7 of 7 people found the following review helpful
Building Social Business by Dr. Muhammad Yunus 2010
Reviewed by: Dr. Joseph S. Maresca
This book is an excellent rendition on how to invest in
poor countries while getting a modest return and doing
much good at the same time. The classic profit maximization
model does not produce optimum results because many
working poor simply cannot afford the higher prices.
To some extent, this phenomenom is happening in the
USA. Hence, there are Grameen branches in Brooklyn
and Queens, New York.
Yunus guarantees loans to the poor ; thereby acting as
an intermediary. This is not much different from the
USA government guaranteeing certain loans to
borrowers. The result is that bankers are much more
willing to lend money due to the guaranteed payment.
Borrowers repay in small weekly amounts. Women
have great drive to overcome poverty. The Grameen
Bank lends $100 million dollars a month in
collateral free loans averaging $200 apiece .
The repayment rate is an astounding 98%.
Grameen lends money to beggars to sell toys,
households and foodstuffs door-to-door.
There are 100,000 beggars in the program.
Since implementation of the program, over
18,000 beggars have quit begging.
Grameen offers children of borrowers money to go
to school. And so, 50,000 students are pursuing
medicine and engineering coursework. This program
is microcredit or microfinance at its best. In some
cases, a mother may be illiterate and her children
go on to become physicians and engineers
due to the Grameen Bank.
Grameen Violia Water sells pure water at a price
that the poor can afford. In the future, the
"Artificial Sun" coupled with desalination
may be able to accomplish a similar feat.
The objective of the Grameen program is to
overcome poverty, have a sustainable economy
and have a modest return on the investment.
When loans are paid back, profits are plowed
back into the company not unlike the function
of retained earnings in a for-profit company.
Fabio Rosa has brought solar energy to nearly
750,000 Brazilian homes with no electricity
previously. There is a similar opportunity to do
so for the Palestinians, if the various strategic
constituencies can agree on a workable
Currently, Grameen Telecom, Grameen Energy
and Grameen Well Being serve the poor.
Grameen and Pfizer have a joint cooperative
venture to bring affordable health care to
village clinics through Grameen Healthcare.
A similar cooperative arrangement could be
brought to the Medicaid program here in the
United States in places like Appalachia and
other rural communities where professionals
are hardly ever seen practicing their craft.
The first major attempt to outline Appalachia as a
distinctive cultural region came in the 1890s through
the tireless efforts of the Berea College President .
William Goodell Frost coined the phrase
"Appalachian America" which encompassed 194
counties in 8 states.
The Grameen organizations seek to promote social
business under the umbrella of charitable
organizations and non-profit groups. Universities
and think tanks are another great resource for
Grameen and its people. A successful program
has been underway to cross-fertilize the poor
and the wealthy to deliver affordable bone marrow
transplants for everyone. The assignment algorithms
in linear programming and operations research may
be utilized to bring together donors and patients
Overall, the book is well written by a popular
Nobelist- Dr. Muhammad Yunus. The ideas contained
in this book could be applicable to both
poor and rich countries since virtually every
country on this earth has poor people in
every walk of life .
3 of 3 people found the following review helpful
on December 5, 2012
This is the only book I've ever read by Muhammad Yunus, so I am basing my comments on his philosophy solely on the content of this book. Previous reviewers have noted that reading his other books first may be more beneficial. Mr. Yunus gives an unambiguous & digestible explanation of his definition of "social business". Nothwithstanding this is a well written book, which many will glean powerful business & humanistic lessons, Mr. Yunus tends to place his philosophy in a "holier than thou" light more often than not. While the heart of the book is about poverty, a running theme is the constant ridicule of traditionally formed businesses, with an overriding assumption that most are profit-obsessed, blood-thirsty, winner-takes-all enterprises; he uses the term "profit-maximizing" companies ubiquitously. What of the hundreds of thousands of businesses around the world that create products & services that improve the quality of life, at very fair prices? What of the local diner owner who serves the best pancakes around, who charges $2.99 a plate knowing people could & would easily pay $3.99, with a wonderful atmosphere that allows families to share a great meal together? What of larger corporations, like Trader Joes & IKEA, who offer fantastic products at affordable prices that allow the average person to improve their quality of life at reasonable cost, just like what Mr. Yunus does in Bangledesh? My point is there are a large number of businesses that are foregoing richer profits to, as he suggests only social businesses can do, "help human beings live better, fuller lives".
