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Social Business Scope in Alleviating Poverty Research Paper

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Updated: Apr 7th, 2022

Introduction

A social business is a business which operates under the principle of non-loss, non-dividend basis for the shareholders or business owners with an aim of achieving a certain social objective.

Social business may be owned by governments, charity organizations or individual owners (Yunus & Weber, 2007, p.24).

The main objective of a social business is to alleviate poverty through empowering people, especially the less fortunate and the poor with financial resources to do business or through programs which provide them with employment or access to cheaper and affordable goods and services.

The shareholders or owners of social business do not get any dividends from the profits made by the business but only their initial contributions to the social business (Yunus & Weber, 2007, p.24).

In this assignment, focus is on discussing social business, its scope and potential in alleviating poverty. Examples of social business to be discussed include the Grameen bank and Grameen Danone businesses both in rural Bangladesh.

Discussion

Why Social Business

The system of capitalism creates two social classes in the society, that is, the haves and the have not’s (Milanović, 2010). The have not’s are the poor, marginalized and oppressed and are subject to exploitation by the haves.

The key driving force behind the establishment of social business was therefore the failure of capitalism to take into account the plight of the have not’s in the society.

Professor Yunus’ idea of social business is one that can be explained as a win; win business both for the business owners and the poor in that the business owners help the poor without incurring any losses (Yunus & Weber, 2007, p.24).

Social business is not charity, because nothing is given for free in social business.

The reason why social business does not go the charity way is because charity work only helps in creating dependence syndrome due to lack of sustainability of the programs executed through charity work.

Instead of charity work, social business aims at creating a mechanism in which the poor may be helped in a sustainable manner in that the social business makes profits just like conventional businesses, but the profits are used for the expansion of the business to reach out to even more people with the owners of social businesses only recouping their initial amounts which they invest in the social business (Henry, 2011, p.139).

The workforce in social business is mainly the poor and less fortunate. They are employed as a strategy of solving the problem of unemployment among the poor.

The workforce is treated just like any other. Once the social business makes more profits, the workforce may be given some incentives to motive them to work even harder and better so as to improve the social business.

According to Professor Yunus, social business is evaluated not on the amounts of profits it makes but on the social impacts it makes in the society (Yunus & Weber, 2007, p.24).

Scope of Social Business

Social business was initially formed with the main objective of helping the poor through financial and educational empowerment programs and environmental protection.

Since its inception, it has broadened its scope with an objective of making it a multidisciplinary strategy to poverty alleviation and development.

According to Baker in his journal titled “Social Business-Aims and Scope”, social business goes beyond economic empowerment as envisioned by its founder Professor Yunus to include corporate social responsibility, entrepreneurship, globalization, social and technological innovation, transformational marketing, sustainability, wellbeing, volunteerism, and foreign aid (Baker, 2011).

The scope of social business as discussed by Baker therefore portrays it as a multidisciplinary approach to poverty alleviation in that it brings on board various disciplines and players together to pool up resources and efforts in order to help the poor through doing business in a sustainable manner.

The multidisciplinary approach therefore makes social business all round and increases its ability to fight, eradicate poverty and initiate development (Yunus, 2007).

Potential of Social Business in Poverty Alleviation and Development

Social business if done properly has got a big potential of alleviating poverty and initiating development.

As per the scope discussed above, social business encompasses various players who bring together their financial, technological and technical inputs in combined efforts which not only help in poverty eradication but also in improving the living standards of the poor.

If undertaken in the proper manner, social business can go to great lengths in poverty alleviation and development as discussed in the two case studies below.

Social Business Case Studies

Grameen Danone foods ltd in Bangladesh

This is a partnership social business between the Grameen bank of Bangladesh and a company known as Danone. Established in 2006, the objective of the business is to provide nutritious diet to children of rural Bangladesh which is poverty stricken.

The two companies agreed to take the initiative due to poverty and malnourishment of children in rural Bangladesh, in which the diet of many children lacks many important dietary components like vitamins, iron, zinc and calcium (Yunus, 2007).

The company operates on a no loss, no dividend basis, meaning that the company owners only get back their original contributions while the profits go into the expansion of the business so as to reach out to as many Bangladesh rural children as possible. The company makes special yoghurt which contains high contents of calcium, zinc, iron proteins and vitamins.

