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Social Business

Social Business. Lecture # 18 Week 11. Structure of this class. What is social entrepreneurship Link with microfinance Case study : Danone Yunus’ idea more broadly, and practical assessment methods. Social entrepreneurship.

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Social Business

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  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, let’s 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 program’s 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

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