OLUWASEUN OBAYOMI

COURSE NAME
Seminar Administrative Development-I Building Social Business

STUDENT’S PROFILE
A rare blend of focus, drive and creativity to pursue excellence at all times in all
my endeavors.

ATLANTIC INTERNATIONAL UNIVERSITY

OLUWASEUN OBAYOMI
ID UM33611SIN42185
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OCTOBER 2014
Building Social Business written by Muhammad Yunus.

A Thesis Presented to
The Academic Department
Of the School of Science and Engineering
In Partial Fulfillment of the Requirements
For the Degree of Masters in Information Systems

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ATLANTIC INTERNATIONAL UNIVERSITY

 Table of Contents

1.0 Introduction

1.1 About the author

1.2 What is a Social Business?

1.3 Types of Social Businesses

1.4 A Learning Process

1.5 Author's Summary on Creating a World without Poverty

1.6 Seven Principles of Social Business

1.7 Applying a Social Business Model to a Conventional Business Model

1.8 Conclusion

1.9 References
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1.0 Introduction
To change the world once is remarkable. A second attempt invites deification. But
Muhammad Yunus, the founder of Grameen Bank and pioneer of microcredit, has
embarked on yet another crusade: to foster a new kind of organization, the “social
business”.

In 1974, Professor Muhammad Yunus, a Bangladeshi economist from Chittagong

University, led his students on a field trip to a poor village. They interviewed a
woman who made bamboo stools, and learnt that she had to borrow the equivalent
of 27$ to buy raw bamboo for each stool made. After repaying the middleman,
sometimes at rates as high as 10% a week, she was left with a profit margin that
was close to nothing. Had she been able to borrow at more advantageous rates, she
would have been able to amass an economic cushion and raise herself above
subsistence level.
Realizing that there must be something terribly wrong with the economics he was
teaching, Yunus took matters into his own hands, and from his own pocket lent
money to around 17 to 42 basket-weavers. He found that it was possible with this
tiny amount not only to help them survive, but also to create the spark of personal
initiative and enterprise necessary to pull themselves out of poverty.
It never occurred to the professor that his gesture would inspire a whole category
of lending and propel him to the top of a powerful financial institution. Against the
advice of banks and government, Yunus carried on giving out 'micro-loans', and in
1983 formed the Grameen Bank, meaning 'village bank' founded on principles of
trust and solidarity. In Bangladesh today, Grameen has 2,564 branches, with
19,800 staff serving 8.29 million borrowers in 81,367 villages. On any working
day Grameen collects an average of $1.5 million in weekly installments. Of the
borrowers, 97% are women and over 97% of the loans are paid back, a recovery
rate higher than any other banking system. Grameen methods are applied in
projects in 58 countries, including the US, Canada, France, The Netherlands and
Norway.

His aim was to turn traditional banking on its head. One of his first moves was to
focus on women because they are most likely to think of the family's needs. This
was a radical step in a traditional Muslim society, and it took Yunus six years to
reach his initial goal of a 50-50 gender distribution among borrowers. Today, 96%
of Grameen's borrowers are women. "If banks made large loans, he made small
loans. If banks required paperwork, his loans were for the illiterate. Whatever
banks did, he did the opposite," marvels Sam Daley-Harris, director of the
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Microcredit Summit Campaign. That was his genius

Established multinational companies (MNC) have recently shown some interest in
the Grameen experience and in its fight against poverty as part of a more general
emphasis on corporate social responsibility (CSR). However shareholder value
maximization remains the rule in the capitalist system, and clearly the
reconciliation of this with social objectives is often problematic. Thus, although
advocates of CSR like to propose that companies should be measured by a „triple
bottom line‟ of financial, social and environmental benefits, ultimately only one
bottom line usually matters: financial profit.

