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By Patrick Mayoh
I had an epiphany! It sounds a bit strange to begin my post like this, but this is actually how I felt when I turned the last page of Muhammad Yunuses’ book on “creating a world without poverty: social business and the future of Capitalism”. It was undoubtedly a great summer read and I totally espouse the vision of Muhammad Yunus on a world without poverty and on rethinking capitalism. Before we get into that, let me say a quick word about Muhammad Yunus.
Muhammad Yunus is generally considered the father of microfinance[1]; he founded Grameen bank a giant microcredit organization in Bangladesh, offering financial products (loans, insurances, and pension savings) to the poor. This all started when Yunus realised how the financial system of his country had no regard for the poor in the society, he came across some ladies who actually sold themselves into slavery just to borrow the equivalent of $1 to make products they had to sell at a price fixed by the borrowers. This prompted him to donate $27 to get these ladies out of the vicious circle. Today the Grameen foundation has gone beyond banking to other industries like healthcare, telecommunications, education and recycling to name just a few[2]. Muhammud Yunus and the Grameen bank in 2006 were awarded the prestigious Nobel Peace Prize for their work in combating poverty. Most importantly Muhammad Yunus (like me) believes social businesses could revolutionize the world and create an era without poverty. The concept itself (social business) is fairly new but I hope to briefly explain 1) what it is 2) how it works 3) how Africa and the whole world in general could fit into the picture.
What is Social Entrepreneurship?
Let us be honest! Capitalism, as we know it today is a failure. There is nothing wrong with the idea of free and open markets all over the world. But the basic assumption that profit maximization is/should be the raison d’être of every business is totally untrue. Like Muhammad Yunus advocates we are “multi-dimensional” beings and have therefore different needs. The logic of uncontrolled growth pursued by organization is detrimental to the Environment and responsible for the over-utilization of resources the world over. The recent/current financial turmoils are just the tip of the iceberg. In reality our way of life articulated around excessive consumerism is unsustainable. If development is all about making underdeveloped nations like Western ones then we might need five planets earth to sustain our way of life[3].
Muhammud Yunus far from discouraging economic activities or entrepreneurship proposes a different approach: “Social-consciousness driven enterprise aims for full cost recovery, or even more, even as it concentrates on creating products or services that provide a social benefit. It pursues this goal by charging a price or fee for the products or services it creates”. The Skoll foundation in Oxford University goes further to define Social Entrepreneurship as business ventures that “exploit a range of organizational forms – often unique hybrids- from charity to not-for-profit to commercial venture to maximise social value creation”.
In a nutshell the goal of a social business is not just profit maximization but social value creation through products (services) that tackle specific social problems ranging from access to healthcare, nutrition (food and water), recycling (environmental degradation), to discrimination, unemployment and access to new technologies. The possibilities are endless, and the Skoll foundation seems to suggest we are just scratching the surface of this new phenomenon.
The Grameen foundation’s portfolio of businesses is a good example with more than 25 ventures in Bangladesh, spawning healthcare, telecommunications, fisheries and livestock, Internet access, Agriculture and management consulting to name a few. The Grameen foundation actually entered into a partnership with DANONE to develop Yoghurt to aid the nutrition of children from poor areas in Bangladesh[4]. Now you know the basic fact, let us see how it works.
Social entrepreneurship: Modus Operandi
Multi pricing is the way for social businesses. The idea is to sell a product at the normal rate for say customers who can afford it and at a cheaper one (rate) to customers that cannot afford it. This is the success story behind Grameen foundation’s many business ventures. Products are sold at a premium say in the city but then are offered at a very symbolic price and sometimes for free in rural areas. The companies are still able to make a profit and extend their operations to other locations. The Grameen’s eye care hospitals for example provide eye care services at a regular market price to patients who have no difficulty in paying the fee while offering the same service to the poor at a token fee.
Also a social business is scalable not only in terms of new locations but especially in terms of social value creation. The Youth Industries Inc. In the USA specialises in food production, recycling and fashion. The project builds a series of shops that train and employ homeless people with the profits reinvested for mentoring and reinsertion programmes for homeless back into society. Likewise the furniture resource centre in Liverpool began as a furniture removal and employment training social business and later diversified to waste collection and recycling, retailing and then into a social business management consultancy.
The premise is to reinvest profits into other social ventures and gradually tackle the problems faced by a community. Investors will not focus on profit maximization but will assess the success of a business first in terms of the social impact created and then in terms of efficiency (use of resources) and profitability.
While charity and other not-for-profit organizations have to continuously rely on donations to survive and achieve their social impact, a social business is self-sustainable and does not have to depend on donors to achieve its impact. It can move from a stage where it depends on donations to a stage where it makes a profit and steady revenues therefore removing the need for continuous donations. Think of it, would you rather commit to £15 a month to Action Aid or invest say £300 in a social business that makes sweet that are priced according to locations to provide healthcare to children in Africa. Not only that, but the social business promises to give your money back after 5 years (like a bond). Don’t you think this could be an attractive idea for philanthropists? The possibility of investing and getting back money that actually change lives somewhere in the world? This is why I so believe Social Businesses/Entrepreneurs could be the solution to the world’s problems. Let us talk about Africa.
How does Africa fit into the picture
Not just Africa but the whole world, even the US with one of the worst healthcare system in the world[5]. By nature we are creative beings. We have created planes, we have gone to the moon, and we have created Internet, I phones, and Facebook to name just the most common. We can create a system that eradicates poverty in Africa through sound revolutionary business and entrepreneurial thinking. Because at the heart of the whole notion of social entrepreneurships is not the eradication of conventional business principle, it is instead the application of these to solve social problems thereby creating social impacts for the stakeholders upstream and downstream.
What if the money allocated every year by the UN and its agencies, Governments and other NGOs; what if part of the money could be allocated for the creation of an investment fund serving as a pool for social entrepreneurs?
The Investment fund will also serve as a rating agency, will standardize terminologies, definitions, impact measurement tools, reporting formats and yardsticks along which social entrepreneurs will have to perform. Success will be measured in terms of the social impact within a particular location.
Financial aid as we know it could be more dynamic with budding African Social Entrepreneurs implementing business principles within a social framework and tackling key problems ranging from healthcare to nutrition and education to name just a few. What if this was one of the ways to get Africa out of poverty like Muhammad Yunus did for Bangladesh, gradually and steadily on the road to achieving a middle income status country.
Although Africa does not have many social ventures, there are a few stories like the one of Veronica Khosa in South Africa which should inspire and drive us to do the same. She started Nguni (affection) to react to the insufficiency of support of victims to HIV by creating a home care service to complement the existing support system while offering an alternative through community based training and action in healthcare provision. The project made 200,000 home visits between 1995 and 1999 and trained 1000 home carers.[6]
We need more Ngunis in Africa and the world I believe.
[1] See social entrepreneurship: new models of sustainable social change published by Oxford University
[2] More details in Muhammad Yunuses’ Creating a world without poverty: social business and the future of capitalism
[3] See Jane Goodall’s reason for hope
[4] You should definitely get a copy of the book.
[5] 1/6th of the population lacks basic access to healthcare
[6] See social entrepreneurship: new models of sustainable social change published by Oxford University
