MUHAMMAD YUNUS

International Center for Microfinance and Social Business

What is Social Business?

Social Business

This is a business model that does not strive to maximize profits but rather to serve humanity’s most pressing needs. Thus, the first motive of a social business is not profit, and second, it does not pay its investors dividends. Instead, it aims at solving social problems with products and services at affordable prices, or giving the poor and marginalized people ownership in a business and therefore allows them to share its profits.

A social business pays back only its original investment and reinvests its profits in innovations or further growth that advance its social goals. Although the social business is pioneering in its aims, it is traditional in its management. Its workforce is professional and paid according to market wages. This type of business may or may not earn profit, but like any other business it must not incur losses in order to be able to sustain itself. In every sense the social business is sustainable: its direct environmental impact, its impact down the value chain, and critically, its financial independence. This is a key difference between social business and charity. Once its initial investment is repaid, the social business aims to be financially self-sustaining, giving it the independence and security to focus its efforts on the long-term improvement of the lives of the disadvantaged.

Seven Principles of Social Business

1. 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.
2. Financial and economic sustainability.
3. Investors get back their investment amount only. No dividend is given beyond investment money.
4. When investment amount is paid back, company profit stays with the company for expansion and improvement.
5. Environmentally conscious.
6. Workforce gets market wage with better working conditions.
7. …do it with joy.