Posted by: Sabine Kurjo McNeill | April 20, 2008

The profit motive recedes

The profit motive recedes
March 22, 2008 by Don Cayo

Muhammad Yunus made his mark with micro-credit, starting with a handful of 50-cent hip-pocket loans and building it into a bank that has provided $6 billion to 7.5 million borrowers.

This stellar record built the 67-year-old Bangladeshi’s reputation as “banker to the poor” and won him and his Grameen Bank a Nobel Peace Prize last year.

But micro-lending is only a small part of what Yunus turns his hand to these days. The famed bank is just one of 25 Grameen companies that range from cellphone and Internet providers to manufacturing and sales firms, training and health-care institutions, property developers and asset managers.

They’re all run on a new model he touts in Creating a World Without Poverty: Social Business and the Future of Capitalism (written with Karl Weber, published by Public Affairs, 261 pages, $31.50). They’re so-called social businesses: Their bottom line is the good they produce for the community.

Although these businesses must cover their costs, they don’t seek a profit. Yet Grameen Phone, to single out but one, has grown into Bangladesh’s largest company. So it’s perhaps not surprising that Yunus has become convinced that this kind of business is the wave of the future.

Yet, as he tells it, this not-so-little business empire evolved largely by accident. The former head of a university economics department, he never aspired to be a banker. Indeed, he spend years trying to convince conventional bankers to take a chance on poor people as borrowers, and only undertook to do it himself when they wouldn’t.

So, too, with the other Grameen businesses. He and his staff would see niches no one else would fill and, in frustration, start their own companies.

The story of two-year-old Grameen Danone, a yogurt manufacturer with a mandate to provide nutritious, low-cost food to poor people, is a little different. It grew from a carefully thought-out partnership with Danone Dairy, a French for-profit company that decided to make a foray into the non-profit world.

That Grameen’s social business model works well in Bangladesh is beyond dispute. But, as Yunus made clear when I spoke with him last Saturday, things in his country are very different not only from those in a fully developed place like Canada but also from the situation in most other poor countries.

Its government is incompetent and corrupt but, despite this, Bangladesh is making steady progress in poverty alleviation. It’s enjoying astonishing economic growth (6.7 per cent a year) and is on track to meet most of its goals for poverty reduction and quality-of-life improvement.

How has it managed this?

It’s thanks to the competence, scale and scope of Bangladeshi non-governmental organizations, he said. And he wasn’t just tooting the Grameen horn but also giving credit to other groups that are national in their reach and powerfully effective.

They grew out of a tradition of weak governance, he said, and manage to compensate for it. They also manage to recruit the money and brainpower to make progress toward their lofty objectives.

Most other countries have no tradition of non-profits providing public goods on a national scale, but Yunus counts on finding the talent, goodwill and passion to invest in and run new social businesses, since “the machine of for-profit business doesn’t work very well when it comes to providing social benefits.”

© The Vancouver Sun 2008

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