itself can be started by a SBE as social business
enterprise. One business school, or several business schools can join
hands to launch this as a project and start serious business
transactions.
Let us not expect that a social business enterprise will come up, from
its very birth, with all the answers to a social problem. Most likely, it
will proceed in steps. Each step may lead to the next level of
achievement. Grameen Bank is a good example in this regard. In creating
Grameen Bank I never had a blue-print to follow. I moved one step at a
time, always thinking this step will be my last step. But it was not.
That one step led me to another step, a step which looked so interesting
that it was difficult to walk away from. I faced this situation at every
turn.
I started my work by giving small amount of money to a few poor people
without any collateral. Then I realised how good the people felt about
it. I needed more money to expand the programme. To access bank money, I
offered myself as a guarantor. To get support from another bank, I
converted my project as the bank's project. Later, I turned it into
central bank project. Over time I saw that the best strategy would be to
create an independent bank to do the work that we do. So we did. We
converted the project into a formal bank, borrowing money from the
central bank to lend money to the borrowers. Since donors became
interested in our work, and wanted to support us, we borrowed and
received grants from international donors. At one stage we decided to be
self-reliant. This led us to focus on generating money internally by
collecting deposits. Now Grameen Bank has more money in deposits than it
lends out to borrowers. It lends out half a billion dollars a year, in
loans averaging under $ 200, to 4.5 million borrowers, without
collateral, and maintains 99 per cent repayment record.
We introduced many programmes in the bank --- housing loans, student
loans, pension funds, loans to purchase mobile phones to become the
village telephone ladies, loans to beggars to become door-to-door
salesman. One came after another.
If we create the right environment, SBEs can take up significant market
share and make the market an exciting place for fighting social battles
in ever innovative and effective ways.
Lets get serious about social business entrepreneurs. They can brighten
up this gloomy world.
Santa Barbara Permaculture Network
(805) 962-2571
P.O. Box 92156, Santa Barbara, CA 93190
margie@sbpermaculture.org
www.sbpermaculture.org
"We are like trees,
we must create new leaves, in new directions, in order to grow." -
Anonymous