1.1 About the author

Muhammad Yunus born 28 June 1940 is a Bangladeshi social entrepreneur,

banker, economist and civil society leader who was awarded the Nobel Peace
Prize for founding the Grameen Bank and pioneering the concepts
of microcredit and microfinance. These loans are given to entrepreneurs too poor
to qualify for traditional bank loans. In 2006, Yunus and the Grameen Bank were
jointly awarded the Nobel Peace Prize "for their efforts through microcredit to
create economic and social development from below". The Norwegian Nobel
Committee noted that "lasting peace cannot be achieved unless large population
groups find ways in which to break out of poverty" and that "across cultures and
civilizations, Yunus and Grameen Bank have shown that even the poorest of the
poor can work to bring about their own development". Yunus has received several
other national and international honours. He received the United States Presidential
Medal of Freedom in 2009 and the Congressional Gold Medal in 2010.

In 2008, he was rated #2 in Foreign Policy magazine's list of the 'Top 100 Global
Thinkers'.

In February 2011, Yunus together with Saskia Bruysten, Sophie Eisenmann and
Hans Reitz co-founded Yunus Social Business – Global Initiatives (YSB). YSB
creates and empowers social businesses to address and solve social problems
around the world. As the international implementation arm for Yunus‟ vision of a
new, humane capitalism, YSB manages Incubator Funds for social businesses in
developing countries and providing advisory services to companies, governments,
foundations and NGOs.

1.2 What is a Social Business?

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Social business, as the term had once been commonly used, was first defined
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by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his
books Creating a world without poverty—Social Business and the future of
capitalism and Building Social Business—The new kind of capitalism that serves
humanity's most pressing needs.

In these books, Yunus defined a Social Business a business that was:

 Created and designed to address a social problem

 A non-loss, non-dividend company, i.e.
 It is financially self-sustainable and
 Profits realized by the business are reinvested in the business itself (or used
to start other social businesses), with the aim of increasing social impact, for
example expanding the company‟s reach, improving the products or services
or in other ways subsidizing the social mission.
Unlike a profit-maximizing business, the prime aim of a Social Business is not to
maximize profits (although generating profits is desired). Furthermore, business
owners are not receiving any dividend out of the business profits, if any. On the
other hand, unlike a non-profit, a Social Business is not dependent on donations or
on private or public grants to survive and to operate, because, as any other
business, it is self-sustainable. Furthermore, unlike a non-profit, where funds are
spent only once on the field, funds in a Social Business are invested to increase and
improve the business' operations on the field on an indefinite basis. "A charity
dollar has only one life; a Social Business dollar can be invested over and over
again."
1.3 Types of Social Businesses
Type I: focuses on businesses dealing with social objectives only.
Eg. The product produced is for the benefit of the poor.
Type II: can take up any profitable business so long as it is owned by the poor and
the disadvantaged, who can gain through receiving direct dividends or by some
indirect benefits.
Eg. The product could be produced by the poor but exported to an international
market while net profits would go towards workers benefits.

The impact of the business on people or environment, rather the amount of profit
made in a given period measures the success of social business. Sustainability of
the company indicates that it is running as a business. The objective of the
company is to achieve social goal/s.
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1.4 A Learning Process
It is a great learning process. You are doing things which you never did before.
You are thinking in a way which you never did before. You are surprised to see
you are enjoying it a lot. You start digging into your experiences to see what is
relevant for the task. You check through the reservoir of technology that you are
familiar with, start contacting the pool of experts that you have gotten to know in
your business, to achieve your new goal. You start exploring a new world which
was totally unknown to you. You realise that you are now wearing "social business
glasses" on your eyes, you see things which you never saw before. You start
sensing that your eyes were fitted with "profit-maximizing glasses" all along, while
you thought these were your natural eyes in your economic world.

Now when you turn your eyes to your own profit-making businesses you start
noticing things which you never noticed before. You bring new-gained experiences
from your new business to your old businesses. Slowly you move towards
becoming an multi-dimensional person, rather than a robot-like person.

Some people ask me why can't you run businesses with some profit and some
social benefit "doing well by doing good", as it is popularly described.

Of course, it can be done. I am never against it. But I am trying go to the ultimate
point where you don't make any profit for yourself at all. This is easy to identify,
easy to handle in day to day decision making.

