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					                                 SOCIAL BUSINESS
                                        GRAMEEN BANK




                   PREPARED BY
TAYEB AHMED KHAN
                                           2012
SOCIAL BUSINESS                      2012




       SOCIAL BUSINESS AND GRAMEEN BANK




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SOCIAL BUSINESS                                                                                     2012



             Social Business and the Seven Principles of Social Business:

       People used to know about the normal businesses those are profit seeking or in other words for-
      profit business. But Dr. Yunus came up with the idea of social business. Social business main
      aim is to maximize social welfare rather than profit and run the business. The business should
      have a vision to solve the problem in the society or to help to poor by business method without
      considering the profit. According to Dr. Yunus everyone get help through the business,
      especially the poor. For example- Dr. Yunus started his first step to the social business by
      Grameen bank where he used to provide loans to the poor so that they can be self-employed. He
      also states that the business should be started small, and only the money invested can be taken by
      the owner of the business after a certain time and the rest should be kept for expanding and
      improving the business. Though it is not a profit making business but you need to earn money as
      less as you can since to run the business it needs money, also if the loss is not covered then the
      business will be shut down.

      Also Dr. Yunus suggest that there are two types of social business. Firstly, the type 1 business, in
      which the business‟s main motive is to solve the problems in the society and the profits are
      reinvested by the owners of the company to develop and expand the business. This type of
      business is referred to as non-loss, Non-dividend Company. Another type is the profit-making
      company which is owned by the poor people either directly or through a trust which should be
      dedicated to work for the social issues. This type is generally said the type 2 business.

      Since Dr. Yunus is the founder of this social business, he formulated the seven principals of
      social business along with the help of Hans Reitz, director of Grameen Creative Lab (GCL) in
      Wiesbaden. Germany. The principals are given below:

          1. The business objective is to overcome poverty, or one or more problems (such as
             education, health, technology access, and environment) that threaten people and society --
             - not to maximize profit.
          2. The company should attain financial and economic flexibility.
          3. Investors get back only their investment amount. No dividend is given beyond the return
             of the original investment.



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SOCIAL BUSINESS                                                                                   2012

         4. When investment amount is paid back, profit stays with the company for expansion and
             improvements. The company will be environmentally conscious.
         5. The workforce gets market wage with better-than-standard working conditions.
         6. Do it with joy!!!

      All the above principals will present a good overview of the type one social business, i.e. non-
      loss, Non-dividend Company. Well also the seventh principal is bit different as far the principals
      goes. This one was suggested by Ritz and Dr. Yunus liked it so put that on the principals. This
      one was given in the principal because with the business difficulties and problems, people tend to
      enjoy the work less. And since social business only helps you mentally not financially, it needs
      joy. With the joy of work people will reach the ultimate joy.




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SOCIAL BUSINESS                                                                                     2012

      Line of demarcation between a social business and a non-profit organization/

      NGO (Non-Government Organization)/ CSR (Corporate Social Responsibility):

      There are many sort of business or organization related to the social issue or problems. As like
      social business these organizations also work for the betterment of the society, but their practices
      are different from each other. As social business is a business that deals with solving the problem
      of the society in business method, the other type of organization doesn‟t actually deals the
      problem in this manner.

      Like some people might mix up a social business theory with the non-profit organization. This is
      a very wrong idea. Since non-profit organizations seek funds from the donors. And later they use
      those funds for the people who need them. But they do not pursue any business techniques to
      help the poor. They just receive the money and spend it. They will do that continuously. But they
      don‟t invest the money in a business that will generate income or that will help the needs of the
      poor. Also it does not have an owner. On the other hand a social business is completely different
      from this. The principals of social business do not go like this. It has to have an owner. Also the
      business should generate sufficient income to run the business. And mostly the money should not
      be given away, they should be invested to fulfill the needs of the poor or to help the poor in other
      ways.

      Sometimes people often recognize a NGO as a social business. Though the objectives of both
      these things are same, but again NGO is not a business. It doesn‟t go as par the principals
      suggest. You must to fulfill all the 7 points of the principals to establish an organization as a
      social business. Moreover it relies on the charity. Charitable funds are not promising at all times.
      It‟s very hard to raise money and for shortage many good projects of NGOs may stopped. But on
      the other hand social business is meant to be sustained.

