Mohammad Yunus: Building Social Businesses To Eliminate Poverty
Mohammad Yunus was in NYU last week to speak to b-school students about social businesses. Yunus, who started the microfinancing company Grameen Bank, has extended Grameen to various other ventures. Yunus doesn’t own a single share in all the Grameen companies he has helped create. He said he did it because he saw a problem and wanted to solve it.
- Yunus started Grameen Bank in the late 70s, a bank fully owned by borrowers. The first loan was for $27. Today, Grameen Bank is lending about $100 million per month.The lenders are 97 pct female. Grameen microfinance banking reaches about 80% of Bangladesh’s poor. Grameen Bank has now expanded to school and college tuitions, it has awarded about 34,000 scholarships.
- They noticed a lot of Bangladeshis were suffering from night blindness in the late 70s. The problem was lack of Vitamin A in their diets. They had 2 options – eat more vegetables or consume vitamin tablets. So Grameen got into vegetable farming, and quickly became the biggest seed company. Night blindness diappeareed from Bangladesh.
- For a country that had little phone penetration, Grameen Phone was started with the vision of putting phone in the hands of poor illiterate women. Fortunately there are only 10 numbers to learn, said Yunus jokingly. Grameen Phone employs about 3,000 women and has captured 55% of mobile market share. It is largest mobile phone company in Bangladesh.
- Only 30% of Bangladeshis have access to electricity. So Grameen created Grameen Shakti, a solar energy company. Grameen Shakti has since sold over 200,000 solar units. Their goal is to sell 1 million solar systems. Grameen Shakti has about 8,000 employees, of which 4,000 are ‘engineers’. They are not really engineers by education, but dropouts who have been technically trained to assemble and maintain solar systems. He said, by calling them ‘engineers’, both employees and customers feel good about the title. Solar panel costs very high, about $3.5 per watt. If it comes down to $2 per watt (cheaper than kerosone), every home in Bangladesh can be powered by solar.
Mohammad Yunus at NYU signing books
Yunus believes there’s a flaw with the for-profit model where profit maximization and increasing shareholder value is the primary motive, it assumes that humans are money-making robots. However, human beings are not single dimensinal. Selflessness and happniness derived from making other people happy is the ultimate goal for some, hence social businesses. NGOs and non-profits take money from donors and spend it, hence not self-sustainable. On the other hand, social businesses have a cash flow. While the businesses themselves can be profitable, the shareholders only recover costs. They don’t make a profit or earn dividends. Earnings are retained in the business or used to extend the business or enter new markets.
Yunus partnered with Danone (Grameen Danone) to produce yogurt in Bangladesh. The yogurt has additional essential nutrients and is targeted towards Bangladeshi children. By de-emphasizing packaging and cutting marketing costs, the company can sell good quality yogurts for cheap. To take it to the next level, Yunus insisted Danone come up with containers that were bio-degradable and edible. His argument – after all, poor people were paying for the container!
Bangladesh has a serious water problem, drinking water there has high arsenic content. Grameen partnered with Veolia, world’s leader in water services, to bring water to masses at very affordable prices, enough to recover costs.
Yunus piece of advice – take your profit maximizing glasses for a day, and switch to social business glasses. The world looks very different!
Y. T. Shetty on October 7th, 2009
Mohammad Yunus is a transformational figure who has brought about a social revolution in Bangladesh. His idea of microfinance has spread to many countries in the world. Microfinance is considered as an important means for poverty alleviation. His focus on social businesses is worth emulating in every country.