When you mix profit and social benefit it gets complicated for the CEO. His
thinking process gets clouded. He does not see clearly. More often this CEO will
take decision in favour of profit, and exaggerate the social benefit. Owners will go
along with it. Social business gives a clear unambiguous mandate to the
management. There is no balancing act involved. If you can agree to take a "small"
profit, you can also persuade yourself to take zero profit. Once you get there you
get rid of all old ways of thinking. You prepare yourself to explore a new world, a
new way of seeing things, and doing things in a different way. When you were in
the world of a "small profit" you were still operating in the old world, with old
ways of doing things, only restraining yourself here and there.

Another way to put the same question is: Why can't you allow thee investors in
social business to get a small fixed profit say, 1% dividend. My answer is the
same. I may describe this situation by saying something like this: you are in a "no
smoking" building, you are arguing "Why can't I be allowed to take just one small
puff ?" Answer is simple it destroys the attitude. In Ramadan, Muslims are not
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allowed to eat or drink until the after the sunset. Why not take a sip of water during
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the day? It destroys the strength of the mental commitment. You lose a lot for a
small favour.

Social business is about making complete sacrifice of financial reward from

business. It is about total delinking from the old framework of business. It is not
about accommodation of new objectives within the existing framework. Unless this
total delinking from personal financial gain can be established you'll never
discover the power of real social business. Some times you can set up a technically
correct social business with the purpose of making profit through your other
companies by selling products or services to this social business company. This
will be a clear sabotage of the concept. There may be many other subtle ways by
which one can weaken the concept and practice of social business. A genuine
social business investor must make all efforts so that he does not walk into this trap
unwittingly.

Capitalism has created poverty by focusing exclusively on profit. It built a fairy-

tale of prosperity for all. This never happened. That's why Europe decided to
entrust the government to take care of poverty, unemployment and health. They
were smart enough to figure out the emptiness of capitalism in solving these
problems.
1.5 Author's Summary on Creating a World without Poverty
While free market capitalism is thriving globally, almost unopposed now, and
bringing unprecedented prosperity to many, half of the world lives on two dollars a
day or much less. Eradication of poverty remains the biggest challenge before the
world. Colossal social problems and deprivations, mostly poverty-related and very
unevenly distributed around the globe, continue to shame us everyday. Obviously
the free market has failed much of the world. Many people assume that if free
markets can‟t solve social problems, then governments can. After all, the
government is supposed to represent the interests of society as a whole. But
decades and even centuries of experience has shown that while government must
do its part to help alleviate our worst problems, it alone can not solve them.

Fortunately for us there is a keen desire among many to lend a hand through
charity, for addressing the problems of poverty and other social problems. Charity
is rooted in basic human concern for other humans. These days concern is usually
expressed in the shape of non-profits and NGOs which may take various names
and forms. Then there are aid organizations sponsored by rich governments'
bilateral and multilateral. Nonprofits and aid organizations are trying to keep the
problems within some control. But charity is a form of trickle-down economics; if
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the trickle stops, so does help for the needy. On the other hand multilaterals like
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World Bank focus only on growth as the means of helping the poor, but can not see
that the poor people can be actors themselves. There are serious questions about
the type of growth that can help the poor. As another response to the global social
problems some businesses are identifying themselves with the movement for
Corporate Social Responsibility (CSR), and are trying to do good to the people
while conducting their business. But profit-making still remains their main goal, by
definition. Though they like to talk about triple bottom lines of financial, social,
and environmental benefits, ultimately only one bottom line calls the shot:
financial profit.

I always believed that poverty can be totally conquered in our own lifetimes if the
right approach is adopted. I based my belief on the inherent ability of the poor that
can be unleashed once they are given the opportunity to help themselves. This I
have proved in action through my three decades of experience with Grameen Bank.
The concept of microcredit did not exist before I initiated Grameen Bank in
Bangladesh, which basically recognized that credit without collateral is a
fundamental right of the poor. Our success with this in my own country has
been widely replicated all over the world including in some of the richest
countries; and the Nobel Peace Prize 2006 for Grameen Bank and myself is
one recognition of that success. The story of Grameen Bank has been told in my
earlier book: "Banker to the Poor". In this new book I have described the further
evolution of Grameen System. But more importantly I have introduced and
elaborated here my broadened concept of social business, that the Grameen
experience has led me into.

