Social business: Muhammad Yunus on his new strategy for fighting poverty

Devex
By Catherine Cheney

Nobel Prize laureate Muhammad Yunus speaks at We The Future event in New York City. Photo by: Stuart Ramson / UN Foundation

NEW YORK — Grameen Creative Lab, an organization on a mission to accelerate social business, partnered with Danone, the multinational food company, in a joint venture to produce yogurt enriched with micronutrients at an affordable price.

While Muhammad Yunus, part of the driving force behind the lab, won the Nobel Peace Prize for founding the Grameen Bank in Bangladesh — leading to his reputation as the father of microfinance — that was not his focus at this week’s Global Goals Week. Instead, he wanted to discuss social business, which he defines as a business that is formed to address a social problem, but that reinvests all of its profits back into the business itself or uses the profits to start other social businesses — all with the aim of increasing social impact.

As Yunus made the rounds at Global Goals Week, he made the case for social business and generated some debate about the widely held claim among social entrepreneurs that it is possible to pursue social impact and profit without tradeoffs.

Devex caught up with the author of “The World of Three Zeroes” about how, in his view, this is the only model that might really lead the world to zero poverty, zero unemployment, and zero net carbon emissions.

Muhammad Yunus talks about his vision for a new kind of business at the We the Future event in New York City.

Yunus appeared onstage with Chris Anderson, head curator of TED, at the We the Future event organized by the Skoll Foundation and the United Nations Foundation at the TED Theater in New York City.

“Every time I see a problem, I create a business to solve it,” Yunus said.

The problem with charity is that the money goes out but does not come back, meaning that money only has a one time use — whereas the social business model means that money goes into solve the problem, but then comes back to solve more.

“Charity money has one life, but social business money has endless life,” he said.

But Yunus also said that the singular goal of profit maximization has created many of the problems the world faces. Despite all the talk of business as a force for good at the U.N. General Assembly, he said the world cannot end poverty without changing the financial system.

Anderson asked Yunus to address some of the criticisms of the microcredit and microfinance model that he pioneered. The problem, he said, was that some of the lenders who followed in his footsteps started making money off the poor and became the very loan sharks that he was trying to cut off. When Anderson asked for more clarification on microcredit done right versus microcredit done wrong, Yunus said that the cost of the funds plus 10 percent or less interest is the green zone; the cost of the funds plus 10 to 15 percent interest is the yellow zone; and the cost of the funds plus 15 percent interest or above is the red zone.

Connecting his vision for social business with growing concerns about what the rise of automation will mean for the future of work, Yunus told Devex that people are either job seekers or job creators. With access to credit, people can start their own businesses, just as so many have done before through the Grameen Bank. He echoed a We the Future session moderated by Devex on human capital, where panelists presented models to flip the script on the traditional global development model so that beneficiaries become changemakers. Yunus explained that it is social business, not foreign aid, that will ultimately lead to the poverty-free world he believes is possible.

“The real solution will be when you move from charity to sustainability,” he said.