The rest of my points: 1- Cross-subsidization IS a form of charity. When you charge one person more for an item SPECIFICALLY so that another can buy it much cheaper, you are instituting charity into the transaction. Exploitation is exploitation. 2- The "grameen ladies" work off commission, PROFITing off their efforts. Unless you are impoverished, everyone else in the world who does this is self-centered & shallow, UNLESS of course you invest money in Grameen and waive your right to a profit...huh? 3- Social businesses, charities, etc. DEPEND on the success & subsequent altruism of the so-called "profit-maximizing" businesses they criticize and behave self-righteous towards. Funny, when the bangledeshi's wouldn't buy the highly nutritious yogurt at the fair price Grameen offered it at, Grameen upped the sugar content and reduced the portion size in order to increase profits so they could survive. Really? They made it more unhealthy in order to increase profits? Interesting! More examples like this abound in the book, especially when he covers the competitive salaries offered at Grameen companies. Profit by another name is still...
Regardless of the tone suggested here, I am a humanist and support the eradication of poverty, and the improvement of life. Overrall, I enjoyed this book, as it facilitated deep introspection. I believe in value for value. I believe in choice. I am not of the social business mindset as HE strictly defines it. I believe that profit is a way of saying "thank you" for a job well done. I do not aim to simply survive. I can forgo a 60% profit margin for a 40% one in the best interest of humanity, as I believe many business people would also do without much thought. I have done this. What I will NOT do is pretend that I do not have a right to define & improve the quality of life sought for myself and my family, simply because I already have electricity.
5 of 6 people found the following review helpful
on December 28, 2010
Building Social Business attempts to communicate the value and potential worth of a concept called "Social Business." The author, Muhammad Yunus, through a mixture of exposure, practical advice and hope-filled discourse, lays out the case for solving social issues with his business model. Instead of presenting the story of social business in a textbook-like fashion, Yunus takes the reader on a journey though the history, theory and lessons-learned of his collective social business experience. Redundant and drawn out at times, he takes the entire book to fully explain his business model while addressing problems, fears, and inspiration along the way. Yunus concludes his case in the final chapter by expressing his vision for the end of poverty with a new proposed era of worldwide social business.
Early in the book, the author helps to explain social business by pointing out what it is not. "Social enterprise," "social entrepreneurship," "charity organizations," "non-governmental organizations," "non-profit organizations" are definitely not the same thing. Yunus defines social business simply as a traditional business that sustains itself but whose purpose is to create social benefits rather than to generate a profit. A social business can be further categorized into two subtypes. A type I business is a non-profit making company devoted to solving social problems owned by investors who reinvest all profits back into the business. A type II social business is owned by poor people themselves. Type II social businesses are "profit-making" but since these profits go to poor people (the owners), the businesses are still helping to solve social problems. Since most of the book concentrates on type I social business, Yunus feels it important to explain the Seven Principles of type I:
1. The business objective is to overcome poverty or one or more problems (such as education, health, technology, access, and environment) that threaten people and society--not to maximize profit.
2. The company will attain financial and economic sustainability.
3. Investors get back only their investment amount. No dividend is given beyond the return of original investment
4. When the investment amount is paid back, profit stays with the company for expansion and improvement.
5. The company will be environmentally conscious.
6. The workforce gets market wage with better-than-standard working conditions.
7. Do it with joy!!!
The middle chapters of the book serve a few purposes. First, Yunus talks frankly about some of the challenges that must be overcome when attempting to create a social business. For example, in 2007, Grameen Danone, a social business that makes yogurt for poor people in Borja, Bangladesh, ran into serious difficulty. The price of milk doubled and the company was no longer sustainable by selling 80 grams of yogurt at 5 taka (7 cents). He therefore had to decide if the price of the product should be raised or somehow try to cut costs another way. His decision to raise his price to 8 taka was met with disastrous consequences; yogurt sales plummeted. After a lot more brainstorming, Yunus decided to sell the product in a smaller 60 gram container for only 6 taka. The business recovered but he sends the message to the reader that running a social business (just as a traditional business) requires a great degree of flexibility.
Next, advice on launching a social business is provided to the reader. Yunus tries to reach out to those that wish to get involved with social business but don't know how. When starting a social business, don't look for opportunities that will generate maximum profits. He suggests, instead, that potential creators of social business pick a social problem then seek a business solution to solve the problem. He additionally discusses ideas on what social problems a person might attempt to solve through social business. Some common examples are poverty, hunger, disease, healthcare and pollution to name a few. While solving some of the world's toughest problems, like poverty, may not be realistic, Yunus advises that people start small and start right away. Providing employment, for example, to five people is a very realistic goal for a new social business entrepreneur.
Weaved into the discussion is information about some social businesses he helped to create over the years. His first social business was Grameen Bank (which means village bank). Established in 1976, the bank provides microcredit to poor people in Bangladesh. Microcredit loans average about $200 per loan. Already discussed is Grameen Danone, a social business that produces affordable yogurt. The social problem addressed by that business is that of malnourishment in poor rural areas. The yogurt provides essential and much needed nutrition for folks at a price they can afford.
