Creating a world without poverty pdf

To illustrate his idea of a social business, Yunus weaves through the book the fascinating case study of Grameen Danone, a joint venture between Grameen and the French multinational food product company Danone. Yunus sees many sources from which these new social businesses can originate: existing companies, foundations, the World Bank and other agencies, government development funds, successful entrepreneurs looking for a next activity, wealthy retirees, and recent college graduates.

Indeed, all of these sources hold promise. He also believes that social businesses would encourage more people to give back: Many would find establishing and working in a social business more attractive than working for a charity, given the prestige society accords business entrepreneurs above and beyond their financial success.

Yunus addresses the practical hurdles of creating social businesses by succinctly describing the steps that must be taken if social businesses are to become mainstream institutions. Advocates must develop a set of legal definitions of social business, along with taxation and regulatory rules.

Social business standards must then be established and certified. Yunus believes that different types of independent accreditation and ratings agencies will spring up to meet the demands of potential investors and consumers.

I would add that government, certifying agencies, and the boards of social business firms themselves will need to take great care to prevent social business managers from using these enterprises for their own benefit. Metropolitan Museum of Art New York. Popular Book - By Meghann Foye. Malissa Wood. Best Book - By Sy Harding. Michael Wald. Shelton PhD. Kirsch M.

If a borrower asks a Grameen staff member, "Please tell me what would be a good business idea for me," the staff member is trained to respond this way: "I am sorry, but I am not smart enough to give you a good business idea.

Grameen has lots of money, but no business ideas. That's why Grameen has come to you. You have the idea, we have the money. If Grameen had good business ideas, instead of giving the money to you, it would use the money itself and make more money. When a borrower tries to shy away from a loan offer, saying that she has no business experience and does not want to take money, we work to convince her that she can come up with an idea for a business of her own. Will this be her very first experience of business?

That is not a problem. Everything has to have a beginning somewhere, we tell her. It is quite different with the World Bank. If you are lucky enough to be funded by them, they give you money. But they also give you ideas, expertise, training, plans, principles, and procedures. Your job is to follow the yellow lines, the green lines, and the red lines—to read the instructions at each step and obey them precisely. Yet, despite all this supervision, the projects don't always work out as planned.

And when this happens, it is the recipient country that usually seems to bear the blame and to suffer the consequences. There are also big differences in the incentive systems in the two organizations. In Grameen Bank, we have a five-star evaluation and incentive system for our staff and our branches. If a staff member maintains a percent repayment record for all his borrowers usually , he gets a green star. If he generates profit through his work, he gets another star—a blue star.

If he mobilizes more in deposits than the amount of his outstanding loans, he gets a third star—a violet star. If he makes sure all the children of all his borrowers are in school, he gets a brown star. Finally, if all his borrowers move out of poverty, he gets a red star. The staff member can display the stars on his chest. He takes tremendous pride in this accomplishment. By contrast, in the World Bank, a staff member's success is linked to the amount of the loans he has successfully negotiated, not the impact his work has made.

We don't even consider the amount of loans made by a staff member in our reward system. I have always opposed such campaigns. These are important global institutions created for very good causes.

Rather than close them down, we should overhaul them completely. The world has changed so much since the time they were created, it is time to revisit them. If a project fails or performs poorly, the staff member involved in designing and promoting it should be held responsible.

Corporate Social Responsibility Still another response to the persistence of global poverty and other social ills has been a call for social responsibility on the part of business. NGOs, social activists, and politicians have put pressure on corporations to modify their policies in regard to labor, the environment, product quality, pricing, and fair trade. To their credit, many businesses have responded. Not so long ago, many executives managed corporations with a "public be damned" attitude.

They exploited their workers, polluted the environment, adulterated their products, and committed fraud—all in the name of profit. In most of the developed world, those days are long gone. Government regulation is one reason for this, and another is the movement for corporate social responsibility CSR. Millions of people are now better informed than ever about both the good and the bad things that corporations can do.

Newspapers, magazines, television, radio, and the Internet investigate and publicize episodes of business wrongdoing. Many customers will avoid patronizing companies that harm society.

As a result, most corporations are eager to create a positive image. And this has given a strong push to CSR. CSR takes two basic forms. One, which might be called "weak CSR," has the credo: Do no harm to people or the planet unless that means sacrificing profit.

