Microcredit in Social Business Creating New Employment

Prepared for
The Daily Star
64-65, Kazi Nazrul Islam Avenue, Dhaka-1215.

Prepared by
Md. Mostafa Kamal
MBA ID: 16-686
MBA 16th Batch
Department of Finance
University of Dhaka

Microcredit in Social Business Creating New Employment

Social business is defined by Nobel Peace Prize laureate Professor Muhammad Yunus
and according to him, social business is a non-loss, Non-dividend Company which is created and
designed to address a social problem. The characteristic of social business is that it is financially
self-sustainable and profits generated by the business are reinvested in the business itself, with
the intention of increasing social impact. Unlike a profit-maximizing business, the prime aim of a
Social Business is not to maximize profits. Furthermore, business owners are not receiving any
dividend out of the business profits. So the social business cab is described as a non-loss, Nondividend Company, committed entirely to achieving a social goal.
Bangladesh is regarded as the birthplace of microcredit program in the whole world. We
can illustrate the example of Grameen-Danone. Danone group and Grameen Bank have created a
company which makes highly nutritional dairy products which are sold at affordable prices. The
women who sell these goods have received microcredit to start their own businesses and now
contribute to their household incomes. In the end, the success of this project is evaluated by
using financial and non-financial criteria that is the number of newly-created direct and indirect
jobs such as milk producers, wholesalers, door-to-door saleswomen, improvement in children's
health and environmental protection. Several hundred livestock-farming and distribution jobs
have been created in the local community as a result of establishment of the first factory.
It may take a relatively longer time for Grameen Danone to create an overall impact on
the nutritional state of the country but the concept of social business will inspire others to change
the present state of poverty in the world. The Village Phone Program is a unique initiative to
provide Universal Access to telecommunications service to remote, rural areas. Village Phones
have proven immense potential in boosting income of poor households in rural areas, promoting
health care, development of agri-business and in the social empowerment of poor women.
The group lending model of poverty alleviation is now being widely imitated in many
developing countries of the world. Microfinance industry has been able to bring about a lot of
change in the lives of millions of poor and low-income households in terms of generation of self
employment, promotion of income and savings, smoothing consumption and coping
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vulnerability. The remarkable and significant impact of microfinance program lies in the
empowerment of the poor women as more than 90% recipients of microcredit are women. By
accelerating women participation in income generating activities, microcredit has emerged as the
most powerful driver of financial inclusion which ensures inclusive development. In Bangladesh
there are mainly four types of institutions involved in microfinance activities i.e. Grameen Bank
(GB), NGO-MFIs having licenses from Microcredit Regulatory Authority (MRA), Commercial
and specialized banks and Government sponsored microfinance programs.
Even profit maximizing companies can be designed as social businesses by giving full or
majority ownership to the poor. This constitutes a second type of social business. Grameen Bank
falls under this category of social business. It is owned by the poor. The poor could get the shares
of these companies as gifts by donors, or they could buy the shares with their own money. Many
infrastructure projects, like roads, highways, airports, seaports, utility companies could all be
built in this manner.
Based on the pioneering work of the Grameen Village Phone in Bangladesh, Village
Phone and Village Phone Direct extends the benefits of affordable telecommunications access in
a sustainable, profitable and empowering way. The Village Phone Program is a unique initiative
to provide Universal Access to telecommunications service to remote, rural areas. Village Phones
have proven immense potential in boosting income of poor households in rural areas, promoting
health care, development of agri-business and in the social empowerment of poor women. This
relatively inexpensive technology can solve many of the problems the poor in rural villages have
faced for decades. There is a growing evidence of the positive role of VPs in terms of womens
empowerment. The village phone has had direct and indirect impacts in the incomes of village
residents. All those contributions of microfinance have serious impacts on the social businesses
to create new employment and as well as on the overall development of the country.