/ 17 February 2020

Social entrepreneurship means business

Open Forum: Ethical Capitalism Worth A Try?: Muhammad Yunus
Economist Muhammed Yunus founded Grameen Bank in 1976, enabling small businesses in Bangladesh to borrow money without requiring collateral. (Christof Sonderegger)

Social entrepreneurship is a business model in which an enterprise exists to solve a social problem — usually using entrepreneurial methods of planning and processes. Social entrepreneurs identify a problem, come up with a solution and then find the processes and funds to implement it. For developing countries, social entrepreneurship holds the double benefits of providing employment for the social entrepreneurs themselves and creating an impact for social and environmental causes that really need them. 

Here’s an example of what social entrepreneurship is not: in a cake sale, the cake’s probably been donated by parents, which means that this isn’t a sustainable business model, as parents aren’t going to keep handing over cake — they’d likely prefer to simply donate cash rather than making endless runs to a 24-Hour Woolworths or baking cake pops and brownies. A social enterprise, like any business, needs to be able to generate its own income. A cake stand that used its profits to buy more ingredients and expand a tiny market stall to a small shop, then a thriving chain, all employing previously disadvantaged women who learn about management and marketing as well as budgeting and baking? Now we’re talking business. 

What makes a social entrepreneur? 

Perhaps the quintessential social entrepreneur — and the winner of a Nobel Peace Prize for his efforts — Muhammed Yunus provides a clear example of how an enterprise can promote social change. As the founder of Grameen Bank, he was responsible for pioneering microfinance and extending credit to individuals in developing nations to allow for the stimulation of their own entrepreneurial goals when they didn’t qualify for traditional bank loans. As a trained economist, Yunus was able to identify the disproportionate change that small loans could make in the businesses and lives of poor individuals with entrepreneurial aspirations, and established Grameen Bank to extend credit that differentiated itself from the predatory lending that was the only alternative at the time. An additional insight was that extending credit to women was a smart move — as well as being an underserved demographic in that they were unable to borrow money in Yunus’s India at the time, they were also statistically more likely to use their earnings responsibly. 

Why it’s working 

With millennial and gen Z shoppers coming to expect the businesses that they support to have values that align with their own, it’s no surprise that young customers are leaning towards startups that seem to have society’s best interests at heart. It’s easy to take a cynical view of enterprises that are well aware that their social heart and soul are a major part of their appeal: whether they’re truly aiming to do good or simply pandering to a social justice-conscious audience is hard to tell. On the other hand, if they’re generating solutions while truly contributing to an important cause, it’s difficult to argue against their value.