Companies that practice weak CSR are supposed to avoid selling defective goods, dumping factory wastes into rivers or landfills, or bribing government officials. The second form, "strong CSR," says: Do good for people and the planet as long as you can do so without sacrificing profit. For example, they may work to develop green products and practices, provide educational opportunities and health plans for their employees, and support initiatives to bring transparency and fairness to government regulation of business.

Is CSR a force that is leading to positive change among business leaders? Could it be that CSR is the mechanism we have been searching for, the tool with which at least some of the problems of society can be fixed? Unfortunately, the answer is no. There are several reasons why. The concept of socially responsible business is built on good intentions. But some corporate leaders misuse the concept to produce selfish benefits for their companies. Their philosophy seems to be: Make as much money as you can, even if you exploit the poor to do so—but then donate a tiny portion of the profits for social causes or create a foundation to do things that will promote your business interest.

And then be sure to publicize how generous you are! For companies like these, CSR will always be mere window dressing. In some cases, the same company that devotes a penny to CSR spends 99 cents on moneymaking projects that make social problems worse. This is not a formula for improving society! There are a few companies whose leaders are sincerely interested in social change.

Their numbers are growing, as a younger generation of managers rises to the top. Today's young executives, raised on television and the Internet, are more aware of social problems and more attuned to global concerns than any previous generation. They care about issues like climate change, child labor, the spread of AIDS, the rights of women, and world poverty. As these young people become corporate vice presidents, presidents, and CEOs, they bring these concerns into the boardroom.

These new leaders are trying to make CSR into a core part of their business philosophy. This is a well-intended effort. But it runs up against a basic problem. Corporate managers are responsible to those who own the businesses they run—either private owners or shareholders who invest through the stock market.

In either case, those owners have only one objective: To see the monetary value of their investment grow. Thus, the managers who report to them must strive for one result: To increase the value of the company. And the only way to achieve this is by increasing the company's profits. In feet, maximizing profit is their legal obligation to their shareholders unless the shareholders mandate otherwise.

Companies that profess a belief in CSR always do so with this proviso, spoken or unspoken. In effect, they are saying, "We will do the socially responsible thing—so long as it doesn't prevent us from making the largest possible profit.

Sometimes this is true. Occasionally, through a happy accident, the needs of society and opportunities for high profits happen to coincide.

What about when the demands of the marketplace and the long-term interests of society conflict? What will companies do? Experience shows that profit always wins out. Since the managers of a business are responsible to the owners or shareholders, they must give profit the highest priority.

If they were to accept reduced profits to promote social welfare, the owners would have reason to feel cheated and consider corporate social responsibility as corporate financial irresponsibility. Thus, although advocates of CSR like to talk about the "triple bottom line" of financial, social, and environmental benefits by which companies should be measured, ultimately only one bottom line calls the shots: financial profit.

Throughout the s and into the new century, American auto companies have produced gas-guzzling, super-sized SUVs, which demand enormous resources to manufacture, use huge amounts of fuel, and create terrible pollution. But they are very popular—and very profitable—and car makers continue to build and sell them by the millions. SUVs are bad for society, for the environment, and for the world, but the big auto companies' primary goal is to make profits, so they keep on doing something very socially irresponsible.

This example illustrates the most fundamental problem with CSR. By their nature, corporations are not equipped to deal with social problems. It's not because business executives are selfish, greedy, or bad. The problem lies with the very nature of business. Even more profoundly, it lies with the concept of business that is at the center of capitalism. Capitalism Is a Half-Developed Structure Capitalism takes a narrow view of human nature, assuming that people are one-dimensional beings concerned only with the pursuit of maximum profit.

The concept of the free market, as generally understood, is based on this one-dimensional human being. Mainstream free-market theory postulates that you are contributing to the society and the world in the best possible manner if you just concentrate on getting the most for yourself. When believers in this theory see gloomy news on television, they should begin to wonder whether the pursuit of profit is a cure-all, but they usually dismiss their doubts, blaming all the bad things in the world on "market failures.

I think things are going wrong not because of "market failures. Mainstream free-market theory suffers from a "conceptualization failure," a failure to capture the essence of what it is to be human. In the conventional theory of business, we've created a one-dimensional human being to play the role of business leader, the so-called entrepreneur.

