How companies should respond as social business goes global

July 11, 2015 08:19
Nobel Peace laureate Muhammad Yunus pioneered microfinance through Grameen Bank which offers small loans to impoverished villagers without collateral. Photo: Hongyu Wang

Social business has been known as a systemically defined business practice for tackling poverty and is blossoming in every corner of the globe including China, the world’s second largest economy.

Last month, the first pan-China Social Enterprise and Social Investment Forum was held in Shenzhen where social investors, practitioners, advocates and policy makers shared their views on how to fight poverty by combining social and business goals, instead of incorporating mission and structure-defined entities.

The forum was initiated by Narada Foundation’s Xu Yongguang and Canyou Group's Zheng Weining.

Zheng said social businesses should be operated by companies that care about social problems.

Liang Chunxiao, former vice president of Alibaba Group, described a social business as any enterprise that links social needs and markets.

It can be internet companies that provide financing and an operating platform to SMEs.

Hu Jinxing, chairman of More Love Foundation, said social businesses should serve both commercial and public interests.

Liu Wenkui, secretary general of the China Foundation for Poverty Alleviation, said the foundation helped develop social businesses by launching a securitized product on the Shenzhen stock exchange in 2008.

The forum discussed the social business model in Bangladesh which originated from Grameen Bank’s microfinance program pioneered by Nobel Peace laureate Muhammad Yunus in 1983.

The bank offers small loans to impoverished villagers without collateral.

Yunus lists seven principles for a social business.

A social business must dedicate itself to solving a social problem, operate on self-sustainable basis, not pay dividend beyond the shareholder's principal investment, retain profits within the organization, not create additional environmental problems, improve staff and worker's salaries and working conditions, and have a joyful workforce.

In 2005, in the remote Bangladeshi town of Bogra, Donone and Grameen Healthcare Trust formed a dividend-free partnership, Grameen Donone, to build a new industrial plant to produce nutritious yogurt for undernourished children.

The yogurt went on sell two years later. This was the world's first social business.

Ten years later, Grameen created other social ventures in Bangladesh with Veolia Water, Cure2Children, BASF, Intel, Adidas and Otto.

It also set up many social business investment funds, sponsored university programs and awarded scholarships.

Some governments are beginning to spare their conventional welfare money to support social businesses.

Today, a global infrastructure for social business is in place with two global annual summits, which include Social Business Day in Dhaka on Yunus's birthday on June 28 and Social Business Summit held by Grameen Creative Lab, Yunus's global social business replication body in Germany, in November.

So far, two types of social business ownership models have proved viable.

A social business can be structured like a conventional business, owned by investors who will not take anything from their company beyond the original amount invested, or it can be owned by a group of underprivileged people or their trust, according to Yunus.

In his book Building Social Business, Yunus envisions a social stock market specializing in social businesses, providing them with long-term sustainability.

To make that happen, a pre-defined classification of social business needs cross-border consensus.

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A Hong Kong-based trader; author of Grameen in Kosovo