      Last but not the least CSR is completely apart from business. CSR is a sign of good citizenship,
      good ethical company, and mainly all companies are much more concerned about increasing
      their image to public. The CSR department of a company may build hospital, may build a school
      but it has nothing to do with the social business. in contrast a profit-making company devote 95
      percent of its resource to maximize the profit and the other 5 percent to make the world a better
      place, whereas social business devotes 100 percent of its resource for the welfare of the people.




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SOCIAL BUSINESS                                                                                    2012

      As DR. Yunus suggested in the book “Building Social Business” all profit maximizing firms
      should follow few basic steps as their responsibility. Those are

         1. The business should make sure that it doesn‟t imperil anybody‟s life in this planet.
         2. The business should contribute to make the planet a safer place then it would had been
             without the business.
         3. The business should be conducted within the frame work of social and political
             responsibilities established by the state and global authorities.

      So as most of the companies just follow these rules, it does not mean they have turned to be a
      social business.

      At the end I would like to conclude that social business is completely different from other
      business types or the organizations. This is a business based on the aim of helping the people
      with business methods. There must be no confusion between social business and other sorts of
      businesses.




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SOCIAL BUSINESS                                                                                      2012

      Suggest a social business that will alleviate problems with (a) Dhaka

      City traffic jam (b) Hunger in Bangladesh (c) poverty in Bangladesh.

      Problems in Bangladesh are so many that should be removed. From the beginning my wish is to
      be beside people to help them, to support them. Now since Dr. Yunus came up with the idea of
      social business, I would like to create a social business that helps to sort out many problems.
      Firstly I need to start small as Dr. Yunus frequently suggested in the Book „Building Social
      Business‟. I would like to work to solve the problem of poverty in Bangladesh with my business
      plan and idea.

      Poverty is a big issue not only in Bangladesh but also in many other parts of the world. Also
      people are dying for foods. So my first step would be starting a small company that will produce
      necessity items like food. I would like to choose the type 1 social business, non-loss Non-
      dividend Company. It will be based on the production of rice, wheat etc. totally agro based firm.
      The firm will produce these products and pack them and deliver to the shops. I‟ll use the cross
      subsidies method. In this way I can give necessity food to the poor at a very lower price the
      government can afford even by subsidy. In this way I can reduce mainly the hunger and also
      reduce the poverty in a great no.

      Since the company will be in a remote place with lots of land to cultivate and a lots of people
      with the need of removing poverty. Here the most advantage for the company is that I will
      reduce the middleman. Since these sort of necessary items are totally on the hands of middleman
      and government. Since my business will be a social business, everyone would like to help me if
      they have the least humanity. So price can be reduce even in the cross subsidy. The higher price
      charged for the city will be less than the market price, so I will have the competitive advantage.

      Also I will offer job opportunity, necessary shelter, and good wages to make the workers a
      healthy lower middle class life. In this way, the surrounding place where the industry will be
      situated will have no poverty at all. Even in the eyes of people remote village people are not
      visible. They treat them without any dignity. But establishing a social business in that sort of




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SOCIAL BUSINESS                                                                                    2012

      place will make the people of that place visible. Also electricity, water, and other things will be
      provided in those places.

      About the financial stability the company is certain about it. Since the price of rice, wheat, and
      other agro based products is going up constantly, making a social business in this sector will add
      high value to the customer who needs them mostly, also for the people in general. Even if the
      general people are priced slightly higher than the price for the poor people, they will be happy to
      have the product. So if the production can meet all the demands, the company can attain
      sustainable and strong position.

      As social business will provide me the mental satisfaction, I will be happy to change the life of
      few people and also to reduce the death rate due to hunger. Though I need to make money for
      achieving economic stability, but people must have to give the least amount to buy foods. Or else
      I cannot provide them the service they need desperately. And I hope to continue the business till
      the end of my life since even if the hunger is reduce in Bangladesh, there will be many other
      places left in the world. I would like to help them too.




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SOCIAL BUSINESS                                                                                    2012

      Two questions about social business

      Q.1) If you are to explain the concept of social business to a person who has absolutely no idea
      about social business, how would you explain?