We've insulated him from the rest of life, the religious, emotional, political, and social. He is dedicated to one mission only—maximize profit. To quote Oscar Wilde, they know the price of everything and the value of nothing. Our economic theory has created a one-dimensional world peopled by those who devote themselves to the game of free-market competition, in which victory is measured purely by profit. And since we are persuaded by the theory that the pursuit of profit is the best way to bring happiness to humankind, we enthusiastically imitate the theory, striving to transform ourselves into one-dimensional human beings.

Instead of theory imitating reality, we force reality to imitate theory. And today's world is so mesmerized by the success of capitalism it does not dare doubt that system's underlying economic theory. Yet the reality is very different from the theory. People are not one-dimensional entities; they are excitingly multi-dimensional. Their emotions, beliefs, priorities, and behavior patterns can best be compared to the millions of shades we can produce from the three primary colors.

Even the most famous capitalists share a wide range of interests and drives, which is why tycoons from Andrew Carnegie and the Rockefellers to Bill Gates have ultimately turned away from the game of profit to focus on higher objectives. The presence of our multi-dimensional personalities means that not every business should be bound to serve the single objective of profit maximization.

And this is where the new concept of social business comes in. Social Business: What It Is and What It Is Not To make the structure of capitalism complete, we need to introduce another kind of business— one that recognizes the multidimensional nature of human beings. If we describe our existing companies as profit-maximizing businesses PMBs , the new kind of business might be called social business.

Entrepreneurs will set up social businesses not to achieve limited personal gain but to pursue specific social goals. To free-market fundamentalists, this might seem blasphemous.

The idea of a business with objectives other than profit has no place in their existing theology of capitalism. Yet surely no harm will be done to the free market if not all businesses are PMBs. Surely capitalism is amenable to improvements. And surely the stakes are too high to go on the way we have been going.

By insisting that all businesses, by definition, must necessarily be PMBs and by treating this as some kind of axiomatic truth, we have created a world that ignores the multidimensional nature of human beings. As a result, businesses remain incapable of addressing many of our most pressing social problems. We need to recognize the real human being and his or her multi-faceted desires. In order to do that, we need a new type of business that pursues goals other than making personal profit—a business that is totally dedicated to solving social and environmental problems.

But it differs in its objectives. Like other businesses, it employs workers, creates goods or services, and provides these to customers for a price consistent with its objective. But its underlying objective—and the criterion by which it should be evaluated—is to create social benefits for those whose lives it touches.

The company itself may earn a profit, but the investors who support it do not take any profits out of the company except recouping an amount equivalent to their original investment over a period of time. A social business is a company that is cause- driven rather than profit-driven, with the potential to act as a change agent for the world. A social business is not a charity. It is a business in every sense. It has to recover its full costs while achieving its social objective.

When you are running a business, you think differently and work differently than when you are running a charity. And this makes all the difference in defining social business and its impact on society. There are many organizations in the world today that concentrate on creating social benefit. Most do not recover their total costs. Nonprofit organizations and nongovernmental organizations rely on charitable donations, foundation grants, or government support to implement their programs.

Most of their leaders are dedicated people doing commendable work. But since they do not recover their costs from their operations, they are forced to devote part of their time and energy, sometimes a significant part, to raising money.

A social business is different. Operated in accordance with management principles just like a traditional PMB, a social business aims for full cost recovery, or more, even as it concentrates on creating products or services that provide a social benefit.

It pursues this goal by charging a price or fee for the products or services it creates. How can the products or services sold by a social business provide a social benefit? There are countless ways. These products can be cheaper because they do not compete in the luxury market and therefore don't require costly packaging or advertising, and because the company that sells them is not compelled to maximize its profit.

In each of these cases, and in the many other kinds of social businesses that could be imagined, the company is providing a product or service that generates sales revenue even as it benefits the poor or society at large. As long as it has to rely on subsidies and donations to cover its losses, such an organization remains in the category of a charity.

But once such a project achieves full cost recovery, on a sustained basis, it graduates into another world—the world of business. Only then can it be called a social business. The achievement of full cost recovery is a moment worth celebrating. Once a social-objective- driven project overcomes the gravitational force of financial dependence, it is ready for space flight. Such a project is self-sustaining and enjoys the potential for almost unlimited growth and expansion.

