BUILDING SOCIAL BUSINESS VENTURES Grameen Bank is best known for bringing the power of microfinance to over four million poor women in Bangladesh. But it has also created more than two dozen other ventures. Whether non-profit or for-profit, our involvement relates to benefiting for the poor people. Muhammad Yunus, Grameen Bank’s founder, describes why – and how – Grameen has launched enterprises in areas as diverse as textiles, cell phone technology and health care. He shares the valuable lessons he has learned in finding new ways to give Grameen’s members even greater access to opportunity and power. We need a very different structure, different framework, different reference points. We’ll be judged by our own achievements. Dr. Yunus sees a global need for a new kind of capitalism, one that puts people in need first. He demonstrates how economic viability can magnify the impact of social ventures. And he describes the support systems needed to allow this new model of capitalism to reach its vast potential. NON-LOSS BUSINESSES One of the things that I draw attention to in connection with poverty-- that poor people are victims of the system. And system is composed of institutions, policies and concepts. So, I’m talking about creating institutions which are open and which can reach out to the poor people so that they can do business with those institutions. And Grameen Bank is one example that we tried to build where poor people are welcome. And we said we reverse the basic principle of banking. Conventional banking is based on the principle: the more you have the more you can get. We reversed that - we said the less you have, the higher priority you get. If you have nothing, you get the highest priority. Then we talk about the concepts. Where did we go wrong with the concepts? And the concept, one issue that I raised that capitalism has been narrowly defined, narrowly interpreted. So that the real interesting part of capitalism has been just abandoned. Or never explored, never exposed. The business, the way it has been interpreted in capitalism, is that business is an entity which is created to make money and that's the capitalist system. I said that is wrong. Capitalism never said that you have to create an institution to make money only. You can create another kind of institution which can do good to people. It is interested in recovering its cost so that it can continue and run, but it’s not interested in maximization of profit. It could be just described as non-loss companies. So that you are already familiar with non-profit organizations. Non-profit organizations are organizations which are basically charity organizations, so that you give away. Because you are not interested in making profit, But you are not interested in recovering cost either. But the non-loss companies are in very much a business proposition. It runs by itself; it recovers its own money and continues but works to achieve some social objectives. From the conventional businesses now there are voices saying that we would like to be more supportive of people and to society--sometimes called socially responsible businesses. These are good initiatives from people but I'm a little bit skeptical about that because the basic ground on which you work, you can go to a certain extent. If you are bold, you can go a little bit more. You may be a business leader. You want to do something but your investors who are there-- but still you are tied to the basic tenet of business: maximization of profit. They want you to bring them more money. So you are always pulled back. The framework is laid out because that's the conceptual framework. You cannot venture out of it. All the institutions, all the assessments, evaluations, ratings are all done on the basis of this. So I appreciate and admire those who are doing that. But at the same time saying that we need a different kind of framework, reference points so that we can do the full blast of it, and that's what the social business entrepreneurship is all about. Where you're not judged by the existing measures. You create your own measuring scale. To give an example, a conventional bank can lend some money without guarantee, without collateral to few people. This is great. I'll applaud that. But that has not changes the bank. But if you come to Grameen Bank, this is what we would all do with millions of people. This is our only business. We can't get away from this. This is what we have committed ourselves into. So that's a distinction I'm making. We need a very different structure, different framework, different reference points. We'll be judged by our own achievements. ROADS TO SOCIAL BUSINESS VENTURES One can start a social business venture from two different sides...or maybe three different sides. You may be already in a non-profit organization, NGO, doing a health care program, providing health care with donor money--somebody gave you money. Then you realize that all the time you need the money from somebody to do one more thing. You say, this is very uncertain whether I get the money or not. Why don't I charge a small fee for the service? It's not covering all the cost, but getting some money. So at least to that extent I don't have to take the money from outside. That will be less. You have a health care program. You're all focused on the poor people because that's what your intention is. Now to make money what you thought, maybe I will expand this business a little bit. While I'm doing the poor, I'll also do the