Q. The popular discourse today is that ‘growth is getting redistributed’. However, growth alone is not achieving development in the true sense. What is the single-biggest drawback of today’s economic growth model that is constraining inclusive development?
A. The issue with today’s model is the way in which we think about growth – completely separate from our society and environment! If we consider economics in this purely theoretical light, abstract from the world’s problems, we are missing out on the important aims outlined in the Sustainable Development Goals.
It is imperative that these social and environmental factors become part of a holistic view of economic growth for the future of humanity and our planet.
Q. The role of the private sector is more and more important to achieve the funding requirements for social business/sustainable development. Do you agree? How can the private sector’s involvement be mobilised further?
A. The role of larger corporates is absolutely vital for a sustainably developing world. Governments and charitable organisations simply do not have the money behind them to drive the financing that is required. At Yunus Social Business, we work with corporations to use their core competencies to create social change.
It is important to tackle social issues from both a top-down and bottom-up approach.
We not only work with social entrepreneurs in developing and emerging economies, but we have inspired 20+ global corporations including Danone, Veolia, McCain, BASF, Uniqlo, MAN and Tata Trusts to build corporate social businesses.
Q. Growing concentration of income/wealth has become as acute a problem as that of development itself. Forget low-income countries, even higher-income emerging markets like Malaysia or developed markets like USA are not free from this. What is causing this global phenomenon of income inequality?
A. 82% of the wealth generated last year went to the richest one percent of the global population, while the 3.7 billion people who make up the poorest half of the world saw no increase in their wealth. These are the figures that Oxfam released at Davos this year. If you have money, it is easy to multiply it year over year.
We need to look at the way money is invested, not only to satisfy the shareholder profits but also to satisfy people and solve their problems.
That’s why we talk about social business, business that is designed with the only intention of solving problems. At YSB, we provide opportunities of investment and support to early-stage social businesses that seek to change this narrative and create examples of how business can be used for social good.
Q. Social business, just like microfinance, ultimately depends upon the entrepreneurial ability of the local communities to think of workable ideas. But not every community/region is equally inclined towards that. Do you find this to be a challenge in your work in the social business space?
A. In the end, we believe that social business, just like normal business, can work anywhere. Of course, there are always regional specificities and that is why we have strong local teams in place that understand the cultural, historical and market differences. However, the problems that people face in developing and emerging economies are vastly similar – like access to clean water, healthcare, income opportunities etc. – so many social business models can be copied from country to country.
Q. Many emerging markets today are taking less of donor aid. In other words, their growth models now is not so much aid-driven, as it is driven by their inherent policies. What is the combination of factors that can help achieve this?
A. There is certainly a dramatic shift happening in the development sector at the moment, which sees aid and development moving to become completely separate entities. While there will always be a need for emergency aid for disaster relief, sustainable development is moving in the direction of social business.
We can see this in the British Government’s pledge for a “fundamental shift” in aid spending to focus on long-term economic and security challenges rather than short-term poverty reduction.
A new business-minded model of development is coming to the forefront, by working with the capitalist system and relying on the inherent skills and innovation of those living and working in developing economies.
Aid is not a long term solution, local social business approaches however can be a long-term solution
Q. Digital disruption is now going beyond services and manufacturing to enter even soft-infrastructure areas like health, education, environment, etc. For example, African farmers use SAP technology to manage their agri-produce better. Can tech-innovations be a big catalyst for workable social business models?
A. Tech innovations are incredibly important and have changed the way we can deliver services to those living on the very fringes of society. For example, services like MPESA have totally changed the financing landscape in Kenya allowing access to financial management for those who have never had access to banking services before. In the healthcare and education spaces too, technology can play an amazing role at reducing the cost of delivery to near zero.
At the same time, we need to keep in mind that artificial intelligence also poses a threat to our societies.
Labour will be less and less needed to produce the goods and services we consume today. How will people earn their income in the future?
Q. Lastly, how do you view the challenge of funding? What in your opinion is the best funding mechanism that can help take social business to the next level?
A. We take philanthropic donations to fund our non-profit venture fund because we are financing early-stage businesses that are not ready for the support of larger financial institutions. However, we know that unlocking capital from larger institutions is absolutely vital if we want to make big changes in society.
That’s why earlier this year we released the world’s first Social Success Note (SSN).
Similar to Social Impact Bonds, the SSN is a new financial innovation that supports the work of front-line social businesses.
It does this by providing a long-term funding solution that harnesses the power of private return-seeking capital to achieve social and environmental outcomes. The upfront funder provides a front-line social business, in this case, the social business “Impact Water”, with a working capital loan. This will allow Impact Water to continue to sell, install and maintain affordable water filtration systems in schools in Uganda.
Thereafter, the outcome payer provides an outcome payment of split between the upfront funder and the social business (if targets are met). With access to low-cost capital, Impact Water will be able to achieve maximum impact without sacrificing social gains to achieve a market return. The vision is for social entrepreneurs to have access to low-cost capital to achieve their social impact and donors to get higher leverage with their grant money. I’m really excited about the potential has to allow more financing to flow into social businesses!
For more information on Yunus Social Business, see our website.