      Ans. Social business is totally a new idea in the world of today‟s business. Dr. Yunus came up
      with this idea. The main concept of social business is to build business which will help the social
      problem with the help of business by creating and selling products. Well this might be the idea of
      a profit motive business. But in the social business, say for example a can of fresh juice which is
      very helpful for the young children. They can have the juice at lower cost, only the production
      cost and some expenses regarding selling and administrating the company. But there will be no
      profit for the business. Its main focus is to help the needed people. Since for the company it is
      necessary to sustain the costs to continue providing services so they should take al less as
      possible unlike any other business. Also if profit comes out from the business, it should stay with
      the company, the owner is not allowed to take the profit. It‟s a basic principal that owner is only
      allowed to with the amount he invested, not more then that and the profit remains with the
      company for expanding and improving. There are two types of social business. Firstly, the type 1
      business, non-loss, Non-dividend Company, in which the business‟s main motive is to solve the
      problems in the society and the profits are reinvested by the owners of the company to develop
      and expand the business. Second type is the type 2 business, the profit-making company which is
      owned by the poor people either directly or through a trust which should be dedicated to work
      for the social issues. Also there are some principals for social business. If those conditions are
      fulfilled then the business is said to be social business. The conditions are:

         1. 1 To overcome problems that threatens people and society.
         2. The company should attain financial and economic flexibility.
         3. Only the invested amount will be returned.
         4. Profit stays with the company for expansion and improvements.
         5. The company will be environmentally conscious.
         6. The workforce gets market wage with better-than-standard working conditions.
         7. Do it with joy!!!




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SOCIAL BUSINESS                                                                                    2012

      Q.2) A new small business owner probably cannot relate to the idea of starting a social business.
      What modification would you bring to the definition of a social business? Prescribe a
      framework.

      Ans. social business is a very precise thing. A new businessman should immediately grab the
      idea of the social business. There are many problems in the world, but none of them taken care
      of. Even some organization takes part to solve the problems but they anticipate for a shorter time.
      Eventually the problem is remains unsolved in the long run period. So Dr. Yunus came up with
      the idea to solve the problem permanently. The social business is a business where all the
      problems like poverty, hunger are taken care off while being engaged in the business. in simple
      words, doing the business for solving a particular or more problems.

      The social business is very smartly discussed by Dr. Yunus in the book „building Social
      Business‟. All the parts and subparts are fully discussed in the book. The first step to start a
      social business is to find out a problem in the society and then try to come up with a business
      plan that will help to sort out the problems. Also a new small business man should consider a lot
      of other things while starting a business. For example- Dr. Yunus suggest that it is important to
      start the business as small. Then measure the impact of your social business whether it helps to
      deal with the problem. Then you should expand or improve its service. Most importantly the
      businessman should enjoy the work though if there is a not gain or no impact on the people.
      Without the joy of this business, it will be hard to sustain the business in the long run. Also a
      new business man should know that there will be no profit for him at the business. All the profits
      must be retained as par the principals of social business. Also the owner can withdraw only the
      amount invested, not a single dividend can be received.

      The seven Principals of Social Business describe what is needed to become a social business. But
      still a new business man will think about his or her profits. So they‟ll be discouraged to be a
      Social Businessman. Since one of the law suggest that only the amount invested can be
      withdrawn by the owner. There is no profit for the owner. Only the satisfaction in the heart is
      given as reward. This idea is very discouraging as a person like me. When a small entrepreneur
      starts for a business he thinks of making money, becoming rich. But doing a social business, it is
      quite impossible. And also it creates an impact on the joy with work which is another principal
      stated by DR. Yunus. And if there is no joy with the work there will be no success. So another
      law should be added to the seven principals of social business is that the owner can work as a


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SOCIAL BUSINESS                                                                                     2012

      stuff of the company like he can become the CEO. Instead he receives a moderate salary. This
      way a lot of young, small social entrepreneur can be encouraged to start a social business.

      Another law suggests that the company should be environment friendly. Well for any big
      company it is very hard to run the company this way. For example- poor people would like to
      live in buildings so that storms cannot take away the homes. These buildings can be provided to
      the poor people starting a social business. But bricks cement, etc. cannot be made ecofriendly.
      Also even it can be made, there is a lot of cost, so then the service cannot be provided at lower
      cost. So I would like to suggest that a social business should concentrate only any single
      problem, dealing with various problems at a time could be difficult.

      Other things regarding social business is fully acceptable. All the laws are smartly formulated by
      Dr. Yunus and Hans Rietz. Starting a social business can be easy. And to check if it is a social
      business, you can easily look up by fulfilling all the principals.




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SOCIAL BUSINESS                                                       2012

      Bibliography
      http://www.muhammadyunus.org/Social-Business/social-business/

      http://en.wikipedia.org/wiki/Social_business

      The book „ Building Social Business‟ by Dr. Yunus.




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