The social business model was conceptualized by Professor Muhammad Yunus, the 2006 Nobel Peace Laureate, and is a great alternative to the classical profit-maximization model. Social business ventures have materialized with great success in Bangladesh and abroad, and should be considered for implementation by corporations, NGO’s, trusts, individuals and other for-profit organizations.
What exactly is social business?
Social business differentiates itself from the classical business model of profit-maximization by having goals that are conducive to the betterment of society, such the alleviation of poverty, malnutrition, lack of education. Social businss is a non-loss, non-dividend company with specific social objectives. It is not a charity because it is operating as a business where cost-effectiveness, profit margins, etc. are integral to helpig it reach financial independence and sustainability (non-loss). However, it is not a regular profit-maximizing business because its objective is not to enrich its investors, but instead improve the welfare of the under-privileged. Once the social business has reached a point of financial sustainability, social business investors only receive the asolute amount they originally invested (non-dividend).
What are the 7 Principles of social business?
The 7 Principles of Social Business are the principles that a business must follow to qualify as a social business.
- The business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization;
- Financial and economic sustainability;
- Investors get back their money amount only. No dividend is given beyond the investment;
- When investment amount is paid back, company profit stays with the company for expansion and improvement;
- Environmentally conscious;
- Workforce gets market wage with better working conditions;
- ...do it with joy.
Are there many types of social businesses?
There are two types of social businesses: Type 1 and Type 2. A Type 1 is when the social business produces a product or service that is specifically targeting a social objective. For example, Grameen Danone is a Type 1 social business because it is amanufacturing a yogurt to fight childhood malnutrition. A Type 2 social business is when its shareholders are primarily under-privileged, and the profits are put into a trust to improve the quality of life for its shareholders by providing schools, health clinics, etc. Perhaps, the most famous example of a Type 2 social business is the Grameen Bank since nearly all of its shareholders are the under-privileged.
The vision and mission of Professor Yunus and the organizations that share his ideals are to eradicate poverty by 2030 and put poverty in museums as a relic from history, never to afflict society again.
Do not hesitate to contact us, the Social Business team at the Yunus Centre, with any questions, comments, or suggestions that you may have.