And as the social business grows, so do the benefits it provides to society. Thus, a social business is designed and operated as a business enterprise, with products, services, customers, markets, expenses, and revenues—but with the profit-maximization principle replaced by the social-benefit principle. Rather than seeking to amass the highest possible level of financial profit to be enjoyed by the investors, the social business seeks to achieve a social objective.

Unlike those organizations, but like a traditional PMB, a social business has owners who are entitled to recoup their investments. It may be owned by one or more individuals, either as a sole proprietorship or a partnership, or by one or more investors, who pool their money to fund the social business and hire professional managers to run it.

It may be also owned by government or a charity, or any combination of different kinds of owners. Like any business, a social business cannot incur losses indefinitely. But any profit it earns does not go to those who invest in it.

Thus, a social business might be defined as a non-loss, non-dividend business. Rather than being passed on to investors, the surplus generated by the social business is reinvested in the business. Ultimately, it is passed on to the target group of beneficiaries in such forms as lower prices, better service, and greater accessibility. Profitability is important to a social business. Wherever possible, without compromising the social objective, social businesses should make profit for two reasons: First, to pay back its investors; and second, to support the pursuit of long-term social goals.

Like a traditional PMB, a social business needs to have a long-term road map. Generating a surplus enables the social business to expand its horizons in many ways—by moving into new geographic areas, improving the range or quality of goods or services offered, mounting research and development efforts, increasing process efficiencies, introducing new technologies, or making innovations in marketing or service delivery so as to reach deeper layers of low-income people.

How long will it take for investors to get back their investment in a social business? That is up to the management of the social business and the investors themselves. The proposed payback period would be specified in the investment prospectus: It might be five years, ten, or twenty. Investors could choose the appropriate social business in which to invest partly on the basis of this time frame and on their own anticipated needs, as well as their preference for a particular social objective.

Once the initial investment funds are recouped, investors can decide what to do with those funds. They might reinvest in the same social business, invest in another social business or a PMB, or use the money for personal purposes.

In any case, they remain as much owners of the social business as before, and have as much control over the company as before. Why would investors put their money into a social business?

Generally speaking, people will invest in a social business for the same kind of personal satisfaction that they can get from philanthropy. The satisfaction may be even greater, since the company they have created will continue to work for the intended social benefit for more and more people without ever stopping.

The many billions of dollars that people around the world donate to charitable causes every year demonstrate that they have a hunger to give money in a way that will benefit other human beings. But investing in a social business has several enormous differences from philanthropy.

First, the business one creates with social business is self-sustaining. There is no need to pump in money every year. It is self-propelling, self-perpetuating, and self-expanding. Once it is set up, it continues to grow on its own. You get more social benefits for your money.

Second, investors in a social business get their money back. They can reinvest in the same or a different social business. This way, the same money can bring more social benefits.

Since it is a business, businesspeople will find this as an exciting opportunity not only to bring money to social business but to leverage their own business skills and creativity to solve social problems. Not only does the investor get his money back, he still remains an owner of the company and decides its future course of action.

That's a very exciting prospect on its own. Broadening the Landscape of Business With the entry of social businesses, the marketplace suddenly finds itself with some new and exciting options, and becomes a more interesting, engaging, and competitive place. Social concerns enter the marketplace on an equal footing, not through the public relations window. Social businesses will operate in the same marketplace with PMBs.

They will compete with them, try to outmaneuver them, and seek to capture market share from them, just as other businesses do. They will consider price, quality, convenience, availability, brand image, and all the other traditional factors that influence consumer choices today. Perhaps for some consumers, the social benefits created by the social business will be an additional reason to buy from it—just as some consumers today prefer to patronize companies with a reputation for being worker-friendly, environmentally conscious, or socially responsible.

But for the most part, social businesses will compete with PMBs on the same terms as we see in traditional capitalist competition—and may the best company win. Social businesses will also compete with one another. If two or more social businesses are operating in the same market, consumers will have to decide which one to patronize.

Again, product and service quality will probably be the main determining factor for most customers. Social businesses will also compete for potential investors, just as PMBs do. Of course, this will be a different kind of competition than we see among PMBs.

