by Barrister Harun ur Rashid | July 21, 2010 6:49 pm
Social Business is an innovative concept because it is not a charity. It is non-loss, non-dividend business enterprise with social objectives. The investors can recoup their funds but may not take any profits.
As witnessed every day, social activists, and philanthropists are not driven by making money but driven by the desire to help the needy and poor in society.
There is more to materialism for human beings and often they get satisfaction to help the poor community by providing essential services to them.
Social business has to generate social gain and to maximize social returns like patients treated, houses built, or health insurance extended to poor people.
A charitable dollar can be used only once. A dollar invested in a self-sustaining social business is recycled endlessly. For example, you don’t buy a fish for the poor but give a fishing rod to poor to catch fish.
Social businesses may cover reduction of poverty, diseases and combating global warming or any other issues that creates a minimum standard of living and quality of life necessary for human dignity.
Why do they become social business entrepreneurs?
Like social entrepreneurs, the prime motivation for them is the altruistic attitude. It implies spirit of benevolence, compassion and empathy. They operate in the realm of the heart and mind. Heart which feels for the people and the mind which thinks for and with the people.
A compelling reason is that some people recognise that social ills cannot be solved either with outdated conceptual models or with old pattern of planning. New approaches are urgently needed to solve problems.
What sets social business entrepreneurs apart is that they have taken action to do something about it, namely, devise a solution for the need and follow through to make that solution to others through non-loss and non-profit businesses.
The blending of business approaches within philanthropic model to help the poor and disadvantaged section of the community is innovative. The philosophical underpinnings of such activities are based on creating a community based on social justice and human rights. Broadly what German philosopher Immanuel Kant (1724-1804) envisaged such type of activities as “natural rights”.
Social business: A jump from social entrepreneurship
According to the management expert, Peter Drucker, the term “entrepreneur” (from the French word, meaning “one who takes into hand”) was introduced 200 years ago by the French economist Jean- Baptiste Say. To him, an entrepreneur is someone who shifts “economic resources out of an area of lower and into an area of higher productivity”.
Nobel Peace Laureate and Human Rights activist Martin Luther King Jr. ( 1929-1968) once said ” True compassion is more than flinging a coin to a beggar; it comes to see that an edifice which produces beggars needs restructuring”. This implies that the causes of begging are to be addressed through innovative interventions.
And that is exactly what social entrepreneurs try to do by inventing ideas to ease a problem confronted by poor people. Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They offer new ideas for wide-scale change in thinking and action.
Just as social entrepreneurs act as the agents for change in the community, social business entrepreneurs create new industries to meet the needs of the poor and disadvantaged people in the community.
Recent years have witnessed a new phenomenon that blurs philanthropy and social business. Philanthropic resources have been made available for global development, particularly through application of social business for philanthropic objectives.
In other words, use of capital is focused on philanthropic sector but with a focus on development objectives. As a result, some charity foundations now carefully consider not just whether a project will do good, but whether it will achieve a greater impact than other potential social investments.
Social businesses are of two types:
• Businesses focused on social objectives, for example, a product is produced for the benefit of the poor.
• Businesses owned by the poor who can receive benefits from investments. For example, a product produced by the poor, but exported to overseas while net profits would go towards poor.
The purpose of social business is solely to achieve one or more social objectives through the operation of a business and no personal gain is desired by investors. Social objectives include health care for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water and introducing renewable energy for the poor.
Bill Gates caused a stir in the World Economic Forum last year with his call for “creative capitalism” Money-making is an important part of humanity but it is not the only part, according to Bill Gates. Caring, concern, sharing, empathy—all of these aspects must also be considered when developing an economic framework
Social business, according to Nobel Laureate Professor Mohammad Yunus, is the missing part of capitalism. In his book “Creating a World Without Poverty—Social Business and the Future of Capitalism,” Professor Yunus describes what a social business is and what is not. According to him, it will have the following ingredients:
• Social objectives for helping the poor
• Community ownership of social business: ownership by poor or disadvantaged community
• Non-profit distribution: investors may not receive profits after investments being paid back.
There are a few examples of Grameen Bank’s social businesses. For example, Grameen Danone collaboration that has taken initiative to produce and market nutritious food and beverage products for malnourished children in the country.
Second example is the Grameen Project for non-profit hospital and for training nurses in the country. The hospital is designed to offer primary and secondary care, with 50 Beds capacity. Another is the Grameen Green Children Eye Hospital, projected to perform 50,000 eye examinations and 10,000 cataract operations annually.
In the US, the Village Enterprise Fund, a non-profit organization in California, provides education, mentoring and seed capital to create a sustainable income generating businesses in East Africa. Each new business is estimated to benefit as many as 30 poor people.
Acumen Fund, US provides finance (US$ 200,000 to 300,000) to social businesses and prior to funding, they first assess the best available charitable option to determine if the project has potential significant impact on poor people and whether the project is cost-effective.
How to make it start?
According to Professor Yunus, one good way is 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 up in the shape of financing for the social business or as partnership for implementing the social projects.
Another idea floated is the Social Stock Market itself can be started by a social business entrepreneur and several business entrepreneurs may join hands to launch such Market.
It is to be noted that given the enormous problem of hunger, disease, absence of primary health care and housing of 45% of poorest Bangladeshis, social business entrepreneurs cannot solve all the ills in the society.
But social business is a very good start and private think-tanks and academic institutions may encourage the idea of social business to wider dissemination among the community by organising workshops and seminars. The role of the media is very important to popularize the innovative social business in the community.
In Bangladesh, social entrepreneurs have set up hundreds and thousands of community or non-government organisations (NGOs) in various social sectors with a view to promoting poor people in better livelihood activities. Almost all of them were established during the last 37 years. It is suggested that some of the NGOs may take initiative of starting social businesses in health, housing, nutrition or any other needy area with the ownership of the poor.
I am confident that given the pool of innovative and imaginative social entrepreneurs in the country, social business will attract many of them and let us make Bangladesh a pioneer in the field of social business entrepreneurships to help poor and underprivileged in the country.
By Barrister Harun ur Rashid
Former Bangladesh Ambassador to the UN, Geneva
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