A Different Kind of Dividend
May 21, 2010
Muhammad Yunus envisions a different kind of business world.
In his model, businesses combine the energy of profit making with the bigger goal of helping people. This concept, which he calls social business, is easy to obtain — if entrepreneurs change the way they see things.
“Everyone has within them the potential to be selfless,” the Bangladeshi banker and economist told a packed lecture hall at the Harris School of Public Policy Studies. “Not selfish. Selfless.” The May 21 event was co-sponsored by the student-led Emerging Markets Group and the Harris School.
Social businesses, Yunus explained, are unlike charities in that they are self-sustaining and don’t rely on donations. The profit then goes into humanitarian goals, not paying dividends to shareholders.
“He’s almost the perfect person for this discussion,” said Colm O’Muircheartaigh, dean of the Harris School. “He’s devoted a large part of his life to the poorest of the poor.”
People should look at business as an opportunity for solutions, he said. He described the Village Phone Program at GrameenPhone, a cell phone company he helped build. The plan offered small loans that let the poor buy cell phones and rent them to neighbors who couldn’t afford to own them.
He said the program pulled thousands out of poverty. Some, however, believe the program isn’t as profitable — socially or otherwise — as it once was. In a story in Fast Company, the affiliate that manages the program said in 2007 that profits have been declining because technology has become so affordable and access to cell phones has become widespread across Bangladesh.
“The program is not dead,” Mazharul Hannan, Grameen Telecom’s chief of technical services, told the magazine, “but it is no longer a way out of poverty.”
Yunus hopes to one day see a stock market exclusively for social businesses. His model has led to ventures with adidas, Dannon, and Intel, he said. It all happened in a matter of a few short years.
Yunus first gained international prominence with his use of microfinance, a system that makes small loans to the poor without requiring collateral. He went on to found Grameen Bank in 1983, which makes $100 million worth of loans — mostly in increments of about $200 — every month. And most of those loans are to women. “Banking we do in a reverse way,” he said. “Conventional banks go to the rich. We go to the poor.”
In 2006, he and the bank received the Nobel Peace Prize “for their efforts to create economic and social development from below. Yunus, who also received the Presidential Medal of Freedom from President Obama last year, said he is not advocating doing away with traditional business. But the more people realize that “life is short, they begin to wonder: ‘How do I leave my signature on this planet?’” he said.
Ian Ellis, a first-year student in the Full-Time MBA Program, said he was inspired to hear “the impact the ideas and tools of business can have to help so many people. Yunus’s courage and conviction are contagious and motivating to me to always use my business education in my community.”
Another full-time first-year student Mathew Webb, who co-chairs the student-led Emerging Markets Group, said he “took away an appreciation for how I as a business leader can involve those less fortunate than myself by building a social business, one that balances profit and social focuses.”
Not everyone was sold on Yunus’s theories. Ryan Gembala, a second-year full-time student who started and ran a nonprofit organization before entering business school, said he found the talk well-intentioned.
“However, his definition of social business calls for investors to earn zero return and zero dividend while backing risky, start-up social businesses,” Gembala said. “With the extraordinary positive impact that social businesses could have on the world, I do not believe his current model provides enough financial incentives for investors to assume this type of risk in exchange for zero return.
“They may be better off donating to an established nonprofit that has proven its ability to create social impact.”
Yunus continues to explore more businesses to help the poor. He created a solar power company because most people in his native country don’t have access to electricity. He started social businesses to make more efficient stoves, durable shoes for the poor, and yogurt that’s supposed to nourish more children.
Yunus is now focusing on developing a health care system for the poor. “When I see a problem, I create a business to solve the problem,” he said. “It’s more exciting to solve problems than make money.”
— Shane Graber