Developing a Social Business Strategy

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June 04, 2008

The following is a summary of a report to the Board of Directors of Grameen Foundation regarding social business viability by Khalid Shams, Former Deputy Managing Director, Grameen Bank.

Grameen’s Social Business Initiatives

Grameen Bank
has been experimenting with new social business ventures since the early ‘90s. It has effectively used the microfinance platform for launching several social enterprises. Some of these were ‘for-profit’, while others were ‘not-for-profit’ entities, but each had a distinct corporate mandate for social development. Grameen Bank itself would be an example of such a social business enterprise, which provided microfinance related services to the designated rural poor and the bank is also owned solely by the borrowers themselves. Some of the social enterprises were created in direct response to the demand of GB borrowers i.e. the Sixteen Decisions of the bank, as well as the rural poor, for essential services needed for development of health, education, nutrition, and alleviation of poverty.

Some of the enterprises were concerned with extension of new technologies that could directly raise the income and productivity of the poor trapped in such traditional sectors like agriculture, fisheries, rural industry. New ventures were also launched for development of information and communication based technologies.

More recently, Professor Yunus has taken the initiative of setting up “social businesses” that aim to provide nutrition and health services to a targeted client. In these new ventures, after the initial capital costs have been fully recouped, the investors agreed to take only nominal dividends, plowing back all profits for further expansion of the social business. Grameen-Danone Foods Ltd, and the newly formed Grameen Eye Hospitals are the latest examples of more rigorously designed social business models.

Numerous Grameen social enterprises have had both direct and indirect social development impact. They have clearly demonstrated that some of the social objectives of a poverty alleviation program can be achieved in a business like way. But with more to measure than simply the financial bottom line of the conventional company balance sheets, how is the social impact itself assessed? In case of Grameen social enterprises, a successful social business venture may be evaluated on the basis of the following criteria:

A. The social development impact on a targeted clientele group.
B. Profitability of the business venture to ensure sustainability.
C. Application, development and extension of technologies that can raise productivity of the poor.

The Challenge of Developing Viable Business Plans

The developed as well as the developing countries have had long traditions of “philanthrocapitalism” and different business models have been tried out in many countries. Bangladesh has also been an incubator for many social enterprises. But the primary concern right now is to address the massive task of poverty alleviation. A major challenge is to meet the needs of the poor for their social development in a more business like way, to ensure sustainability in the long run. As with any new business venture, there are inherent risks and challenges that must be addressed by a social enterprise.

It is important for such an enterprise to:

  • clearly establish both the social and business objectives of the enterprise, providing it with a distinct corporate identity.
  • pilot test and develop the modus operandi for providing social services as well as applications of technology necessary for fulfillment of its objectives.
  • develop suitable organization, management and delivery systems that will be able to function at grassroots and ensure full corporate accountability to the board of directors.

Recruitment, Placement of Leadership

Senior management and the board of directors must be both professionally competent and at the same time fully committed to the social and business mandate of the enterprise. There must be a realistic plan to recruit and retain the management team, in the given market context.

Raising Equity and Initial Seed Funds

As with any business start-up, but more so with social ventures, raising the seed capital or equity will be the most crucial challenge. Start up costs can be daunting and investors are reluctant to provide the required seed funds as equity capital. A social business, in which investors do not stand to make much of a profit to recoup their initial investments, may face further obstacles in raising the needed capital.

Enterprises with predominantly social objectives such as education and health, generally require endowment funds to meet start up capital costs.

Management of technology-based joint ventures have proven to be a major challenge, but successful ventures have tend to be more profitable in the long run as evidenced by Grameen Telecom, another not-for-profit company and its Village Phone Program.

The Future Prospects

Globally, and in particular in the USA, there is a strong interest in initiating development and poverty alleviation programs through social business ventures. The existing MFIs, including wholesellers of microfinance services like Grameen Foundation, have in many instances successfully scaled up their microcredit operations. These can be leveraged further for launching new social business ventures.

Comments

Cheers to Grameem Bank or making grass root level programs for the most poor and the needy.

"The international community should take the necessary steps to ensure that the poorest countries of the world have full access to ICTs. Our objective is to connect all villages of the world to the Internet. Only this way we will have a digital democracy." - Kofi Annan, UN Secretary-General, at the World Summit on the Information Society (Tunis, November 16, 2005)

Dear Prof. Muhammad Yunus and Grameen Team All,

at the end of 2005 a group of Italian managers working in the information technology sector decided to answer this important message. They founded "Informatici senza Frontiere” (ISF, in English could sound as “Computer Scientists without Frontiers"), a non-profit association aiming at sharing the knowledge and know-how of its members with the poorest populations and the weakest subjects of the world.
For founders and volunteers of "Informatici senza Frontiere", the access to information and communication technologies represents an essential prerequisite for the social and economic development. Information technology should be considered as a vital resource, and developed countries often waste their technology - they not only throw away what they consider as obsolete hardware but they also waste unused know-how.
Through "Informatici Senza Frontiere"we hope to be able to contribute to filling the gap of the digital divide: for a better world.
You can have a more in-depth idea of our work by visiting ISF website http://informaticisenzafrontiere.org/indexen.php

Today as ISF “foreign office” volunteer acting on direct behalf of ISF President (Mr Girolamo Botter herewith in CC) I am contacting you in order to put ourselves at your disposal in order to ask you if you see any space for a mutual cooperation aiming to enhance ISEP as “dreamt” of by Mr. Muhammad Yunus for “a world in which technology is harnessed to create a better life for everyone, not just the wealthy few”.
From his words we found that probably a first, practical possible start could arise from your analysis of our free open source software project OPEN HOSPITAL(http://sourceforge.net/projects/angal/) a complete hospital information system originally developed by Informatici Senza Frontiere for Angal – Uganda including modules for managing:
• patient master data
• pharmacy
• laboratory
• pregnancy
• malnutrition control.
As you can see at ISF url for projects
http://informaticisenzafrontiere.org/progen.php
we are already active in several African hospitals where Open Hospital is used and spread in users’ native language and executable even from USB key where only very resource limited and old computers are available. In addition we have since a few weeks a new team devoted to study open source microfinance applications in order to tailor and deliver them to volunteers in a Madagascar mission project.
Our organization is growing year after year in Italy and always new ICT managers with long experience from main National companies as well as young and valuable technicians from universities are joining our projects and help us in realizing “social business” tasks.
We would really appreciate if you could let Mr. Muhammad Yunus know about ISF and allow your organization to evaluate any possibility to establish a suitable contact to know each other and talk about any joint ISEP effort that you should hold as priority.

We thank you very much in advance for your kind attention and feedback and we remain at full disposal.
Best regards,
Aldo Ceccarelli
Volunteer of Informatici Senza Frontiere (ISF), Italy

продам Форд-Фокус 2008 года за 200 тр. торг возможет. срочно!!!
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Awesome post! At the risk of sounding spammy, I think you would really appreciate knowing about this... ViSalus - Social Networking Meets Network Marketing!

I'll be checking back (good info)and hope to see you on Twitter!

I'm a fan of Prof Yunus, he was making a great job by building grameen bank

This is something I joined in on in 2004 to convert a software business to one which invests profit into social purpose and funds an economic development proposal in Eastern Europe, for a national scale social business strategy.

http://www.p-ced.com/projects/ukraine/national/

Thanks for sharing this useful information and I hope this might be useful for me a lot.

Thanks

PLR article...

[...]Developing a Social Business Strategy « Creating a World Without Poverty[...]...

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