Grameen allowed the poor to be an actor in the free market and to enjoy some of
its fruits to try to come out of poverty. It is fundamentally a business model, pure
and simple, but a social business. There can be other social businesses. They are
just like any other business; but for social objectives and not for personal gain or
dividend. I have tried to show in the book why social business can succeed in
addressing social problems where other means mentioned above have failed. social
business should not be confused with the term social enterprise which is used in a
more encompassing sense and includes NGOs, personal initiatives, charities, etc.,
and may include social business too.

Social business introduces a totally revolutionary dimension to the free market

economy. It does not interfere with the mechanism through which the normal
Profit Making Business (PMB) works and prospers capitalization, expert business
management, competitiveness etc., but investors here do not receive any dividend,
though they can recover their investment if they want to, to reinvest in other social
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businesses or PMBs. The satisfaction gained in achieving the stated social goals
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are the only motive behind the investment, and the business will be evaluated
according to that standard. Essentially it is a non-loss, non-dividend business
aimed at social objectives education, health, environment, whatever is needed to
address the problems faced by society. The profits here remain with the business
and help it to grow further. The whole thing is based on the premise that
entrepreneurs need not be motivated only by the profits they personally receive,
but can also be motivated by social goals and may enjoy success there with equal
satisfaction. The important thing is not to mix up a Social Business with a PMB. In
fact the inclusion of Social businesses alongside PMBs in the business world will
give the free market capitalism a larger, nobler and a more fulfilling purpose. Its
advantages over straightforward charity are many efficiencies, continuous use with
each turnover, competition with PMBs following the same rules, utilization of
business innovations being some of the most important ones.

One thing is very clear to me that with social business taking off, the world of free
market capitalism will never be the same again, and it then will really be able to
deliver a deathblow on global poverty. I am sure, many business wizards and
successful business personalities will apply their abilities to this new challenge the
challenge of creating a poverty-free world within a short time. At the moment we
are seeing merely the line of horizon. Soon a good part of business genius,
creativity and innovation of the world will devote itself to this new goal of social
good. A whole new stock market with its new indices will thrive in the financial
capitals of the world motivated by this new incentive. It will accelerate the process
of poverty eradication to an unthinkable pace using the same market mechanism
which accelerated the global prosperity for the rich in the first place.

1.6 Seven Principles of Social Business

These were developed by Prof. Muhammad Yunus and Hans Reitz, the co-founder
of Grameen Creative Lab:

 Business objective will be to overcome poverty, or one or more problems

(such as education, health, technology access, and environment) which
threaten people and society; not profit maximization
 Financial and economic sustainability
 Investors get back their investment amount only; no dividend is given
beyond investment money
 When investment amount is paid back, company profit stays with the
company for expansion and improvement
 Environmentally conscious
 Workforce gets market wage with better working conditions
 Do it with joy
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The business model concept is useful is offering guidance as how to create social
businesses. However, despite ever-growing literature on the business model
concept, there is no consensus as to its definition. It is either revenue focussed, or
focussed on the transactions between the firm and its external constituents.

Three main components of a business model, as suggested in a paper by

Muhammad Yunus, Bertrand Moingeon and Laurence Lehmann-Ortega are:

 A value proposition, that is, the answer to the question: „Who are our
customers and what do we offer to them that they value?‟;
 A value constellation, that is, the answer to the question: „How do we
deliver this offer to our customers?‟ This involves not only the company‟s
own value chain but also its value network with its suppliers and partners.
 These two components need to fit together to generate: a positive profit
equation, which is the financial translation of the other two, and includes
how value is captured from the revenues generated through the value
proposition, and how costs are structured and capital employed in the value
constellation.