rich. So that I make money with the rich and cross-subsidize my work with the poor. In the end, I recover my costs. So this is one way, just a cross-subsidization. So moving gradually from the non-profit end, step by step, to a level where you are not any longer a non-profit organization, you are recovering your cost and, for the first time, you balanced it. So you have entered the business world from the non-profit world. You have entered the non-loss world. To your investors, you are assuring that their money will not disappear. It's not a grant. It's a loan, but maybe a loan with no interest. But not assuring that you make money. You are saying that you feel good that you are doing this. That's it. So this is one category where you come in. Another one--one can be a really big business person making lots of money. It's a real aggressive business, just like any classic business could be. But he decided. I've made enough money and I continue to run this company, make more money in that. But I also want to run a social business venture. I want to do good through this company Because I know the tricks of the business. I don't want any profit to come because I make enough profit here. But this is something that I want to do. So the same person could play two roles: Could be just a conventional business person or could be a social business person at the same time. Or the third category--neither in the non-profit world or in the for-profit world-- He was a professor. He was an artist. Can come in and design something. This is the way I'm going to do it. And I'll make it happen. And you become a very successful social business entrepreneur. As an artist, you never cared for money. You enjoyed doing your work, and still you don't care for money. And you are doing good for people and you enjoy that. It's possible. When we created companies, they came from many different historical backgrounds. It's not something I planned from thirty years back. I'll have this company and this company and two years later, this company. I had absolutely no such plan, no such even imagination that someday it would happen. Because the whole Grameen story is started out with a plain piece of paper or blank mind. Every time it was one step, and we thought that was the last step. And when we took that step, two more steps appeared. We never had any idea I was going to have a bank. That was not intentional at all, nowhere. All I was doing is demonstrating that it can be done. But I was sucked into the process where it lead me to say. Why don’t we have our bank? Because it’s not working this way this is the only solution if we can create our bank. but each one of those companies came along the way for solving a particular problem some of them didn’t come at the beginning as a company. It was a project and then it became larger and larger. Then I saw the difficulty of a bank running completely different things like fisheries projects, like agricultural projects, which by itself is a large entity. So I decided why don’t we give them a shape of a company? So what kind of company, well, the best things to describe is a non-profit company. As a non-stock, non-profit company. But, when the opportunity for telephone came obviously we need investors and if we say it’s a non-profit company, nobody will be around. So we said it’s a for-profit company, the big money will be waiting for you. And we got the partners and we started. so wherever it was applicable in a certain way we took that part if it’s a non-profit, we did the non-profit. If we thought this is the way we can do it for profit, we did the for-profit. But we made it very clear wherever we are involved, whether non-profit or for-profit, our involvement relates to benefiting for the poor people. Either directly by the service - fisheries, agriculture and so on. Or if it’s mobile phone, two ways, we bring mobile phone to you you make money and also you own the company, a piece of the company that we’re holding for you. So this is how we went ahead and everything comes, we see the new idea what would be the best format for that, is it non-profit or for-profit? Then we went ahead. GRAMEEN AGRICULTURAL FOUNDATION Grameen story begins with agriculture, I got involved in production of rice. Because I thought producing rice is a solution to overcome, famine, hunger. So it started with agriculture and it started with irrigation. And we saw the opportunity of all the non-functioning deep tube wells lying all over the country. So we thought why don’t we just take it from the government and irrigate the land and let the people have it. In that effort we got involved with a large operation of deep tube wells, irrigations, farming, equipments and so on, and we called it Agricultural Project. And when we bought more of those deep tube wells in the northern part of Bangladesh it became a huge operation by itself. So at one point we decided that maybe it will be better served if we have a separate structure as a company for them, so we converted them into a non-profit company called Grameen Agricultural Foundation. GRAMEEN FISHERIES FOUNDATION Then we got involved with the fisheries program, this was an accident I had no idea that we would ever get involved with fisheries. One day I got a call from the Secretary of fisheries, from the Ministry of Fisheries he wanted to talk to me about this project that the government had. So he said well, this project is just a mess, there’s a lot of corruption nothing being done, we, the