The Social Business Model: A Sustainable Alternative to Charities and Aid

[Deeq A.]

We know that people increasingly feel they want to make a difference and many see charities as a way to achieve that, likewise it plays an integral role in the lives of so many of our marginalized communities, but consequently questions arise over why has it recently been a concern of our people who wanted to make sure that their donations are going to a legitimate cause and that their money will work in changing lives and not end up lost through poor administration? Why are charities often exploitatively sidetracked into invisible ghost accounts? In the light of this, why hundreds of thousands of dollars are usually lost without even reaching a worthy portion of it to the intended beneficiaries?  Then on the other way round, why such a huge voice of the public at large seem to be worthless when it comes to being questioning against such atrocities committed in the scarce resources, knowingly thousands of these vulnerable people get stuck in the poverty trap as a result of the severity in the process.

According to the most recent data published by UNDP, the country is among the world’s poorest on the basis of the indicators in place with enormous percent poverty rate, incessant threats and insecurity to food and water security, poor standards of living are greatly contributed by partially the phenomenon of the wide spread droughts across the country, with the devastating impacts on the communities and their livelihoods which result in cash shortages and massive out-migrations and death of livestock, In that case, the country experienced below the average rains for up to four seasons, spanning two years and also affecting many people. Through robust humanitarian assistance/Aid and charitable donations that was managed to reach with them could not succeed to bring a lasting solution to the vast needs of the people as it always remains a serious concern at emergency levels.

So at this critical time, why don’t we give a closer look at the importance of coming up with alternative solutions to increase the impact through the transparency of the donations along with a collective social accountability to whom we endow the trust in order to serve on that basis of decent ethics and timely manner? Why don’t we come up with better strategies that can sustainably bring about strong resilience to the vulnerable people as well as enhance the necessary mechanisms that are greatly needed to demonstrate accountability framework in the system?

In that regard, I would be sharing with you one of the successfully applied models of charities and aid that can manage a large amounts of money in a sustainable manner by requiring complex accounting and researches to be conducted as appropriate as necessary, then if expectedly should this system be replicated in the context of the Somali society, will it definitely serve a remarkable ease of the stresses in the resource shortage,  lesser reduction of the ratio of corruption will be achieved and will it also help a dynamic transformation of the lives of the marginalized communities.

As it is aforementioned in the caption of the article, the social business model can serve a vital role in answering such apparent and undermining questions if it is well adapted with care, the model will also bring a durable systematic alternative to entail what is needed to tackle the determinants of the deprivation trap as well as bring the business and the charity together to improve the living standards. It is quoted from the Nobel laureate Mohamed Yunus (Charity dollar has one life, a social business dollar can be invested over and over again)

For us to understand the social business model, we should be taking ourselves through some illustrations of the Yunus Center for the Social Business to comprehend how the venture operates in the context of Bangladesh and its believed that in the power of social business to turn the challenges into opportunities to create a lasting change.

What is the social business?

A social business is a social mission at its core, set up to solve a specific problem to the benefit of poor or disadvantaged members of society, social businesses operate exactly like normal companies except for a few small differences. Unlike a charity, a social business generates profit and aims to be financially self-sustaining. Removing the need for fundraising allows social businesses to reinvest profits back into generating sustainable social impact. A social business is a company that either creates income for the poor or provides them with essential products and services like healthcare, clean water or clean energy.

The aim of the Social Business

The aim of a social business is to have a social goal that the company can pursue on behalf of its investors. At the same time, a social business is aimed at being self-sustainable meaning it must attempt to avert losses just like any other normal company.

When profits are accumulated only the amount of invested shall be returned to the investors. Thereby not giving back dividends beyond the amount invested. Profits are reinvested for expansion and further social benefit by providing a good or service at the best price to help the people. To sum it all a social business is a company aimed at providing a good or service to help the people while operating with the motto of No Loss, No dividends. 

 The Social Business Model

Social business is a cause-driven business. In a social business, the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point. Purpose of the investment is pure to achieve one or more social objectives through the operation of the company, no personal gain is desired by the investors. The company must cover all costs and make the profit, at the same time achieve the social objective, such as, healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water, introducing renewable energy, etc. in a business way.

The impact of the business on people or environment, rather the amount of profit made in a given period measures the success of social business. Sustainability of the company indicates that it is running as a business. The objective of the company is to achieve social goal/s.

Yunus Social Business is a non-profit venture fund and they believe that business can be used to solve human problems, Donations can be turned into investments in social businesses that provide employment, education, healthcare, clean water and clean energy to over a million people worldwide. The center was founded in 2011 by Saskia Bruysten, Sophie Eisenmann, and Nobel Peace Laureate Muhammad Yunus, the mission is to promote social business as a sustainable alternative to long-term aid, bridging the gap between business and philanthropy.

Why Social Business?

• Sustainable philanthropy: Yunus Social Business offers alternative to charity or aid that allows you to transform a philanthropic donation into an investment that can be used over and over again.
• A bridge between business and aid: The model focuses specifically on solving social and environmental development challenges while creating income for, and providing essential products and services to, the poorest communities around the world.
• A world-class team: They are proud of their people. They bring with them many years’ experience from the world’s leading companies, a dedication to improving lives and a determination to reduce global poverty to zero.

What to look for

• Social impact: A big idea translated into a tangible solution that has the potential to improve millions of lives.
• You and your team: Experienced entrepreneurs with drive and natural leadership skills and a team with the skills and experience the will drive your social business forwards.
• Business model: A solid business model with a minimum of 6 months success, a market opportunity that is underserved and a product or service that benefits the poorest communities or improves incomes.
• Potential: An easily scalable business with clear application across regions and countries that’s highly innovative or unique.

Yunus Center History

Yunus Social Business has its roots in Bangladesh. In 1983 Prof. Yunus founded Grameen Bank, beginning a micro-finance revolution for which he won the Nobel Peace Prize. Grameen grew from a bank into several enterprises, each dedicated to serving poor rural communities in Bangladesh and each created with the specific intention of reinvesting any and all profits back into benefitting the poor. These were the first Social Businesses. In 2009 while at the World Economic Forum, Prof. Yunus sketched out the 7 principles which were to become the model for Social Businesses used today.

SEVEN PRINCIPLES OF SOCIAL BUSINESS

• Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization.
• Financial and economic sustainability
• Investors get back their investment amount only. No dividend is given beyond investment money
• When investment amount is paid back, company profit stays with the company for expansion and improvement
• Gender-sensitive and environmentally conscious
• Workforce gets market wage with better working conditions
• Do it with joy

 The investment model

 

References:

http://www.socialbusinessmodelcanvas.com/wp-content/uploads/SBMC-v2.png

http://www.muhammadyunus.org/index.php/social-business/social-business

https://impactpartner.tn/en/

https://en.wikipedia.org/wiki/Social_business_model

https://reliefweb.int/disaster/dr-2015-000134-som

 

By: Abdifatah Hussein Dahir

fataax11@gmail.com