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103 Chapter Six Muhammad Yunus’s Model of Social Business A New, More Humane Form of Capitalism or a Failed “Next Big Idea”? Milford Bateman and Sonja Novković Introduction One of the most dramatic developments in the field of entrepreneurship and international development policy in recent years has been the rise of the “social enterprise” (Nicholls 2006; Seelos and Mair 2005). A social enterprise is said to combine traditional entrepreneurship and private sector–­ style operational efficiency while explicitly addressing basic human needs that markets, conventional for-­ profit businesses, and state policies are unable to fulfill (Dees 2001; Certo and Miller 2008).Today, although it is understood differently in different parts of the world, the social enterprise concept is widely seen as an immensely powerful force for economic transformation and social value generation (Borzaga and Defourny 2001). Possibly no one is more convinced of the power of the social enterprise model than the 2006 Nobel Peace Prize laureate and leading light behind the modern microfinance model, Muhammad Yunus. But rather than sign on to the existing model, Yunus (2007, 2010a) came up with his very own form of social enterprise, which he terms a “social business.” Yunus (2010b) defines his social business model to be “a non-­ loss, non-­ dividend company dedicated entirely to achieve a social goal. All profits, or ‘surplus revenue,’ [are] ploughed back into the venture for expansion and improvement. In social business, the investor gets his or her investment money back over time, but never receives dividend beyond that amount.” The fundamental difference between Yunus’s social business model and the wider social enterprise model is that a social business is always a for-­ profit business. Nonetheless, the social business is said to be equally able to automatically pursue and achieve important social goals.1 Indeed, never one for 104 Milford Bateman and Sonja Novković understatement, Yunus has very widely proclaimed that his social business model represents a radically new and more humane form of capitalism. Given, however, the very serious problems associated with Yunus’s first big idea— microfinance—it is logical, if not absolutely imperative, to ask if what Yunus has quite openly called his “next big idea” has any real substance or merit. That is, before Yunus’s next big idea begins to absorb scarce funding, policy makers’ attention, and even more individual and collective effort than at present, and before other potentially more socially efficient enterprise models (such as cooperative enterprises) are further undermined and marginalized as a result, we need to understand the rationale and likely long-­ term impact of the social business model. Importantly, Yunus has described Grameen Bank and its affiliates as “ideal” examples of the social business concept. The aim of this chapter, then, is to use the lens of microfinance to very briefly interrogate some of the far-­ reaching claims Yunus has made on behalf of the social business model. Grameen Bank provides three examples of some of the most highly regarded social businesses in which microfinance has been central: Grameen Bank itself, Grameen Danone, and Grameen Telecom. An analysis of these supposedly best practice examples should shed some light on the efficacy and relevance of the social business phenomenon. The Origins of the Social Business Model In the last twenty years the number of active programs supporting the development of social enterprise has multiplied many times over. In particular, the social enterprise form has achieved a high international profile because it is thought to be extremely successful in addressing the unmet needs of the poorest in society (Seelos and Mair 2005). A growing number of high-­ profile and generously funded bodies now exist to promote the social enterprise concept, including Ashoka, the Skoll Foundation, the Bill and Melinda Gates Foundation , the Schwab Foundation for Social Entrepreneurship, and the Grameen Foundation. These bodies emphasize the supposed achievements of individual social entrepreneurs in terms of securing poverty reduction and “empowering the poor.” Over the years, Yunus has had much personal interaction with the key individuals and institutions that lie behind the social enterprise concept, even going so far as to serve in a nonexecutive capacity as an adviser to, or board member Muhammad Yunus’s Model of Social Business 105 for, quite a few of the highest-­ profile social enterprises.2 Their influence on his thinking seems clear and vice versa.Yunus is very much convinced by the social enterprise model as an alternative to the traditional investor-­ driven enterprise structure more familiar in capitalism. Yunus’s social business...


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