On the healthcare front, in 2009, Yunus' Grameen organization teamed up with the Cure2Children Foundation (of Italy). The goal is to set up a social business in Bangladesh to start bone marrow transplantation, the only way to cure thalassemia (an inherited blood disorder). The goal of this venture is to make self-sustaining business by charging well-off families the standard rate for bone marrow transplant operations. This, in turn, will help to pay for families that can contribute little or nothing. For every two full price patients served, a third poor patient can be treated for a token fee or none at all.
Lastly, Yunus discusses Grameen Veola Water. The company is half owned by Veolia Water AMI (Africa, Middle East, India) and half by Grameen Healthcare. This social business was established in 2008 to supply drinking water to the poorest people of Bangladesh. Unfortunately, for geological reasons, almost all of the groundwater the country has been found to be contaminated by arsenic, at levels that make it a health hazard. Today, more than 30 million Bangladeshis are exposed to the sometimes fatal consequences of chronic arsenic poisoning.
Starting small and with the goal of producing 10 liters of clean water for 1 taka (1 cent), Grameen Veola has begun supplying safe water to poor rural people. Many of the villagers are unaccustomed to paying for water and this has proved to be a snag in the business plan. Yunus, however, optimistically states that Grameen Veola is a work in progress. As long as the central goal of providing an affordable, sustainable and healthy supply of drinking water to the poor people is kept in focus, there's no problem with testing many ways of making the project economically viable.
Yunus concludes his work with an optimistic view of his social business model and how it has attracted so much positive attention in the past few years from every continent. In contrast, however, he also takes a critical stance on capitalism by pointing out where it has failed humanity since the recent financial crisis. According to Yunus, the demands for ever-increasing profits and the creative ways to make that possible (repackaged mortgages and other such loans) caused the collapse of the US housing market. That collapse has had a world-wide affect where millions around the world who did nothing wrong are now suffering.
He's quick to point though that great crisis offers great opportunity. Yunus believes that social business has the potential to reverse current affairs by bringing the poor into the mainstream economic system. He thinks it can transform society by potentially ending poverty in the foreseeable future. When pondering what the world with be like in the year 2030, Yunus thinks that a science-fiction writer has a better chance at predicting the course of humanity than the best scientists and economic analysts of our time. Analysts are trained to make forecasts on the basis of past and present but Yunus concludes with the assertion that "events in the real world are driven by dreams of the people."
I chose this book to read because the title led me to believe that the author is a proponent of socialism and big-government solutions to world problems. I, unashamedly, am a pro-capitalist and an anti-socialist who strongly values the ideas of limited government, free markets and individual liberty. Prior to reading, I thought this would honestly be a good opportunity to reinforce my own views while pointing out the fallacy of a world-view I don't subscribe to. My preconceived ideas about this book actually proved to be somewhat incorrect. Additionally, I am a bit embarrassed to admit I knew next to nothing about the author even though he is a Nobel Peace Prize recipient.
I do not agree with everything Muhammad Yunus presents in his work. I do not share, for example, his belief that traditional capitalism is responsible for poverty and that it creates a "fairytale of prosperity for all." Despite such disagreements, I have come away with newfound knowledge and some genuine respect for the social business concept. While I don't know for certain if Yunus values the tenets of socialism, I was pleased to read about his solutions for helping the less fortunate. He advocates neither big-government solutions nor wealth redistribution initiatives. Yunus, in a nutshell, seeks to reduce poverty by constructing self-sustaining businesses with the mission of creating social benefits, instead of maximizing profits.
The belief in helping others is not monopolized by one side of the political spectrum or the other. I believe that most people, regardless of their political and economic views, desire to be helpful to others in life. Society should, however, be ever mindful of the tenet which says "God" helps those that help themselves. This, in part, is why I hold a favorable view of Yunus `work. Rather than creating a society of government dependence and learned helplessness, Yunus proposes societal transformation via the desire to help the less fortunate coupled with hard work, taking risks and the use of capitalism.
Proposal for problem identified in book
One of the problems identified in the book is that there are currently no legal and regulatory systems to govern social businesses. According to Yunus, "profit-maximizing companies and traditional non-profit organizations are recognized institutions covered by specific rules regarding organizational structure, governance and decision making principles, tax treatment, information disclosure, transparency and so on." Social business is not a recognized category.
