Social Business or Philanthropy?

Derek Li

The term “Social Business” means different things depending on who you are. And it’s true, there are no boundaries that set apart a business from being “social” or not. But the fundamental message is clear, these are businesses that strive to be a positive force of change than simply a profit maximizing company.

So that sounds like a simple enough idea. Why then, is this idea so current right now? You might think, “that’s cute, but a business is a business after all. How could anyone combine business with development in the same sentence?”

Take Dr. Muhammad Yunus’ Grameen Bank as example, Grameen Bank provides pioneering loan services to impoverished villages in Bangladesh whom were previously thought as uncreditworthy. A more recent example would be Kenya’s M-Pesa, mobile-based transfer and microfinancing service, granting proper bank services to Kenyans who cannot afford to open bank accounts. These businesses create brand new opportunities in markets that never existed before, bridging resources to those in need.

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Social entrepreneur Jacqueline Novogratz exemplifies this concept throughout her career. In her book, “The Blue Sweater”, she shows how dysfunctional businesses arise in developing countries simply because they dependent on non-profit donations. During her time in Africa, she encountered an example where women in Rwanda make merely $2 dollars a day in a bakery that loses $2000 per month, but still operates because there is an NGO that is willing to fund it. With the intention to merge development and business together, she started Acumen Fund, a not-for-profit group that believes in a market-orientated investment policy to invest in impact companies.

Philanthropy has revolutionized in unimaginable ways under Acumen Fund. As of today, various funds such as Acumen invest in a range of businesses spanning from agricultural ventures in Pakistan, electricity projects in Northern India, to mosquito nets in Tanzania. Their investment strategy is no charity at all, but in return provide business consultancy for these businesses to succeed. The concept of “impact investment” is no longer foreign, and these pioneers have shown us the future of what development entails.

Not to dismiss philanthropy quite so easily, but more often, opportunities arise from the entrepreneurial spirit within the human race. We live in a society where problems can indeed be solved by innovative solutions; perhaps this is the key to solving inequality around the world.

Dr. Muhammad Yunus – “I’m encouraging young people to become social business entrepreneurs…Making money is no fun. Contributing to and changing the world is a lot more fun.”

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