Saturday, 3 July 2010
Social entrepreneurship - from the horse's mouth
Yesterday at IESE, Barcelona I had the privilege of listening to possibly the most well-known of all social entrepreneurs, Prof. Mohammed Yunus of the Grameen Bank, Bangladesh. More or less single-handedly inventing the concept of microcredits, and helping millions of people in the process set up businesses. A lot of people are tagged “inspirational speaker” but this one really “walks the walk” – a Nobel Peace Prize winner, he’s made important things happen for good and reinvented business models. He's also extremely clever - makes you think "why didn't I think of that?" - and very funny.
Yunus works always from the bottom up, small operations which scale. And as a lateral thinker, he thinks that sometimes, knowing nothing about a subject is a distinct advantage. “When I had to set up the bank, it was quite easy”, says Yunus. “I just observed how ordinary banks worked…and then did exactly the opposite.” Operations local not central. Ownership by those involved, not third parties wanting a return. Prices based on what people can afford, not what the market dictates (what the market dictates for borrowing for people in poverty creates a "market failure" well-known to microeconomists). As Albert Einstein once observed, “We can't solve problems by using the same kind of thinking we used when we created them”.
In the Grameen Bank he set up, not only a microcredit system which put the loan sharks out of business in Bangladesh and helped millions of women out of poverty, but also transplanted the model, against the advice of many, to Queens, New York City, where it’s also been a great success. And a healthcare insurance system. And a nursing college. And a project to get necessary vitamins to undernourished kids. And a massive vegetable-growing project to prevent night blindness through lack of vitamin A. Oh, and a mobile phone company with 50% of the Bangladeshi market, using a single woman in each rural village as a reseller of mobile phone time. All practical, bottom-up solutions.
He appreciates that modern business is highly effective in making things happen, but believes it flawed in its motivations. He’s not against businesses making money, but wants to propose an alternative kind of business, the “social business”, to run alongside it. Whereas the definition of a social entrepreneur can be sometimes a bit blurry (for example, with-profit or not-for-profit?), he is, typically, very straightforward and precise. What have all these businesses got in common? Firstly they’re owned by the people who run them. In fact, Yunus has never owned a single share in any of these multi-billion dollar enterprises. And secondly, they don’t pay dividends but reinvest the profits. (Hmm, doesn’t this sound pretty similar to that radical thinking that we in the West call a co-operative…?) Social business, co-op, mutual, social entrepreneurship - call it what you will, it works.
Finally, what has he to say on the motive for business in general? In short, he agrees with something that my friend Prof. Miguel Ariño said on his blog last week: the first objective of business should not be profit, although this can be a by-product. It is there to satisfy a need or, as Yunus says, to solve a problem. And businesses are, in my opinion, generally much more effective at doing this, expanding and deploying more rapidly while making good use of their talented people, than other types of organisation.
Well that’s about as good an argument for social entrepreneurship – in whatever flavour you decide to pursue it – as I can think of.
Posted by Rob Marchant at 10:45