A Review of Creating a World Without Poverty
By Steve Gillman
Creating a World Without Poverty - Social Business and
the Future of Capitalism, by Muhammad Yunus - PublicAffairs;
Reprint edition 2009.
This is one of the most inspiring and optimistic books about
poverty that you will ever read. A true capitalist and humanitarian,
Muhammad Yunus first gained fame as the founder of Grameen Bank,
which makes small business loans to the poor of Bangladesh--loans
as small as $50. These micro loans (Yunus was the first to develop
the concept on a large scale) enable families to become entrepreneurs
and/or expand their businesses. The repayment rate is 98.6%,
which would be the envy of many big banks around the world. With
the creation of Grameen, he has lifted millions of people out
of extreme poverty. That story is told in his book, Banker
to the Poor.
The important and often overlooked part of the story is that
Grameen Bank, though created specifically to improve the lives
of the poor, makes a profit. That's important to the thinking
that went into Yunus' dozens of other businesses and is the basis
for his book Creating a World Without Poverty. In it he
introduces the world to his concept of the "social business."
A social business is one that has a specific social purpose
as its primary goal. As opposed to a charitable organization,
though, it must make a profit, because that is what makes it
able to continue serving its purpose indefinitely.
As an example, lets suppose there are some places on the continent
of Africa where residents could double their incomes if they
had bicycles--which enable them to bring more fruits or other
products to market each day, or to markets that are further away.
A charity might donate bicycles, but as Yunus points out, charitable
giving is fickle at best, going up and down with the economies
of the countries that donors come from. It isn't reliable, and
it is often inefficient as well. It requires the constant search
for new money, which may or may not be found.
A better solution is for someone who cares to start a social
business in the form of a bicycle factory. The goal would be
to make exactly the kinds of bikes that the people need, and
at a price they can afford. They might even be sold on a payment
plan and so be financed entirely out of the additional profits
a buyer makes from being able to transport more goods to market.
Making a profit allows the company to exist forever, serving
the needs of the poor. The profits first are used to repay investors.
This is crucial in Yunus' scheme, because even though the investors
get no profit, by getting repaid they can endlessly recycle there
capital into new social businesses--a kind of virtuous circle
of ever increasing good works. After that, profits are used to
expand if necessary, or prices are lowered on the products, leaving
just enough profit to maintain a margin of safety for the business.
Now, this may all sound very idealistic, but it far beyond
being just an optimistic dream. Yunus has himself created a number
of these social businesses. It is particularly fascinating to
read his detailed account of developing a yogurt business in
Bangladesh (partnering with the makers of Dannon Yogurt), in
order to address the nutritional deficiencies of poor children
and to provide jobs for hundreds of women who sell the yogurt.
It is a powerful book, and once you read it you'll understand
why Mohammad Yunus won the Nobel Peace Prize.
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