Thursday, June 9, 2016

Chapter 1. Social Business: An Introduction

Social Business (SB) is a business model for an entrepreneur to solve social, financial and environmental problems in the society.  Entrepreneur in the field of social business are called social business entrepreneur (SBE).

A simple and pure social business follows the principles set by Prof. Yunus Muhammad. Prof. Yunus has prepared a broad set of guidelines for a social entrepreneur to understand and follow. Based on the guidelines, social business entrepreneur can identify a new business opportunity or qualify existing business as social business (SB).

Core guiding principles of social business: 
  • Business provide its services  to the lowest income group,  solves social problem (healthcare, technology, communication, education and environment) , and solves humanitarian needs.
  • Business must be viable, feasible and economical sustainable in the short term and long term
  • Business generates profit to pay back the investor over period of time, without interest , without cash dividend or any financial incentives. Net amount received is the net amount paid back to the investor. 
  • Profit accumulated after payback to the investor remains within the company for the purpose of funding growth and expansion activities.
  • Business is sensitive & conscious to gender and environment respectively
  •  Business creates jobs , offers respectable salary and good social working condition
  • Business brings happiness , delight and recognition for all the stakeholders. 
Social business has distinctive features compared to profit maximizing company. In a profit maximizing company, the biggest motive is to generate profit, unlike in social business the profit motives are to the level of reaching sustainability not beyond.

Further in a profit maximizing company stakeholders receive profit share, unlike the social business model where there is no sharing of dividend, being a pure and simple non-dividend business model.
Social business, unlike other non-profit business based on charity, don't depend on charity, public or private donation to raise funds, as the business model is self-sustainable to fund growth and expansion. Moreover, charity based non-profit organization raise funds on regular basis, as fund is deployed in the field once and for all. Unlike the charity based non-profit organization, social business model deploys fund to rotate multiple times to generate enough profit to sustain in short term and long term.

'Social business is a business created and designed to address a social problem and non-dividend company, and solving the most pressing needs of the society' - Prof. Muhammad Yunus

Social business creates positive impact on the society and solves problems related social, financial & environmental further covering industry specific needs like heath care, communication and education.

The social business is a success from its start as it offers qualitative impact on the society, unlike the profit maximizing companies. Because of this positive impact, investors with philanthropic approach find social business much more rewarding than the classical profit maximizing business. Not only the wealth is distributed in a social business, no dividend policy helps the company to grow year on year without regular funding, thereby creating a much bigger social impact. 

In the context of free market economy, profit maximizing business and social business compliments each other, as an investor can do both at the same time without conflicting the business model.

Social Business offers a tremendous learning experience opportunity for an entrepreneur. It offers day to day challenge to an entrepreneur. It is extremely important for a social business entrepreneur to enjoy the challenge and share the challenge with known experts.

Social business model is gaining momentum worldwide as alternative to capitalism. Capitalism has so far failed to remove poverty, provide education to poor, unemployment and health care for all.

Government started taking initiative to offer all the basic needs for the poor in terms of education, health care and jobs. It is well known fact that government has also failed in its effort to eradicate poverty, unemployment and healthcare for the poor.

Social business has proven to be a success over the last few years where capitalism and government have failed over the past couple of decades.

Source of fund for social business is charity money from individuals who are high net worth individuals.

Another source of fund is Corporate Social Responsibility (CSR) program of large corporate. These large corporate run CSR with three objectives: Environment, social and financial benefits.

Research data has proved that the individual charity money is more suited for SBM; as CSR program originates from financial profit and financial profit remains the major objective for these companies.
Social business is fundamentally a business model which is pure and simple. It is different than social enterprise, which also solve social problem and at the same time generates profit for investor.  The future of social business is bright as it gives the investor the motivation to achieve a social goal and enjoy its success as satisfaction.

Grameem Danone is one of the best success story in CSR based social business. It offers fortified sweet yogurt for malnourished children of Bangladesh at affordable price, called "Shokti Doi" meaning “Energy Yogurt”.

The future of social business is very clear, it will take off and deliver a tough challenge to free market capitalism. The success of SBM will attract the best business talents to explore and experience the new form of capitalism.

The financial market, including the stock market will respond to the new form of capitalism and form new index to measure the financial, social and environment impact of Social Business. It will start a revolution in the financial capital market and will motivate the world for accept social business as financial viable business model in free market economy.
Countries like USA, Bangladesh, India, Germany, Brazil and many African countries have ongoing projects based on social business model. It is time for the rest of the world to experience social business.

“The best way to experience an experience is to experience it.” -  William Grant  

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