Social Business

1
Social Business

• Lecture 18
• Week 11

2
Structure of this class

• What is social entrepreneurship
• Link with microfinance
• Case study Danone
• Yunus idea more broadly, and practical
  assessment methods

3
Social entrepreneurship

• A broader definition of capitalism where
  companies have a dual objective profitability
  social (health, nutrition, the environment..)
• Companies can potentially issue separate stock
  based on social returns, and people could buy the
  shares of those with greater social business
  entrepreneurship
• By raising social business entrepreneurship"
  and investing it in sustainable businesses
  without a profit motive, companies could reach
  into new markets, expanding their core businesses
  and at the same time improving the standard of
  living of the poor

4
Link with microfinance

• In microfinance expanding outreach is viewed as
  expansion of core business
• MFIs have a dual objective self sustainability
  and poverty alleviation
• Reporting on self sustainability and
  profitability indicators by MFIs already exists
  (E.g., PlanetFinance)
• Reports on meeting social objectives have already
  started , i.e., reports on average loan size,
  asset accumulation, house improvements, school
  attainment, etc.
• While meeting profitability objectives is
  rewarded by the market (i.e., the case of
  Compartamos), social objectives are generally
  rewarded by philanthropists (i.e., the recent
  microcredit gathering in Luxembourg)

5
Now, lets go back to the social business idea
A Case Study

• The Case of Danone (2005).
• The yogurt Danone would make would be
  fortified to help curb malnutrition and priced
  (at 7 cents a cup) to be affordable. All revenue
  from the joint venture with Grameen would be
  reinvested, with Danone taking out only its
  initial cost of capital, about 500,000, after
  three years.
• The factory - and ultimately 50 more, if it works
  - will rely on Grameen microborrowers buying cows
  to sell it milk on the front end, Grameen
  microvendors selling the yogurt door to door and
  Grameen's 6.6 million members purchasing it for
  their kids. It will employ 15 to 20 women.
• Danone estimates that it will provide income for
  1,600 people within a 20-mile radius of the
  plant. Biodegradable cups made from cornstarch,
  solar panels for electricity generation and
  rainwater collection vats make the enterprise
  environmentally friendly.
• The strength is that it is a business, and if it
  is a business, it is sustainable.

6

• International organizations such as Unicef
  believe it may be such a revolutionary means of
  improving nutrition through a sustainable
  business model that it is watching closely - and
  may seek to replicate around the world.
• For Danone, the Bangladeshi enterprise is about
  expanding into new markets with
  nutrition-enhancing products. It is growth
  strategy
• The idea Danone has of creating a social dividend
  for shareholders is cutting-edge. No one else has
  come up with this interesting a model. It
  supports your brand, returns your capital, you're
  not going to lose money and you give your
  shareholders a vision of doing something good."

Currently operating in Northern Bangladesh Sold
in the market place as high-energy yoghurt Costs
5 taka or 7 cents US
7
More broadly, Yunus social business idea

• State intervention because market failure
• State intervention because conceptualization
  failure
• -human beings are not one-dimensional entities
• -assume two types
• (a) Profit maximizing
• (b) Socially-objective driven/ social business
  entrepreneurs (SBEs)

8

• How to encourage the creation of SBEs?
• - Via education two worlds, profit and social,
  can choose (social MBAs)
• - Via visibility in the market SBEs should
  develop their own norms, standards, measurements,
  evaluation
• A Social Stock Market
• - The creation of rating agencies

9

• How to start?
• Little by little. Just like in microfinance
  microloans, housing loans, pension funds, loans
  to purchase mobile phones to become the village
  telephone ladies, loans to beggars to become the
  door to door salesman
• In the social business a large number or
  battles need to be won in nutrition, health,
  education, the environment..
• Submission of business proposals can be
  published as a starting point for new cycles

10
Business Planning for Social Enterprises

• A road map that gives direction in executing an
  intervention, managing a program, and realizing
  the programs goals and objectives
• Once the social mission of the project has been
  established and once the business plan has been
  designed and executed, the problem is
• How to assess social impact

11
Sutia Kim Alter suggests some practical methods

• Baseline study and interview a sample via well
  designed questionnaires
• Well defined indicators (nutrition, education,
  ecology)
• Systematic gathering of information
• Support data with dialogue
• Develop case studies
• methodology for assessing social impact is in
  work in progress. However, as more SBEs document
  and publicize their reports, methodologies might
  become more precise and a reliable set of best
  practices can emerge
• ? Group versus individual liability
  revisited