Yunusian Social Business in the Impact Investment Ecosystem

Human society has been immensely calamitous and chaotic due to the ‘unscrupulous’ economic system, which is predominantly driven by greed, resulting in the concentration of assets in the hands of a few. Wealth concentration is considered one of the primary causes of prevailing socioeconomic anomalies. Solely profit-oriented or synonymously socially neutral investments cause tremendous social problems by generating numerous negative externalities. Approximately 700 million people live below the poverty line today, defined at USD 2.15 per day. The global unemployment rate is 4.9% this year, indicating that about 402 million people are unemployed. Additionally, youth unemployment is 3.5 times higher than that of adults. At least 32 countries are currently embroiled in civil wars, terrorist insurgencies, drug wars, border disputes, political unrest, ethnic violence, etc. About 114 million people have been displaced due to these aberrations. Simultaneously, the global arms trade has experienced a tremendous increase, reaching US$ 204 billion in 2023. Alarmingly, a significant share of illegal arms is in the hands of terrorist organizations, insurgent groups, repressive governments, and other actors involved in conflict, intensifying terrorism, violence, death, insecurity, refugee flows, protracted political instability, and economic devastation.

Resolving the uprising socioeconomic issues is considered possible through the adoption of wealth deconcentration or redistribution mechanisms. Equitable wealth distribution is essential to building a poverty-free, harmonious society. In this regard, investment in social return rather than individual profit could offer a potential solution. Governments, development agencies, and academia have recently emphasized ‘impact investment’ as a potential solution to address these issues. Consequently, many grant-reliant organizations (charities), grant-funded organizations with trading activities, social enterprises, profit-with-purpose businesses, and objective-based businesses have emerged on the economic landscape. 

Nobel Peace Laureate Professor Muhammad Yunus conceptualized the Social Business (SB) model and substantiated it as a crucial tool for addressing critical issues such as poverty, unemployment, and environmental degradation. The SB model can act as a catalyzing agent to deconcentrate wealth through its concessionary and redistributive mechanisms while objectivizing social return on investment (SROI) and remaining operationally viable and economically sustainable. Yunusian social business can alleviate social ills more effectively and efficiently due to its seven operational principles (Table 1). The third principle, which is the most unique and contentious, is the investment mechanism that requires investors to forgo risk-adjusted market return on the investment. Investors can only retrieve the principal amount after a stipulated period. High-net-worth generous individuals or corporations (as part of CSR activities) supposedly invest in SBs without claiming the time value of their investment. They benevolently offer financial concessions for the sake of social well-being, competitive advantage, and growth for the business. This is where SB’s strength lies: outperforming its counterparts and becoming more socially impactful.

1. Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization. 2. Financial and economic sustainability. 3. Investors get back their investment amount only. No dividend is given beyond investment money. 4. When investment amount is paid back, company profit stays with the company for expansion and improvement. 5. Gender sensitive and environmentally conscious. 6. Workforce gets market wage with better working conditions. 7. …do it with joy.

Socially Neutral Investments

Socially neutral, non-concessionary investment is primarily profit-driven and profit-centered. This investment chiefly seeks ‘monetary value’ rather than ‘social values.’ It aims for optimum production efficiency through utility maximization, economies of scale, and cost-cutting approaches, often at the expense of social and environmental well-being and sustainability, which might incur additional production costs and lessen profit margin. To maximize profit, a handful of acquisitive producers are engrossed in mass production, cheap energy uses (e.g., fossil fuels), market colonization, and hegemony. They further overrule the governing system to create a favorable environment for profit hunting. Unaddressed unemployment contributes to the labor supply, thus decreasing labor costs and giving producers higher bargaining power. Under the provision of laissez-faire, they autocratically run the production functions. As a result, global assets gravitate to a few hands, leaving the rest deprived. The offshoots of this type of business exacerbate poverty and economic inequality, social injustice, violence, discrimination, displacement, and even war. Hence, social and environmental harmony is distorted.

The wicked weapon manufacturers liaise with the warmongers to revamp the arms business, perpetrate war, crimes, and violence, and thus keep society in unrest. Worth mentioning is that approximately 1 billion firearms are circulated globally, with 85% individually owned, 13% by the military, and only 2% by law enforcement. Globally, more than 600 people die every day because of gun violence.

The privatized healthcare industry is grasping patients’ money in the name of caregiving, significantly affecting low-income people. Similarly, privatization has commoditized education at a high price that is unaffordable to the general public. This sector now generates money for the monied men. Deep darkness under the luminous light.  