government’s spending a lot of money lot of donor money is involved in that and it’s all squandered... There were about 800 huge big ponds lying around in the one part of Bangladesh These were excavated some centuries back by some king who raised a lot of cattle the cattle needed water so they had dug in lots of these ponds. So he gave a big presentation of the whole situation and urged me to take it. So I discussed with my colleagues, gave the whole details... and they all agreed that we should take it over. So now that we took it over, we have to grow fish in this so we became very interested in fish culture. And that became our big fisheries project. And we loved this beautiful place, lots of fish and so on. And at one point, it became so big we thought maybe we should separate out from the bank so the management of fisheries and the management of bank doesn’t come to the same people. And we separated it out by creating the Fisheries Foundation. So it’s still working the same way in the same territory, producing about 1000 tons of fish each year. GRAMEEN CHECK Many families in Bangladesh inherited a very special skill. Skill of making fabrics, handloom operated fabrics. This is something coming down the families over centuries. And in history we read about the muslin, which became very famous in the European cloth. Muslin so fine fabric, produced in India, because Bangladesh at that time was India. Part of India so this fabric which came from India actually was produced in Bangladesh. And these are the handloom weavers which still survive, tradition survives. But they had to go through a lot of struggles to keep it surviving. And still there’s a million families in Bangladesh who make fabrics. Somehow the weavers, all the things they’re producing, handloom product They are not getting the market and the price. and there’s a competition coming from the cheap fabrics coming from outside Not fabric but clothings, used second-hand clothes, dumped in markets like Bangladesh. And that is so cheap that handloom fabrics cannot compete with them And many of these weavers are also Grameen Bank borrowers. That became our headache, when a lean season comes they find it extremely difficult to pay back. So finally we thought, if we cannot promote it, within the country, can we promote it outside? That idea caught on, we thought maybe this is a marketing thing That we can take this fabric, take it to Europe, take it to USA and say this is a hand loomed product. So we thought of a name so that people immediately recognize what this is. So we called it Grameen Check Because basic fabric that is produced is in checks. And we did good success in the first couple of years. But then something happened in the international market it went down again. But what we achieved in the meantime while we are trying to promote it internationally to our surprise, it excited Bangladeshi young people they thought now this is a matter of pride to wear outfit made of Grameen Check So it became a big domestic market sale. And still this is so. Even people who are giving gifts to their friends... they ask for Grameen Check outfits for them, for their children and so on. As a matter of pride that this is made by handloom weavers in Bangladesh. And they want to show respect to it. GRAMEEN PHONE AND GRAMEEN TELEPHONE When we are talking about poverty, we always talk about the reasons, the causes of poverty and how to address that and we saw that certain interventions are very basic, very important. One is credit which I’ve been promoting as a human right, so basic, so important to life. At the very bottom that it should be treated as human right. And the next important thing I felt that is information technology, this is the age where world is changing. Human society is changing because of the explosion that is coming in the information technology innovations. So I thought if we can connect information technology with the poor people they can change their own life much faster than anybody ever thought of. How to bring this two connections together, how to make it happen that information technology comes to the poor people. One chance we got without ever thinking this is what we would do. One chance we got was, mobile phone and we grabbed it. Government was inviting applications to give license to for mobile telephone company We applied and after long procedural battle, finally we got a license and we created Grameen phone. The idea is to bring mobile phone in the rural areas of Bangladesh and then give the mobile phone into the hands of the poor women with the financing from Grameen Bank so that she can start selling the service of the telephone, and become the telephone lady of the village. When we are negotiating for Grameen Phone to find partners we tried out many different companies and many different companies tried us and we finally found Telnord of Norway. We liked them in principle because this was a government owned company. So at least we thought if it’s a government owned company this will not be a greedy company just squeeze everybody make money and get out. But more than that the chief of Telenord, the president of Telenort Hammondson he is wonderful person, he immediately understood what Grameen Bank is trying to do. And he said we will give you full support. So, if a social business entrepreneur is looking for a business partner from the old world I would say it will be good to be very cautious, of who do you partner with. Because in the