Who will invest in Social Business?

16Apr09

-Excerpt from  “Creating a World Without Poverty – Social Business and the Future of Capitalism” by Muhammad Yunus

Spinning Read

Social Business

Why should anyone in their right mind invest hard-earned money in something that yields no financial return? It seems to be a reasonable question. Yet people are even crazier than that – they give away their hard-earned money to create foundations and to support charities! People by the millions make such contributions every year, totalling billions of dollars. If one compares this “crazy” behaviour with the “craziness” of social investing, then the latter looks much saner. After all, when you invest in social business, you get your money back and retain the ownership of a company that supports itself through earned income. So individual contributions, especially from affluent people who want to help improve the world, will be a major source of funding for social business.

Sources of investment capital for social businesses: (a summary)

• Affluent individuals

• Foundations

• Nonprofit organizations specifically charged with investing in social businesses

• Bilateral and multilateral donors – which can create Social Business Funds in each recipient country to provide equity, venture capital, and loans to social businesses

• The World Bank and other regional development banks (Asian Development Bank, African Development Bank and Inter-American Bank) • Commercial lending institutions – since social businesses are self-sustaining, commercial lenders can be repaid

 • Finally, new kinds of financial institutions can be created as required to cater to the financing needs of social businesses: social venture-capital funds, social mutual funds, and perhaps a full-fledge stock market. Each of these will be a mechanism for mobilizing individual and corporate equity in support of social business.

Picked up this book today and could not put it down. It ties together brilliantly themes discussed on this blog surrounding sustainable social enterprises. The case study in the book is about the multinational social business initiative called Grameen Danone – a 50/50 joint venture initiative to sell fortified Danone yogurt in rural Bangladesh villages. Sure, the product is yogurt – not exactly a global health medical device – but a proven food group for hundreds of years. Sure, there is no “product development risk”, but the senior management of Danone still committed to a social business venture on the grounds they would could see benefits in the double bottom line and they could achieve more impact (higher reputation / acceptance in Asia Pacific with premium branded yogurts) with a social business venture than traditional donations.

Read it – and make your mind spin.

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One Response to “Who will invest in Social Business?”

  1. Dear Biobuzz,

    thank you for having visited Yunusphere.net!

    After having read the book, I also thought that it would be ‘easier’ to find money for Social Businesses than others. But, so far, I was wrong, at least in London.

    Money cultures differ greatly between countries.

    Am currently exploring a potentially interesting avenue and will keep you posted.

    Sabine


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