Yunusian Social Business as Impact Investment

Impact investments mainly seek social and environmental (hereafter, social) benefits through financial investment with the goal of ‘doing good while doing well.’ An investment’s impact should be recognized based on its contribution to social benefits. It seems an unrealistic expectation to achieve significant social impact and market rate of return simultaneously. Nonetheless, if profit-centered, market-driven businesses add some value to society, it is better referred to as ‘additionality.’ Conversely,sinceconcessionary investments such as social business offer a total yield to address social issues, they should be seen as ‘pure’ or ‘authentic’ impact investments because of their intensive societal motif. Further, their alignments with market centrism and profit generation are seemingly the enablers of sustainability for social good. 

The Impact of Social Business

SB’s impacts could be scrutinized from enterprise, investment, and non-monetary impact standpoints. Notably, enterprise impact denotes the social value of the goods, services, or other benefits the business venture provides. Similarly, the investment impact refers to a particular investor’s financial contribution to social value creation. Lastly, the non-monetary impact reflects other contributions besides the financial ones that might augment the enterprise’s social values. In this regard, Yunusian social businesses, including Grameen Bank, Grameen Telecom, Grameen Veolia, Grameen Shakti, Grameen Danone, Grameen Caledonian College of Nursing, and Grameen Eyecare Center, Grameen Green Children Eye Hospital , Grameen GC Eye Care Hospital, many others are to be exemplified. 

Grameen Bank, a microfinance institution in Bangladesh, offers collateral-free microloans to unbanked, impoverished rural women while recognizing them as the owners of the bank. Grameen Veolia serves the arsenic-affected community in rural Bangladesh with clean water. Grameen Telecom, a partial stake of Grameenphone, provided phones to underprivileged rural women so they could enhance their livelihoods through business while staying connected to the outside world. Grameen Danone mainly produces dairy products, including additional vitamins and minerals for rural children. Grameen Shakti (Energy) provides sustainable renewable energy solutions to rural Bangladesh through solar home systems. Grameen Caledonian College of Nursing (GCCN) provides nursing training to underprivileged girls in rural areas, preparing them to facilitate safe childbirth and assume the role of midwives. Grameen Eye Care Center (Vision Center) provides eye care services to rural people through telemedicine. Grameen Green Children Eye Hospital and Grameen GC Eye Care Hospital were established to prevent cataract blindness. Both institutions charge economically underprivileged patients based on their ability to pay, while capable patients are charged the market rate. Nonetheless, all patients go through nondiscriminatory treatments and healthcare services.

Regarding value proposition, value constellation, and profit equation, Grameen organizations are socially oriented, environmentally sustainable, economically viable, and operationally self-reliant. Furthermore, Yunusian social businesses have been demonstrated to be impactful from enterprise, investment, and non-monetary impact standpoints. 

Forgone Market-Rate

In the Yunusian social business model, the forgone market-rate financial return to investors ignites profound intellectual discourse. Conventional perspectives see profit from an economic standpoint where the time value of money is applied and flows to the investors, which is why the Yunusian model seems incompliant with it. 

Conversely, Yunus redefines the profit equation and indicates that social well-being should be considered the primary profit. According to this notion, business yield should be utilized to address social issues. Yunus envisions profit shifting from individual to community, greed to generosity, and exhaustion to sustainability. In the long run, social well-being will foster social, economic, and environmental sustainability. 

Social Business in the Social Investment Ecosystem

According to the Social Impact Investment Taskforce definitions, the social investment ecosystem consists of supply and demand. On the supply side, there are two components: ‘channel of impact capital’ and ‘sources of impact capital’. Similarly, ‘impact-seeking-purchasers’ and ‘impact-driven organizations’ belong to the demand side. Several financial instruments, such as secured loans, unsecured loans, charity bonds, social impact bonds, quasi-equity, equity, and grants, are exchanged in response to demands. 

Yunusian social business could be incorporated into the impact ecosystem’s financial sources (Figure 1), such as secured loans, social impact bonds, quasi-equity, grants, and equity from governments, social investment wholesalers, corporations, and high-net-worth individuals. Furthermore, impact-seeking-purchasers, such as governments, foundations, socially minded consumers, and socially minded corporations, could be connected to SB to boost its expansion, profitability, and social impacts. In this regard, social banks, community development finance institutions, impact investment funds, and crowdfunding could be integrated to channel the funds. 

Value vs. Values and Wealth vs. Well-being

The prevailing greed-driven economic system has profoundly degraded human society and the environment. It can only be fixed if social values are given priority. To do so, a reverse mechanism that can prevent wealth concentration and catalyze equitable wealth distribution should be adopted. In that case, Yunusian social business seems to have high potential.

The impact investment size is increasing gradually. According to the Global Impact Investing Network’s (GIIN) 2022 market sizing report, global impact investment is about USD1.164 trillion with constant growth. In such favorable circumstances, the practice of Yunusian social business is expected to yield a significant impact. Undoubtedly, the impact will be greatly augmented if the seventh principle, “Do it with joy,” is present.