beginning you may not know all the details of the business that is coming up But if something comes up some crisis comes some success comes you may not have the same feeling both ways. So you be prepared for that as you enter into negociations. In order to create Grameen Phone, we were thinking how the investment from the Grameen side would be put into it. Should it be Grameen Bank investing in it? So in the worse case scenario I thought this was not be a good idea. to expose Grameen Bank into such thing. So another alternative I thought of, why don’t I create a separate company? and they become the part owner of the Grameen Phone. So we created that company, that’s a non-profit company This is kind of a proxy company, owning 35% of the Grameen Phone’s share. So this is the relationship between Grameen Phone and Telecom and Telecom we see this as a company representing the interest of the Grameen borrowers. Some day these shares will be sold to Grameen borrowers so that they become the owners of the Grameen Phone. Grameen phone became a very successful company, this is the largest mobile telephone company in the country with two and a half million subscribers And then it has other piece, it brought the telephone in the hands of the poor women in the villages, to make money. And it’s a rolling business - if you have one telephone, if you are a Grameen Bank borrower it, you are sure out of poverty in couple of years. Nobody can push you down. And then it changed the whole attitude of people. People having telephones getting connected with rest of the world And poor women are holding the telephone she is a different person altogether. She can be in touch with anybody she wants to. GRAMEEN IT VENTURES We have been hearing about the outsourcing businesses in India and Bangalore and all this. I said Bangladesh is no different than India. Dhaka is no different than Bangalore... Why can’t we get in there? And start learning the process so that this becomes an exciting business by itself, and also expose us into the potential of information technology. We don’t want to be left out, because unless we have insight information technology we will never know what the potential is so far as the poor people is concerned. So we created one company after another under on the information technology side. information highway, IT park, wanted to put all the people together so that anybody wants to start IT company can just come in and plug in and connect it with Because getting connections and connectivity in Bangladesh is a very time consuming process And we created a Grameen Software hoping that this will be a big source of outsourcing. Employ the young people from Bangladesh who will be programmers and do the programs for USA and the European market. So we started a training program and created a company and franchised a company, Grameen Star Education. Grameen children are coming out of high schools going into colleges soon they will be looking for jobs, they can come to these IT Education centers, Grameen Star Education. And Grameen Bank can pay the fee as a loan, so that they can get the training and be in the crowd of Information Technology and move up. So that became a big business by itself. But it went down quickly and almost came to basic minimum right now. It didn’t do well because the international business went down so it went down along with it. So hopefully the business picks up again, this will pick up but the company exists without making any money right now. As a group IT companies, information technology related companies didn’t work. Many people had to leave the company because the company cannot afford to pay them. Grameen Communications although it is a IT company, its one successful IT company. They want to bring Internet in the villages still trying it out because Internet infrastructure is very poor. So they had not had success on that, their success came from supporting Grameen Bank They have the full responsibly of computerization of the entire Grameen Bank system. They develop the software, they develop the training, they operate the computers. And everything is outsourced to them, and they make good money. GRAMEEN FUND We created Grameen Fund which is a social venture capital. Because we had some donor money for experimentation, for innovations and so on. At one point we thought instead of trying to do it within the bank framework. Why don’t we separate it out and create a fund? a venture fund and then can invest in all the companies that we have in mind and have partners together. So we created Grameen Fund with that money and they invested in Grameen Software, they invested in Grameen IT Park. For all the companies that we created, the first investment came from the venture capital. And then investment came from the private capital so that it’s a joint venture company between the private entrepreneurs in the business world and then social venture from the Grameen Fund. And hoping that if some of the Grameen borrowers become very successful and now want to go into bigger businesses, Grameen Fund can provide the venture capital for them and move it from there. GRAMEEN TRUST Another company which has been very successful I must say, this is Grameen Trust. Grameen Trust is a non-profit, we wanted to handle the problem of uh dealing with the visitors who are coming to look at us, understand, training, and all that. So we we created this company so that all the visitors can go to them and they provide all the facilities, the