The milk is sold to rural Bangladesh children at highly subsidized prices making it affordable to many rural Bangladesh citizens.

The business started on a small scale but it has witnessed an exponential growth which has seen more and more children improve their health through the consumption of the highly nutritious yoghurt.

The business is also expanding and benefiting the local livestock farmers, who work hard to produce milk and sale to the company. The company also employs people from the rural Bangladesh as its workforce.

In these ways, it has managed to improve the living standards of the rural Bangladesh people in a sustainable manner (Yunus, 2007).

Grameen bank in Bangladesh

Grameen bank is a rural based micro credit initiative launched by Professor Yunus in the year 1975 and later established into a microcredit institution by the government of Bangladesh in 1983(Yunus, 2007).

It operates in the rural areas of Bangladesh and its main objective is economic empowerment of the rural Bangladesh people. It operates by giving the poor people some loans without any collateral.

The loans are given to people who are organized into small groups. The bank does not have legal guidelines regarding loan repayment but rather, it relies on group peer pressure to make the group members repay the loans (Yunus, 2007).

The group members practically serve as the collateral in that once a group member defaults repaying the loan, the group members contribute to repay and collect their contributions from the defaulter through their own mechanisms and at their convenience.

The bank targets women because of the gender inequalities in Bangladesh which do not give women opportunities to do business. In fact, over 80% of the beneficiaries of the bank services are women from rural communities in Bangladesh.

The bank has been growing and its impact has been increasing. This saw it receive a Nobel peace award in 2006 together with its founder Professor Mohammed Yunus. It has actually gone to great lengths in empowering poor rural women in rural Bangladesh (Yunus, 2007).

Conclusion

Social business is a philosophy of fighting poverty through doing business. The idea was initiated by Professor Mohammed Yunus of the Vanderbilt University.

The main objective was to take care of the excesses of the capitalistic ideology of doing business, by replacing the capitalistic idea of profit maximization with social maximization.

The scope of social business was initially economical and educational empowerment as well as environmental protection, but recently, its scope has been expanded to include other things like corporate social responsibility, entrepreneurship, globalization, social and technological innovation, transformational marketing and sustainability.

Social business operates on a no loss, no dividend basis. The profits are used for the expansion of the business so as to reach out to as many people as possible.

The success of a social business is not evaluated on the profit margins but on the impact it makes on people as far as poverty alleviation, empowerment and development are concerned (Yunus, 2007).

Examples of social businesses which have been a success include the Grameen bank and Grameen Danone food ltd, both in Bangladesh.

The Grameen bank aims at empowering people, especially poor rural women economically by giving them loans without collaterals to start small businesses.

Since its establishment, the bank has grown and expanded to reach more women each year. As a result of this, the bank received a Nobel peace award in 2006 for its efforts in empowering the poor rural Bangladesh women economically.

Grameen Danone foods ltd is a social business owned jointly by Grameen bank and Danone Company. It was established with the objective of improving the health status of rural Bangladesh children through selling highly nutritious milk at subsidized prices.

It also provides employment to local people as well as creating a market for the local dairy farmers to sale their milk (Yunus, 2007).

The idea of social business is therefore a very healthy one, in that it attempts to bridge the gap between the haves and the have not’s, which is a product of capitalism.

Social business ensures that those who are able and willing to help in solving the problems in the society do so in a sustainable manner which does not create dependence syndrome, and therefore can be explained as a win, win business in that the owners of the business get back their initial contributions to the business, as they quench their desire to help others who are less fortunate in the society (Yunus, 2007).

References

Baker, M.J.(2011). Aims & Scope. Web.

Henry, C.O.(2011). Avoiding the Fear Trap: Learning to Neutralize and Overcome the Power of Fear. Mustang, OK: Tate Publishing.p.139.

Milanović, B.(2010). The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality. Mustang, OK: Basic Books.

Yunus,M., & Weber, K.(2007). Creating a World without Poverty: Social Business and the Future of Capitalism. Greater London W6 7JP: Public Affairs Publishers. p.24.

Yunus, M.( 25 December 2007).Yunus Business Center: Social Business. Web.

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