Archive for February, 2008

Putting Social Business into practice

February 25, 2008

Aha! Finally! I have been running Social Businesses for many years (though I did not use the term up until now), so it is delightful to have Professor Yunus not only give it a name, but shine a bright light on such a valuable free-market approach to addressing social change!

Today I run a Social Business called MicroPlace, which is a wholly owned subsidiary of eBay. Much like Group Danone started a Social Business called Grameen Danone, eBay started MicroPlace. As was true with Danone, eBay employees by the hundreds have expressed their desire to create social change through their work. MicroPlace gives them that opportunity. eBay expects us run the business to achieve break-even, but has committed to reinvesting any profits back into MicroPlace and their other Social Businesses. This structure assures we are held to the standards of the free market while allowing us to focus on our social mission. So it was fun to read “Creating a World Without Poverty” because MicroPlace is a perfect fit with the definition of a Social Business.

The question for me is not if- but how- we move forward with making social businesses more commonplace. We still operate in a dichotomous world that is comfortable with black and white- donations that are purely socially motivated and investments that are purely profit maximizing. Anything in between remains weird and uncomfortable. How do we break out of this rigid world?

I would also love advice from others regarding Professor Yunus’s ideas on Social Business ownership. His proposal is that once a Social Business is profitable, we repay investors the amount that was invested and at that point, the repaid investors would continue to be “shareholders” (though without any financial stake). But how do we keep non-financially motivated shareholders motivated? My experience tells me that social motivation is not as strong as financial motivation. Shareholders without financial motivation tend to relax their standards or fade away completely. How do we keep their interest? Furthermore, do I really want an investor who has been repaid in full and has no financial claim to the business to continue to be an “owner” indefinitely? More cooks in the kitchen can sometimes be a bad thing. While having a committed socially motivated board of directors and advisors is wise, that is different from a repaid investor.

Tracey Turner is GM of MicroPlace, an eBay Company

Can Social Business Significantly Impact the Microfinance Industry?

February 6, 2008

Muhammad Yunus is blazing another trail in his constant search for new and often unconventional ideas for confronting poverty, head-on. Just as Grameen Bank revolutionized banking with its bottom-up approach, I believe his latest initiative—social business—has the power to transform the way societal problems such as poverty, ill-health and even environmental degradation are addressed.

We have already seen that transformative effect in the success of two social businesses, each one pioneered by Professor Yunus. Grameen-Danone has become operational and shows the potential to significantly improve the nutrition of Bangladeshi children while providing real economic opportunities to local communities. Grameen Green Children Eye Hospital will provide valuable eye care services with the goal of alleviating cataracts, which afflict hundreds of thousands of people in Bangladesh. The first hospital opened in 2007, and three more are planned.

Grameen Foundation has been involved in the successful creation of two social businesses, both of which are mentioned in Dr. Yunus’ new book. One is Grameen-Jameel Pan-Arab Microfinance Limited, a joint venture between Grameen Foundation and the Abdul Latif Jameel Group that advances microfinance in the Arab World. The second, Grameen Capital India, is a collaboration of Grameen Foundation, the Institute for Financial Management and Research (IFMR) Trust of India and Citicorp Finance (India) Limited (CFIL). These social businesses have already shown that by combining the responsive, ever-evolving nature of a capitalist business with the passion inherent in a social change-focused organization, we can create a model in which performance is measured in social impact, and its market value is influenced by the extent to which societal problems are solved.

The microfinance sector can make great gains in expanding its outreach and moving closer to social and financial sustainability through embracing the social business model of for-profit, non-dividend companies with an overarching social purpose. Agree? Disagree? What other strategies can microfinance embrace to propel themselves forward? How can other social businesses model the examples set by microfinance-based social business to enact their own changes, and how can those businesses synergize with MFIs?

Alex Counts is the President and CEO of Grameen Foundation.