Consider two profit-maximizing businesses that are competing for investment dollars—two auto makers, for example.

The competition here will turn on which PMB is perceived as having a greater future profit potential. If most investors believe that company A is likely to be more profitable than company B, they will rush to buy shares of company A stock, because they expect to earn higher dividends in the future, and they also expect to benefit from continuing growth in the overall value or equity of the company.

This launches a positive cycle in which company A stock rises in price, making investors happy. By contrast, when two social businesses compete for investors, the competition is based not on future profit maximization but on social benefits achieved.

Each social business will claim that it is better positioned to serve the people and the planet than its rival, and it will develop and publicize a business plan to support that claim. Would-be social investors will scrutinize those claims carefully.

After all, they are planning to invest their money with the goal of benefiting society, and they will want to be sure that their investment does the greatest possible good. Just as a profit-minded investor seeks to maximize expectations of future dividends and equity growth, a social investor wants to find out how close the company is getting in solving the social problem it is addressing. Thus, competing social businesses will push each other to improve their efficiency and to serve the people and the planet better.

This is one of the great powers of the social-business concept: It brings the advantages of free-market competition into the world of social improvement.

Competition in the marketplace of ideas almost always has a powerful positive impact. When a large number of people are vying to do the best possible job of developing and refining an idea—and when the flow of money toward them and their company depends on the outcome of the competition—the overall level of everyone's performance rises dramatically.

We see this beneficial effect of competition in many arenas. The rise of Japanese manufacturers of cars and electronic products forced U. By creating a competitive marketplace for social-benefit investing, the concept of social business brings the same kind of positive pressure to bear among those who seek to serve the disadvantaged people of the world.

Competition among social businesses will be different in quality than competition among PMBs. PMB competition is about making more money. If you lose, you get financially hurt. Social business competition will be about pride, about establishing which team is best able to achieve the social objective. Competitors will remain friends.

They will learn from each other. They can merge with each other at any time to become a stronger social force. And they will feel happy to see another social business entering the same area of business, rather than getting worried. To attract investors, I propose the creation of a separate stock market, which could be called the social stock market.

Only social businesses will be listed there. See chapter 8 for a detailed description of this concept. The existence of a public marketplace for trading shares in social businesses will have many benefits.

It will create liquidity, making it easy for shareholders to move in and out of social investments, just as they currently do with investments in PMBs. It will generate public scrutiny and evaluation of social businesses, providing a layer of "natural regulation" to supplement any government regulation that will need to be created to avoid the usual problems of the marketplace: deception, false reporting, inflated claims, disguised businesses, and so on.

And it will raise the public profile of the social-business concept, attracting even more money and energy from investors and entrepreneurs alike. Two Kinds of Social Businesses At this stage in the development of the concept of social business, we can only glimpse its general outlines. In the years to come, as social businesses begin to spring up around the world, new features and forms of social business will undoubtedly be developed.

The first I have already described: Companies that focus on providing a social benefit rather than on maximizing profit for the owners, and that are owned by investors who seek social benefits such as poverty reduction, health care for the poor, social justice, global sustainability, and so on, seeking psychological, emotional, and spiritual satisfactions rather than financial reward. The second operates in a rather different fashion: Profit-maximizing businesses that are owned by the poor or disadvantaged.

In this case, the social benefit is derived from the fact that the dividends and equity growth produced by the PMB will go to benefit the poor, thereby helping them to reduce their poverty or even escape it altogether.

In the first case, it is the nature of the products, services, or operating systems of the business that creates the social benefit. This kind of social business might provide food, housing, health care, education, or other worthwhile goods to help the poor; it might clean up the environment, reduce social inequities, or work to alleviate ills such as drug and alcohol abuse, domestic violence, unemployment, or crime.

Any business that can achieve objectives like these while covering its costs through the sales of goods or services and that pays no financial dividend to its investors can be classified as a social business.

With the second type of social business, goods or services produced might or might not create a social benefit. The social benefit created by this kind of company comes from its ownership. Because the ownership of shares of the business belongs to the poor or disadvantaged as defined by specific, transparent criteria developed and enforced by the company directors , any financial benefit generated by the company's operations will go to help those in need.