1.7 Applying a Social Business Model to a Conventional Business Model

1. Challenging Conventional Wisdom
This is the capacity to create new strategies which modify the rules of the
competitive game in an industry. This presents a major challenge for
companies, as it entails questioning the models that have previously led
them to success. The principle that could be applied here is what we learn in
Organization Behaviour as „double-loop learning‟. It forces the organization
to transform its fundamental references and adopt new ones. The questioning
of the current rules of the game was at the very heart of the bank‟s
foundation. Muhammad Yunus was first led to the idea by the woman who
needed the money to sustain making bamboo stools. Conventional bankers
continue to be reluctant to consider poor people as potential customers. They
found it impossible to challenge their conventional wisdom – that loans
could not be granted without collateral.
For the Grameen Bank, the value proposition was to lift the poor out of
poverty by making small loans sufficient to finance income-generating
businesses. Except in extreme circumstances, interest is charged on all loans.
The value constellation breaks away from the bureaucratic control. Local
Grameen branch managers first visit the villages and identify the prospective
clientele. Only if the first two borrowers in a grup begin to repay the
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principal plus interest within six weeks do the other group members become
eligible for loans. Group support, peer pressure, self-interest and the
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 motivation of borrowers ensure that repayment rates on Grameen Bank loans
remain high.
2. Finding Complementary Partners
The second step in building social business models is to leverage expertise
and resources by setting up partnerships. The main advantage of
collaborative agreements lies in the pooling of resources and knowledge
leveraged by the partners, which may in turn lead to the development of a
broader portfolio of resources for firms in the network. Cooperation is
considered as a major factor of success for proactive CSR strategies.
The Telenor example illustrates how setting up a collaborative partnership is
a major step in building social business models. Grameen had no experience
in building a wireless phone network, while Telenor had no experience of
developing world markets. Telenor benefited from Grameen‟s knowledge of
the coutry and the network of people the bank had already built. The
combination of the two partners‟ resources and skills led this successful
venture, which offered a useful value proposition to customers while also
helping poor people become entrepreneurs and lift themselves out of
poverty.
3. Undertaking Continuous Experimentation
An existing firm implementing a strategic experimentation is forced to
imagine and learn new ways of doing business- the changes need to be
radical, and will question the firm‟s conventional way of doing business. As
for conventional business model innovation, social business models can start
small, be refined and then rolled out. Corporate world experts can provide
the relevant tools for analysing the market and finding new outcomes, but
analysis alone is not sufficient: only experimentation can determine whether
new business will work out or not. Experimentation does not mean intuition,
but involves the ability and intention to make changes if the path first chosen
turns out unsuccessful.
4. Favouring social profit-oriented shareholders
More and more corporate managers are keen to launch CSR projects that
seek to help developing countries. But they face the problem that, even if
such projects are small in terms of the overall scale of the company, they
still require resources. In the case of Grameen Danone(yoghurt
manufacturing) the resources included both asset expenditure and valuable
top management time. CSR usually turns into corporate financial
irresponsibility unless financial profit-oriented shareholders can be shown
that the incurred costs will turn into a positive cash flow in the long term.
As the CEO of a publicly-held company, Riboud is answerable to his
Danone‟s shareholders, but he risked being unable to provide clear evidence
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of how the resources used in the Grameen Danone experiment maximize

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value for them. Danone developed another innovation by disconnecting the

 funding of Grameen Danone from the stock market. The company created a
publicly-trade mutual fund with a special mission – to give investors social
benefits rather than financial benefits – and gave Danone‟s shareholders the
option of joining if they wished.
Thus, in building social business models, the value proposition and the value
constellation must be constructed through innovative links between all
stakeholders, including shareholders.
5. Specifying social profits objectives clearly
Often in the case of partnerships, cooperation can uncover conflicts between
partners over time. For example, Grameen Phone was started by the
Grameen Group to convert it into a complete social business by giving the
poor the majority of the shares in the company so that they benefit from the
profits, but Telenor refused to sell its shares. To avoid such a situation,
Grameen Danone was established in detail at the beginning of the project.
When the objective is to build a social business, its business model must be
shifted from traditional financial profit generation towards social profit
generation. This is possible where only social profit-oriented shareholders
are involved in the project.