materials and so on. And do it in kind of a business way. Grameen Dialogue is a workshop for new people to understand Grameen Bank It is a technical know how package they provide. And they make a little earning on the side by charging you a fee. If you are getting the materials they charge you for the materials. And if they want someone from Grameen Bank to come and look at your program and give their assessment, they charge a fee and organize this whole thing. And if you want to start a a Grameen program in your country You want to have them build, operate, and transfer. They will take the contract and find the peoples do the negotiations, all those things... and today programs are developed with Grameen staff, on a build, operate, and transfer system already done in Kosovo there is a very beautiful program running, in Turkey it’s running now, in Zambia... So looking at the number of successful replicators of Grameen Bank around the world. You must applaud Grameen Trust for the wonderful work they have done. GRAMEEN ENERGY Another one is the Grameen Energy or Grameen Shakti. Which started out to bring solar energy in the country, because Bangladesh is a country where 70 percent of the people do not have access to electricity. Grameen Energy brought the solar panel and started selling solar panels in the villages. People loved it they packaged it in a way that’s easy for them to pay back. Installment, payment over period of 3 years or so. Its your own system, you learn it very quickly they train you how to maintain that system, it goes on for years... So that has picked up, each month today, they sell over 1,200 solar systems in the villages of Bangladesh. And it keeps growing every month as we move on. GOING PUBLIC: GRAMEEN MUTUAL FUND Some of the successful companies sooner or later will go public and our intention is that when they go public we'll bring some of the shares to the Grameen borrowers to buy. And gradually they will have a portfolio of their shares. But realizing that it may not be convenient for them to look after so many diverse set of companies. It will be a good idea to have one stop shop for them. So we created a Grameen Mutual Fund. Which will be listed in the Dhaka stock exchange this month. One company that we are hoping will go into offering public shares will be 'Cybernet', which has been a very successful company. This is an internet service provider company. They have been making profit, making profit in the 3rd or 4th year of their operation, and ever since they have been making profit. So they have come to a stage where they want to go public, and issue their shares. The next that we see would be Grameen Phone, being a successful company. They would like to be in the stock market, and issue their shares. Delay is coming because one of the ideas is in the Grameen Phone that they will float their shares in 3 stock markets simultaneously. One is Dhaka Stock Market, another is New York Stock Market, and the other is Oslo Stock Market. So they are trying to see what will be. A good time to enter the market .... with a good reaction from the market. But whatever happens, the idea is for us to gradually bring the shares to the Grameen borrowers from Grameen side through the Mutual Funds we have already created. BECOMING A NON-LOSS COMPANY: GRAMEEN HEALTH When we started the company as a non profit, and put some projects inside that company, which we tried to run as a business. That means we are not sure of its business viability yet. So it needs to be funded, it needs to be supported, from the sources of funds that a non profit can accumulate. Once we see that it can run on its own, that it is a non-loss company, then we can create a company, a business company, which is in a non profit format. So these are the experimental stages of things, like Grameen Well Being, were created to address many of the issues which we cannot handle through Grameen Bank. There we have located our health program. Trying to build a health insurance program, making it self-reliant. There are about 20 such health centers running within Bangladesh. Those health care programs are open for both Grameen borrowers and non Grameen people in the village. The distinction is Grameen borrowers pay less as insurance premium than the non Grameen people. Non Grameen people pay double the amount Grameen people pay. We are hoping that the income generated by this will be able to cover all the costs of the infrastructure that we have built in. And when we started, it was less than 50% recovery of the cost. Now we are come near 90% of the recovery of that cost. So we are waiting for a little more step to take, so that we can recover the whole cost. And then we can open it up for replication and putting it into a business format. The next venture that we see now will be a nationwide health care program which is coming up now, and experience from this Grameen Health Program will be enormously helpful for us, for what we need to add to it to make it more interesting to the people. THE IMPORTANCE OF SUSTAINABILITY Social businesses are focused on people's interests, that's by definition. That is something that is good to have. But if they are not business wise successful, then what good are their good intentions? I could run a pharmaceutical company as a charity proposition, I would give subsized medicine to people, and in the end, I make a big loss. Having social ventures on a business platform is a much stronger proposition than having social ventures as a charity proposition. Because charity money is a limited money. Business money is unlimited money. Because the more successful you are, more investors will come in, more credit facilities you will get, because your business is successful, we would like to be supportive of you. And you can hit the sky. And that is the exciting thing about being a social business entrepreneur. A social business entrepreneur can take a business and start small make it successful, and then two things happen. You can expand your business because more investors will be supporting you, because you are successful because you are doing the job, you are teaching objectives, and then other people can imitiate you, build the same system, and be a replicator. drinking water problem. We have the same health care problem. I would like to do it in my country, in my corner of my city. I am in a slum area, I would like to run a health care kiosk, designed by you and I am your franchisee. So it can spread all over the world. So that is what business social venture is all about. SUPPORT SYSTEMS AND INSTITUTIONS Since capitalism is narrowly interpreted, socially conscious people don't want to get involved in business because it is uninteresting for them. That's not what they want, we don't want to make money. We want to do something else, so they are outside the business. So I am saying if you open it up alot of people will gradually come in, but particularly young people are looking for things to do in the world, contribute in the world, solve problems of the world, they will dream of becoming a social business entrepreneur. And the facilities have to be created so they can become social business entrepreneur. And I am talking about even creating a department, there are Business Schools producing MBA's. There will be a Social Business Program at Business Schools which will be creating Social MBA's. And then you need another institution to make it happen, like you have the stock markets. And existing stock markets, people go there to make more money. It is as simple as that - you don't go there for charity. So if I want to do good for people in a business way, I have no way to go. Why don't we create a completely separate stock exchange, where all the companies that are doing good to people will be listed. And it could be women's empowerment, it could be street children, it could be drinking water, It could be arsenic problem in some places, it could be pollution problem in other place, it could be health care program in some place, it could be health insurance for poor people. Whatever the hundred and one, or thousand and one ideas that you can bring and run those things in a business way. And provided the investors, who cannot run a company like this, but would like to invest in one. I have the money and I can spend it. If we have to run a social business enterprise right now, we run into alot of problems, because we have not set up supportive institutions along side. So we'll be depending alot more on the old institutions, and they will be at each stage questioning our norms, they will not understand our performance, our mistakes and so on, if you are not making profit, whey should I come and support you? Why should I lend money to you, you are not making any profit, how are you going to pay us back? But this doesn't mean that you have to be out of the market completely. And it means that you are the first one to venture into new territory, and you lead the way, and others will follow you and create instituion. This is how the pioneers always did. Be the first ones to stick a neck out and make it happen. Luckily, already if you look around the world, there are many many, more than we can think, social business entrepreneurs. So there will be initial problems, but if it sticks, if it grows, you can create your own world. TOWARD PROPER GLOBALIZATION Once you build it in, and you refine the concept, then it becomes much more easy to address the whole global situation of the problems of creating more poor people through globalization. We are worried about globalization because globalization means freedom for everybody. When you talk about freedom for everybody in business, it's the freedom of the rich, it's the freedom of the big, it's the freedom of the richest countries, it's the freedom of the richest companies. Which means that the poor country and the poor companies will have no chance. If you have opened up the highway of globalization, where the big cars and the big trucks can take over the highway. No room for a Bangladeshi richshaw, or a our pullup car on that road. Then we are gone, we are finished. So there will be traffic rules, so our rickshaw can go on the street, maybe slow, maybe rickety, but it moves, it has room, it has full guarantee of safety and all that. That's globalization, proper globalization - not kind of knocking on globalization, and this is a bit easier, much easier, if we allow the social business entrepreneur to join in the traffic. Because they will insure that the traffic is right because they are interested people. And they run their businesses as good as good as those big companies businesses. So you cannot easily knock them off. So this is the way all the bad elements of globalization, terrible aspects of globalization, can be addressed, if we allow these things to happen. ASHOKA INNOVATORS FOR THE PUBLIC THIS SERIES WAS MADE POSSIBLE IN PARTNERSHIP WITH THE SKOLL FOUNDATION UNCOMMON HEROES. COMMON GOOD.