Imagine that a poor rural region of a country is separated from the main commercial centers by a river too deep, wide, and wild to be forded by pedestrians or ordinary vehicles. The only way to cross this river is by ferry, which provides expensive, slow, and intermittent service.

As a result, the area's poor and low-income residents face economic and social handicaps that depress their incomes, reduce availability of affordable goods, and lower their access to education, health care, and other vital services. In our example, we assume that the national and local governments are unable to address the problem because of lack of funds, political indifference, or other shortcomings.

Although this is a hypothetical example, it accurately describes conditions in much of the developing world. Now suppose a private company is formed to build a new highway and a safe, modern bridge to connect the rural area with the commercial center of the country. This company could be structured as a social business in two ways. First, it could provide access to poor and low-income residents at a discounted toll, while charging a commercial toll to middle- and upper-class residents and to large commercial organizations.

Obviously some kind of means-testing procedure would be needed to verify the eligibility of poor people for the discounted toll; perhaps the same kind of ID card that is used to indicate eligibility for government welfare could be accepted by the toll-takers.

The toll revenues would cover the costs of building, operating, and maintaining the bridge and highway, and, over time, they could be used to repay the funds initially provided by investors. However, those investors would receive no further profits. If profits beyond this are generated by the tolls, they could be used to build additional infrastructure to benefit the rural community—more roads and bridges, for example, or perhaps some social businesses to stimulate the local economy and create jobs.

Second, ownership of the bridge-and-highway company could actually be put in the hands of the poor and lower-income residents of the rural area. This could be done through the sale of low-priced shares, purchased by them with loans provided by microcredit organizations or through credit that is later recouped from the profit of the company. Grameen Bank makes small loans available without collateral and at a reasonable cost to the poor, thereby enabling them to start or expand tiny businesses and ultimately lift themselves out of poverty.

Grameen Bank would be a regular PMB if it were owned by well-off investors. But it is not. Grameen Bank is owned by the poor: Ninety-four percent of the ownership shares of the institution are held by the borrowers themselves. Thus, Grameen Bank is a social business by virtue of its ownership structure. If a big bank like Grameen can be owned by poor women in Bangladesh, any big company can be owned by poor people, if we seriously come up with practical ownership-management models.

And yes, a social business could also combine both forms of benefit to the poor: It could follow a business plan designed to produce social benefits through the nature of the goods and services it creates and sells and also be owned by the poor or disadvantaged. The Difference between Social Business and Social Entrepreneurship Some people are puzzled when they hear about social business for the first time. Most often, social business is equated with social entrepreneurship. My friend Bill Drayton has built a global movement around the concept of social entrepreneurship through his Ashoka Foundation.

Decades ago, Bill became convinced that creative, innovative thinking could be applied to solve seemingly intractable social problems. He was excited to see that many people around the world are doing just that, some of them without even realizing that they fall into a very special group of people.

One of the first initiatives Bill undertook was to find these people and to give them recognition by calling them Ashoka Fellows. Then he upgraded his initiatives by organizing conferences, meetings, and workshops to bring social entrepreneurs together, helping them learn from each other, supporting them with small grants, introducing them to donors, documenting their activities, and producing videos that portrayed their work and philosophies.

Today, social entrepreneurship has become a recognized movement. They have made it their mission to find, support, and encourage social entrepreneurs around the world. Social entrepreneurship has become a popular concept among both business people and the general public.

The American business magazine Fast Company publishes a list of the twenty- five best social entrepreneurs every year, bringing attention and funding to some of today's most effective social service organizations. Social entrepreneurship has even become an academic discipline, having found its way into the curricula of some thirty U. The concept of social entrepreneurship is very important.

It brings out the power of yearning in people to do something about problems that are not currently being addressed with the efficiency and urgency they deserve. Because of the movement built around this concept today, we can see an enormous range of people around the world doing exciting things to help others. Grameen Bank and the Grameen sister organizations are often cited as being significant symbols of this movement.

But social business and social entrepreneurship are not the same thing. Social entrepreneurship is a very broad idea. As it is generally defined, any innovative initiative to help people may be described as social entrepreneurship. The initiative may be economic or non-economic, for-profit or not-for-profit. Distributing free medicine to the sick can be an example of social entrepreneurship. So can setting up a for-profit health-care center in a village where no health facility exists.

And so can launching a social business.