In his latest book Building Social Business , Grameen Bank founder Muhammad Yunus is on a quest to realize and spread a new kind of business model, the Social Business. This is not Yunus’ first go at creating something revolutionary. In 2006 he received the Nobel Peace Prize and pretty much put microcredit on the map. Now, he is taking a new perspective on how investing in poor countries can net an investor a return (even a modest one) while having a significantly greater positive impact.
Recognizing that the typical profit maximization model simply will not fly in poorer countries, largely due to the fact that high priced items can never be within reach of the working poor, Yunus decided that a drastically different solution was needed. By reaching out and hearing the plight of the poor, Yunus found out that in the majority of circumstances a small loan was all it took to elevate lives in these poorer neighborhoods. One would think that the poor would have no way of repaying that loan and that they would squander the money lent to them. But in fact, in the majority of cases the exact opposite was true. Not only was the loads repaid but those who were given loans were able to use that money to get education, set up businesses, and generally increase their standard of living.
Yunus saw this as an efficient and effective way to help a lot of people, so much so that he acts as an intermediary for those who would like to pursue a small bank loan. Financial institutions are more apt to lend money if there is some sort of guarantee, and this is where Yunus steps in. Yunus acts as a guarantor thereby giving the poor access to bank loans. By doing so Yunus has literally put his money where his mouth is. As time passed and the loans came to term, Grameen Bank which issued the $100 million dollars worth of loans (at an average of $200 per loan), saw a 98% repayment rate. In the banking world, this is a very high rate of repayment for a cumulative loan that size.
Upon closer inspection the beggars and the poor were not spending their loans willy-nilly. They were spending it on toys, household goods and food to resell to tourists, their peers and community. They took the loan as seed money to start their own ventures, to make even more money. Since Yunus implemented this program 18,000 out of the 100,000 beggars in the program have stopped begging altogether. Grameen is also looking beyond the initial generation and is offering school funds for the children of borrowers.
Who knew that a loan as small as $200 can have a cascading effect for several generations? Yunus knew this all along and is why he believed that those perceived at the bottom of the social and financial pyramid may have more to offer than everyone gives them credit for. Using microcredit and microfinance programs, Yunus and Grameen are developing an infrastructure to overcome poverty and develop a sustainable economy, while simultaneously incentivizing corporations and banks with a modest ROI.
According to Grameen, social business should be conducted under the auspices of charitable organization and nonprofit groups, however Yunus is also quick to add that these businesses should be run just like any other profit-maximizing venture. Efficiency, organization, the willingness to take stock and pivot if need be, and to thoroughly understand the marketplace have been repeated so many times by Yunus that it has become like a mantra. According to him, these are the attributes that a successful social business needs to embody.
Filled with case studies, examples, ideas and executable tactics, this book is as refreshing as it is eye opening. However, while Yunus has gone to great lengths to distilling the social business idea from its origins back in the Victorian era to today, it can do with a bit more definition. Some may actually be detracted with how Yunus defined it and may find it a bit too rigid or dogmatic. Furthermore, while there is a colloquial understanding of the term “poo”, Yunus fails to describe the point when a person stops being poor. To some this may be semantics but it has ramifications when discussing the earning of profits as Yunus describes it.
With Building Social Business, Yunus does a great job of not only introducing the concept and business model to the reader, but he was also able to clearly illustrate why it is needed and who needs it. He has given a way for the faceless poor to pick themselves up and create a better future for themselves. He has given corporations and those that enjoy a significantly better life to make the world a better place, to help eliminate poverty, all the while incenting them with returns on their investments.
Written by one of book review writers from Customwritings.com