News

01.03.2011

|

MicroWorld

|

Microcredit and "social business"

"Social business" is a new business model which mixes capitalism with positive social impact. It's gaining ground as entrepreneurs from developing countries share stories of success. Microcredit is just one part of the picture.

"Social business" is a new business model which mixes capitalism with positive social impact. It's gaining ground as entrepreneurs from developing countries share stories of success. Microcredit is just one part of the picture.

Muhammad Yunus, winner of the 2006 Nobel Peace Prize and "father" of modern microcredit, defines the concept of social business in his book Building Social Business:
"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-containing—that is, it generates enough income to cover its own costs. Part of the economic surplus the social business 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."

We often think of social business and microcredit as going hand-in-hand because the first large-scale social businesses were supported by Grameen Bank in Bangladesh. Grameen Bank provides microcredit to the very poor.

Social business goes far beyond providing microcredit. For example, Danone and Grameen Bank have created a company which makes highly nutritional dairy products which are sold at affordable prices. The women who sell these goods have received microcredit to start their own businesses and now contribute to their household incomes. In the end, the success of this project will be evaluated using financial and non-financial criteria: number of newly-created direct and indirect jobs (milk producers, wholesalers, door-to-door saleswomen), improvement in children's health and environmental protection.

Today, social business is inspiring others to undertake similar projects. Social business is bringing innovation to social entrepreneurship and is being covered in business school classrooms around the world. A new class of solidarity-minded managers and entrepreneurs is emerging. They are pushing forward a social business "revolution" in which microcredit, among other factors, plays an important role.

For more information: ashoka
Translated from French by Catherine Jan

This article is part of the special report: