Recently a number of On Purpose Associates attended a breakfast talk by Muhammad Yunus, popularly known as the father of microcredit. It was an inspiring talk (available here), and he offered a wealth of insightful perspectives. Yunus spoke of his moral indignation at the unnecessary plight of the Bangladeshi poor, whom he saw as a lecturer in the 1970s, and how an entire family of Grameen (or village) organisations has emerged to give poor people the tools and opportunity to tackle their own situation. Beyond Grameen Bank, the Grameen approach has been applied to a number of situations with partnerships, including organisations as diverse as Intel and Danone.
Show me the money?
Yunus implored all of those attending to “revolutionise the system,” to find more and more new ways to apply the social business principle to all manner of the world’s problems, from youth unemployment in Glasgow to malnutrition in Bangladesh. But he added a warning that I found peculiar: social business should not make a profit. Why? Because that would be to profit from the poor. Yunus does think it’s ok for companies to make a surplus, as long as it’s reinvested into the business, or distributed exclusively to the poor. Whilst I agree with Yunus’ broad sentiment, I’m convinced that social businesses should actually make a profit. Taking Yunus’ acceptable distribution of surplus one step further, if surpluses can be made whilst doing business socially, then extending the possibility for some return to investors and shareholders could attract new investment and encourage more businesses to tackle similar social problems.
Profit you can believe in…
Today, many social businesses are actually registered as charities. It’s hard for these social businesses to get loans because of their charitable status, and many charities don’t even want loans because it’s ‘risky,’ and any loans would mean profit for the lenders. Such businesses can struggle to get the strategic input from investors who demand at least some level of financial return. This can impact social businesses’ ability to scale and deter others from launching social businesses. So perhaps Yunus might accept a bit of profit for people who aren’t poor, provided it’s just one part of revolutionising the system, helping to motivate people to tackle social problems over the long term?