“A charity dollar has only one life. A Social Business dollar has endless life.”
– Professor Muhammad Yunus
A Social Business (SB) is a company created for social benefit rather than private profit. Like an NGO, it has a social or environmental mission, but like a business, it generates its own revenues to cover its costs. Investors may recoup their investment. All profits are reinvested for growth and innovation, or to seed new SB ventures. SB aims to expand the current capitalist model by focusing on goals that serve society at large rather than personal profit. Financial sustainability is only a constraint to reach the social aim rather than an end in itself. Since SBs need to compete in the free market to provide their goods or services, they are inherently efficient in serving their social goal.
Below is the continuation of the interview we conducted with Prof.Muhammad Yunus:
TDM: In November, there is a Global Social Business Summit to be held in Malaysia. What do you hope to achieve in this summit and what does it mean for Asians?
Yunus: Every year we hold a summit because this brings people together to review what they have done, what they want to do and plan for the future. In the last four years, they were held in Europe. In one summit in Vienna, we were approached by the Malaysian government and sent us invitation to come to Malaysia and host the conference there. They will provide the venue and logistical support. It was a good opportunity since we can hold it in Asia this time. myHarapan is the official host, a youth organization in Malaysia which means My Hope. We bring people who are already involved in social business. They tell you what they have already been doing. A lot of networking and designing future programs.
TDM: How can local social businesses flourish in the Philippines?
Yunus: Same way with what we do with other countries. When we are invited to a country what we do is to create two companies. One is a social business incubation company. They help people come up with business ideas.
TDM: And how is it funded?
Yunus: That is the second company. We create a social business fund. The incubation company comes up with the ideas and the social business fund invests in these companies. It is done simultaneously. We do not wait for people to make it happen. People create social businesses. People see it, they get interested in it, they fund the social business. We match the social business they want to fund. So for example, if you ask us to come to the Philippines you have to follow the process. You have to give us five million for the social business fund and from there we will create the social business incubation company that will be funded for the next three or four years. After that, we decide if we want to continue funding these companies or not. If you want to continue, then you have to put in additional funding. If not, then we stop.
TDM: What business model do you follow?
Yunus: Just like any other except that this business is not for making money but to solve problems; for example, skills development. So you create a school to train people for specific skills needed by the businesses and you make sure to design it in such a way that it will cover its costs and not remain in deficit. You’re happy to break even since your concern is for your graduates to start their own business or they can be employed with their new skills.
TDM: Is there a difference between a social enterprise and a social business or are they one and the same?
Yunus: There is a difference. A social enterprise is not restricted to companies which don’t make profit or don’t give dividends to their owners. Profit-making companies also call themselves social enterprises but in social businesses, they are strictly non-dividend. You can take your money back or take back your investment from the surplus. So if you put in a million dollars after one year you get back your one million dollars nothing more than that. In social enterprise, any company that is doing good for the people but they are making money in doing that. When it comes to social business, the idea of making money has to be removed from your mind.
TDM: I have seen some companies start out as social business and then once the money starts coming in then they transform into a social enterprise.
Yunus: Yes that can happen. Maybe in the beginning you start as a social business but in the middle of it, you decided to convert it to run it like a regular enterprise but you don’t tell anyone. That’s why in our case, we require social businesses to get a certification from an agency like an auditing firm. You have to submit an audit report as a social business and the certification company tells you your strong points or weak points so you can become a stronger social business. Every year you need to be certified.
TDM: You said, “I am convinced that we can create a world without poverty. If we believe that, it is possible.” Do you still believe in that statement?
Yunus: I thought you believed in it, too. Why are you asking me? We should believe that. And that’s how the United Nations believes too. That’s why they adopted the Millenium Development Goals saying that by 2015, all countries in the world will reduce poverty in half. So I believe that it can be done so I’m supporting that. And it is coming to that level now that 2015 is coming very soon and many countries will achieve that.
TDM: And many countries will not.
Yunus: You’re looking at the glass half full and half empty. But I’m saying that many countries will achieve that. Bangladesh has already achieved it in middle of 2013, two and one half years ahead of the target date. That’s an achievement. Many other countries will do that in 2014, 2015 some maybe 2016. So it’s a process. That is a great achievement. Some countries will not achieve it but that should not be a disappointment. You just encourage them instead to reach that point. And then once you reach that point, you then do the second phase of the MDG in 2030. Bring down poverty to zero.
