Social Business and Muhammad Yunus
Social business, as the term had once been commonly used, was first defined by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business—The new kind of capitalism that serves humanity's most pressing needs.
In these books, Yunus defined a Social Business a business:
- Created and designed to address a social problem
- A non-loss, non-dividend company, i.e.
- It is financially self-sustainable and
- Profits realized by the business are reinvested in the business itself (or used to start other social businesses), with the aim of increasing social impact, for example expanding the company’s reach, improving the products or services or in other ways subsidizing the social mission.
Unlike a profit-maximizing business, the prime aim of a Social Business is not to maximize profits (although generating profits is desired). Furthermore, business owners are not receiving any dividend out of the business profits, if any.
On the other hand, unlike a non-profit, a Social Business is not dependent on donations or on private or public grants to survive and to operate, because, as any other business, it is self-sustainable. Furthermore, unlike a non-profit, where funds are spent only once on the field, funds in a Social Business are invested to increase and improve the business' operations on the field on an indefinite basis. Per Yunus' quote: "A charity dollar has only one life; a Social Business dollar can be invested over and over again."
Seven Principles of Social Business
|1||Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization.|
|2||Financial and economic sustainability|
|3||Investors get back their investment amount only. No dividend is given beyond investment money|
|4||When investment amount is paid back, company profit stays with the company for expansion and improvement|
|5||Gender sensitive and environmentally conscious|
|6||Workforce gets market wage with better working conditions|
|7||...Do it with joy|