Currently, if an individual created a social business in the United States (or elsewhere) there exists the potential for that business owner to be sued. In our world there is an implicit or explicit rule that for-profit companies have a legal obligation to maximize profits for their owners and shareholders. A social business, diverting all resources and profits to socially beneficial purposes, plots a course which is contrary to currently accepted business practices. The potential for legal and economic problems is surely predictable.
If social business is to succeed and become a "standard" model for creating social good, then certain steps should be undertaken to ensure its protection. First, as discussed previously, any profit generated by a social business profit goes to help combat a particular social problem or is put back into the company itself. It would be necessary, therefore, for owners, board members and shareholders to partake in some sort of legal agreement verifying this arrangement. Everybody must be on the same page in other words.
Another necessary step would be to pass laws (nationally and internationally) that govern social business. Such laws would define what a social business is and does as well as spell out what obligations it has to its shareholders (and vice versa). Another important area needing legislation would be procedures under which a profit-maximizing company can switch to a social business company (and vice versa).
Finally, rules concerning the tax obligations of a social business must be defined. Should a social business more closely resemble a traditional non-profit organization when it comes to paying taxes (tax exempt)? According to Yunus, creating a favorable environment for social business to thrive is desirable but mandating a tax-exempt status goes too far. If a social business owner takes the dollar which was supposed to be handed over to the government as tax then, he argues, the business benefits financially and "gives in" to selfish motivations. Such motivations should be irrelevant with a social business. Making social businesses taxable entities keeps them true to the goals of helping people and solving problems.
1 of 1 people found the following review helpful
on September 8, 2010
Mohammed Yunus is popularly known as the Father of Microfinance. However microfinance is only one example within the framework of Social Business that he passionately advocates and practices.
This is his third book. The first book: `Banker to the Poor" was a path breaking classic that narrated the powerful concept of microfinance. Jobra, the little known village in Bangladesh, found its rightful place under the sun, thanks to the first $27 from the Professor of Chittagong University, with his commitment to fight poverty. The Grameen movement was born. Most of Grameen's beneficiaries are illiterate, but as human beings, they do not lack creativity, ingenuity and above all integrity to put the smallest amounts of credit to good use. This book turned the concept of banking upside down. Conventional banks refuse to lend money to the poor since they lack "collateral". When giant global banks run by the most qualified and highly paid bankers collapsed during the recent global financial meltdown, Grameen was making good progress, earning profits and helping the poorest of the poor to earn a decent living. "Bankers, go back to school" was the title of my review for this book.
The second book "Creating a World without Poverty" introduced the concept of Social Business. Social business executes the laudable social objectives with the missionary zeal of a charity, with the efficiency and speed of a profit maximizing business. Hence, we had a unique business model to solve substantial social problems, as demonstrated by Grameen Danone in maximizing nutrition and health in poor children through affordable yoghurt.
This third book is the logical extension of the first two books in a passionate mission to "send poverty to the museums in our lifetime".
It is time that we pay serious attention to the concept of Social Business through public and private sector cooperation, MBA programs and necessary legislation to define this form of business so as to ensure that the governance structures, business processes and accounting standards emerge to establish the new form of organization that can play a major role in solving global problems, especially in relation to elimination of poverty from the face of this earth.
There is an excellent definition of the concept of Social business in the introduction. A further classification of social business as Type I where the investors do not get anything other their initial investment and Type ii where the investors are the poor themselves and profits are reinvested to expand the business.
Contrary to popular belief, social business aims at providing market wages and better than average working conditions to its employees.
There are excellent case studies of diverse ventures, mostly joint ventures. Danone for yogurt, Veolia for clean drinking water in arsenic contaminated regions, Adidas for affordable footwear, BASF for treated mosquito nets. In all these cases, it is important to note that the price points of the offerings are that which is affordable by the poor. There is substantial effort on innovative design, frugal engineering and creative business models. It is a tough journey, but worth every bit. The multinationals involved in these ventures are global technological giants. This also proves the point that low cost products are not low technology or low quality products. In fact it is harder to design a solution working backwards to reach a cost target and offer a value proposition that solves the problems of the poor. This is business with soul and products with a brain.
Classical economics deals with incomes,consumption and choices based on rational decisions. Under this, there is no place for social business on our planet. However, a new school of thought termed "Behavioral Economics" challenges the rational aspect of conventional wisdom. Humans have emotions. We all feel the joys and sorrows of life. Economics is an aspect of human life, and cannot be studied in isolation from human emotions, norms and behavior.
Amongst the 7 principles of social business listed in the book, the seventh principle says "Do it with joy". We have plenty of financial experts for calculating return on investments and shareholder value. None till date can measure the value of inner joy in making this planet a better place for all mankind. What we need is not just economic growth, but growth with a human face.
Once again, I salute this Banker to the Poor for his outstanding work and leadership.