TDM: Does it have to do a lot with political will?
Yunus: Political will is always important but it has to translate into action. You have the will you make the declaration but you need to act. It won’t work if you have the will but no actions. People have to believe in it so they can act on it as individuals. Government may scream all they like but nothing will happen if the individuals do not believe. So they need to see something and then they start to ask themselves what they can do to contribute as an individual or company or as media. What role do I have to play? Everybody shares in the responsibilities, then it becomes easy, possible. Many places, governments are not very active. They are indifferent but the civil society is very active. So it still happens. You achieve it.
TDM: How do you sustain interest?
Yunus: That is why institution-building is very important. Institutions are like engines. Once you build it, you run it, it keeps running if designed properly. For example, we are talking about poverty. So what is the reason for poverty? Income is the reason for poverty. You don’t have income so you are poor. How do you generate income then? You come up with micro credit and build an institution for it and that’s why we held this Microcredit Summit to energize everybody. So that’s an institutional approach. Then you have the problem of jobs. There’s no employment. So how do you create employment? Is employment the only solution? In Bangladesh, I say let’s not look for jobs at all. Let’s instead look at entrepreneurship. Let people become entrepreneurs and do their own thing. One million people don’t have jobs but they have income created from their business; self–employment and entrepreneurship. Instead of hunting for jobs, you create a job for yourself. When a mother becomes an entrepreneur, your children become curious and it impresses on them so when they grow up they want to be entrepreneurs too.
Our principle is people should not go to the banks but the banks should go to the people. We go around asking people, do you need money? We have the money. If you have an idea, we put the money into your idea.
TDM: You’re talking about the Grameen Bank.
Yunus: Yes, I am talking about the Grameen Bank. They don’t go to our offices. We go to their homes not in the marketplaces, sit down with your children and talk to you. If you need the money, we can lend you the money without any collateral and every week we collect the payment.
TDM: I was talking to Mr. Moury (Fundacion Capital) about the conditional cash transfers and the criticisms that it promotes laziness among the poor.
Yunus: Yes I agree with that. Giving people money free as a donation regardless of the conditions is not the solution. You keep the condition frozen. You are not solving it. He is still poor. You are only putting them in a life support system. This money is given only to feed them, not investment money. You say you are poor, you cannot feed yourself, here’s the money. Feed yourself. Globally this is known as welfare system. Giving welfare to people is not the solution. It is part of the solution. You are helping people in distress as a social responsibility. It is only part one. Part two is you go back to that person and help him get out of that situation. But if you just give money then he will lose all the initiative and rely on the dole outs.
TDM: Here in the Philippines you must meet the conditions or else you are out of the program
Yunus: Sure, but you did not create income. The issue is how to get out of it, poverty. Not how to send children to school. That’s good. Children grow up with education, then they will find jobs and find income but that’s a long way. Meantime, you have not created income. Because of this system in many countries, people have gone into unemployment generation after generation. There is no incentive for them to get a job. If they get everything free, then they don’t know the value. Let every person create their own jobs. With the money that’s being given away free, use it instead as a loan. With the condition to use the money so you can take care of yourself and create a job. If you use it well, you return to me and I will lend you more money.
TDM: How many have been able to pay back?
Yunus: 98% pay back their loans. This is only one way but the whole intention is to get you free from government dependence and more dependent on yourself.
More than 550 participants attended the Global Social Business Summit 2012 to explore the theme Power of Innovation—To Change the World. Her Majesty Queen Sofia of Spain, a long time supporter and friend of social business, opened the summit. It was hallmarked by its innovative formats applying the “Swarm Works” methodology in utilizing knowledge and expertise of every single participant at a time.
In 2013 the Global Social Business Summit will be held for the first time outside of Europe and will take place from 7-9 November 2013 in Kuala Lumpur, Malaysia in partnership with myHarapan, a local social business supporting institution. The first ever Research Conference on Social Business will be held two days prior to the summit and the Young Challengers Meeting will be combined with a social business idea competition around youth unemployment. 750 participants from all over the world are expected to join.
We did mention to Professor Yunus our own Gawad Kalinga and how it started the social enterprise revolution in the Philippines but surprisingly, he has not heard of it.
God is Great!