1.8 Conclusion
Pioneering individuals such as Muhammad Yunus are critically important to
facilitate lasting change within complex systems as 'resilience agents' of
revolutionary transformation, by acting to repair global market failures. Yunus is
no saint, has made mistakes and no doubt will make more. Arguments will
continue to rage about the complex impacts of microcredit and the pros and cons of
the for-profit and non-profit models. His hard line on the definition of a social
business is not for everyone. But his achievement is immense. Whether its
urbanites downloading their apps on to their Grameen phones or the street beggars
who are borrowing interest free, Yunus's social business group reaches into all
corners of his country. And that, my social enterprise friends, is what you call
mainstreaming.
Although the situation might be different for everyone from how it was for Yunus
in Bangladesh, there are some leadership lessons we can all take from him as we
continue to find ways of creating a socially enterprising world.
The Grameen group has grown almost exponentially since its beginnings. But two
things have never changed. The rejection of charity as a solution to poverty and the
drive to create financially viable enterprises, owned by the poor themselves, based
on high-volume, low-margin products and services. In a land with no public sector
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grants to keep the salaries paid or super-rich hedge fund managers dabbling in
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social innovation, there is little choice but to be inventive when it comes to

business models, but Yunus's breaking of the NGO or private business paradigm is
impressive.

It has passed into legend that Yunus was told he was mad to lend money to poor
people with no contracts or collateral. I love his willingness to start, not waiting for
the perfect answer before taking that first step. He is a congenital starter and this is
what is needed in a country like Bangladesh where the needs of people are so
acute.
Yunus didn‟t want it to be a little boutique social experiment. He wanted it to grow
in such a way that poverty could be put in the museums. Some of his businesses
are brilliantly original ideas but others are copied from elsewhere. His superbly
efficient and successful eye hospitals, for example, are copies of Aaravind's superb
model in India.
Anyone can have a bright idea at his or her computer or social innovation seminar.
Inventing stuff is the easy part. There is no shortage of great ideas. Execution is the
trick that is so hard to pull off. Developing channels to the people who need the
service on a mass scale and normalising it – now that's the really difficult bit
especially in so-called bottom-of-the-pyramid markets.
Over 30 years, Yunus has created a global ecosystem including heads of state,
business leaders, entrepreneurs, opinion formers, grassroots innovators and citizen
organisations. In his hour of intense need, as a corrupt and corrupting government
regime seeks to ruin him, his network has been galvanized to action. I have no
doubt his enemies would have tried to put him in jail or worse without his allies
and friends around the globe as well as at every strata of Bangladeshi society
speaking out.
Yunus has a great facility with words and is a compelling storyteller and
phrasemaker. His ability to use simple language to cut through to the chase about
poverty and the structures that oppress people is a mark of that leadership calibre
which attracts people to join his mission of eradicating injustice. According to him,
“The question is not "Are people credit-worthy", but rather, "Are banks people-
worthy?"”
Let us hope against hope that the government of Bangladesh does not extinguish
the lights of Grameen. But Yunus's legacy is secure. He has inspired millions
around the world to rally to the cause of the poor. His 2006 Nobel prize acceptance
speech is well worth a read: "We get what we want, or what we don't refuse … we
wanted to go to the moon. We went there. We achieve what we want to achieve.
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Let us join hands to give every human being a fair chance to unleash their energy
and creativity".
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1.9 References
http://en.wikipedia.org/wiki/Social_business

http://topics.nytimes.com/top/reference/timestopics/people/y/muhammad_yunus/in
dex.html

http://www.businessweek.com/stories/2005-12-25/nobel-winner-yunus-
microcredit-missionary

http://www.freepatentsonline.com/article/International-Journal-Business-
Research/178900203.html

https://www.goodreads.com/author/quotes/1254841.Muhammad_Yunus

http://www.grameen-
info.org/index.php?option=com_content&task=view&id=329&Itemid=363

http://www.muhammadyunus.org/index.php/social-business

http://www.theguardian.com/social-enterprise-network/2012/sep/12/muhammad-
yunus-social-enterprise-leader

Yunus Muhammad, Moingeon Bertrand, Laurence Lehmann-Ortega (2010),

"Building Social Business Models: Lessons from the Grameen Experience”, April-
June, vol 43, n° 2-3, Long Range Planning, p. 308-325

N.B
This seminar work as been uploaded to this link below online.
https://aiuonline.academia.edu/OluwaseunObayomi
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