“Building a Social Business” by Muhammad Yunus

oatsandsugar —  December 19, 2011 — Leave a comment

Yunus (a nobel laureate, founder of Grameen Bank and Grameen Foundation, grandfather of modern micro-finance an social-business)’s new book (sequel to “A world without poverty” – where the concept of social-business is first presented) is surprisingly readable.

The first few chapters expound on the basic ideas behind social businesses (donations are to be repaid, without interest; the business should strive to be self-sufficient; the business should look to take care of all of its stake-holders, not merely the shareholders (although they may be the same person); the businesspersons should always do his/her work with a view to fun; etc.), and provide inspiring reading. Whenever I came up with a question, it was promptly answered, just as a good non-fiction book should.

After, every alternate chapter was an anecdote, describing a stage in the development of Danone-Grameen or some other social business (usually large in scale). These anecdotes illustrate the ideas discussed at the start of the book well, making them less abstract and more understandable. However, on the flip-side, they make the theoretical chapters seem boring, and you almost want to skip them to get to the next anecdotal chapter.

This book is a useful, albeit, in my opinion, unfinished and slightly didactic (it allows no room for a part profit driven — part social business) guide to starting a social business – and is easy to read.

I would recommend it, and give it 3.5/5.

Pros:

  • Intelligent and well rounded theoretical framework
  • Brilliant anecdotes which illustrate the “rules” of social-business, and why they formed
  • Interesting discussion of the future of social-business (although a little incomplete) including the discussion of a social stock-market

Cons:

  • A little bit didactic (has a very specific framework for social-businesses, and is quite scathing of other models)
  • Not very well written
  • Quite repetitive
  • A little bit melodramatic and generalising in its aphorisms about the nature of poverty

My kindle highlights/comments

Our initial goal was to make sure we had both men and women borrowers in even numbers. But soon we discovered, through experience, that female borrowers brought much more benefit to their families than male borrowers. Children immediately benefited from the income of their mothers. Women had more drive to overcome poverty. Lending to women in the poor villages of Bangladesh, we realized, was a powerful way to combat poverty for the entire society.
Read more at location 113

Grameen Bank is unusual in other ways. It is actually owned by the borrowers, who in their capacity as shareholders elect nine of the thirteen members of the board of directors.
Read more at location 117

Grameen Bank lends out over $100 million a month in collateral-free loans averaging about $200.
Read more at location 118

The repayment rate on loans remains very high, about 98 percent, despite the fact that Grameen Bank focuses on the poorest people—those whom conventional banks still consider non-creditworthy.
Read more at location 119

Poverty is not created by poor people. It is created by the system we have built, the institutions we have designed, and the concepts we have formulated. Poverty is created by deficiencies in the institutions we have built
Read more at location 150

Because these services are so vital for people’s self-realization, I strongly feel that credit should be given the status of a human right.
Read more at location 162

Some get the chance to explore their potential, but many others never get the chance to unwrap the wonderful gifts they were born with. They die with those gifts unexplored, and the world remains deprived of their contribution.
Read more at location 166

Poor people are bonsai people.
Read more at location 176
I thought this was a bit of a funny comment when taken out of context – but Mr. Yunus was talking about how bonsai trees don’t grow to be tall because they aren’t nourished.

The biggest flaw in our existing theory of capitalism lies in its misrepresentation of human nature. In the present interpretation of capitalism, human beings engaged in business are portrayed as one-dimensional beings whose only mission is to maximize profit. Humans supposedly pursue this economic goal in a single-minded fashion. This is a badly distorted picture of a human being. As even a moment’s reflection suggests, human beings are not money-making robots. The essential fact about humans is that they are multidimensional beings. Their happiness comes from many sources, not just from making money.
Read more at location 198
Not quite sure about what I think about this quote.

In the present interpretation of capitalism, human beings engaged in business are portrayed as one-dimensional beings whose only mission is to maximize profit.
Read more at location 199

In a social business an investor aims to help others without making any financial gain himself. The social business is a business because it must be self-sustaining—that is, it generates enough income to cover its own costs. Part of the economic surplus the social business creates is invested in expanding the business, and a part is kept in reserve to cover uncertainties. Thus, the social business might be described as a “non-loss, non-dividend company,” dedicated entirely to achieving a social goal.
Read more at location 229

The first such joint venture was created in 2005 in partnership with the French dairy company Danone (best known in the United States for its Dannon yogurt) and is aimed at reducing malnutrition among the children of Bangladesh.
Read more at location 262

once creative minds come up with the design for a social business and a prototype is developed successfully, it can be replicated endlessly.
Read more at location 326

Today, as a result of Grameen Danone’s experiments and changes in direction, its business model appears to be working. The company serves a two-part market, urban and rural, using systems and even products that are distinctly different.
Read more at location 1104

Immerse yourself in the culture of the people you intend to serve. As every businessperson knows, understanding your customer is one of the indispensable keys to success. And this means, among other things, understanding and empathizing with the culture of the people you serve: their values, dreams, desires, fears, aversions, likes, and dislikes.
Read more at location 1162
This idea is captured by the whole lucky fish for anaemia idea

we at Grameen had always intended to use cross-subsidization as part of our path to financial stability.
Read more at location 1194

Regarding wages of persons who work for social-businesses: do they get paid less?
That’s a very wrong idea about social business. Social business pays you more, not less. First, a social business has to attract talent from the same labor market that for-profit companies plumb. That means offering competitive salaries and benefits.
Read more at location 1734

So start small—and start today. Learn as you go, and don’t give until you’ve found the right design.
Read more at location 1877

social business should also be made tax-exempt. I cannot readily agree with this proposition. I see social business as an expression of spontaneous selflessness unconditioned by outside encouragement, particularly if that encouragement makes the investor a financial beneficiary.
Read more at location 2286
Again, I don’t know what I think about this – I think the economic cost of investment (interest lost and loss via inflation) should be compensated for via tax-breaks.

They call themselves an “action tank” (borrowing the phrase used by the American social entrepreneur Alan Khazei, founder of City Year):
Read more at location 2761

So let’s agree to believe in these dreams, and dedicate ourselves to making these impossibles possible.
Read more at location 3546

Advertisements

oatsandsugar

Posts

LLM candidate at Cornell Tech. Consultant for King & Wood Mallesons and Project Evangelist for Legalese.

No Comments

Be the first to start the conversation!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s