Microfinance as Social Business -- Parveen Mahmud

Building Social Business…
“Microfinance as Social Business”
Workshop 1
17TH MICROCREDIT SUMMIT
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GENERATION NEXT: INNOVATIONS IN MICROFINANCE
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Title
Text here
Ms. Parveen Mahmud
Managing Director

Nobel Laureate for Peace Professor Muhammad
Yunus, founder of the Grameen Bank and the
pioneer of Micro Credit introduced the Social
Business concept globally
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Just like the implementation of Micro Finance
Bangladesh is also the pioneer in Social Business
The UN declared 2005 as the Micro Credit Year
and also adopted Social Business Concept for
achieving the Millennium Development Goal
(MDGs) in 2012
Introduction:

Definition of Micro Finance and Social Business:
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Micro Credit is collateral free credit to the poor to
generate self-employment through income generating
activities to overcome poverty. Presently in it’ s wider
dimension microcredit is known as Micro Finance,
which includes, "the provision of a broad range of
financial services such as deposits, loans, payment
services, money transfers, and insurance to the poor
and low income households and microenterprises.”
Social business…
is one whose owners are motivated by solving a social problem, often
unemployment, rather than making money for themselves.

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
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Financial and economic sustainability
When investment amount is paid back, company profit stays with the company for expansion
and improvement
Environmentally conscious
Seven Principles of Social Business
Investors get back their investment amount only. No dividend is given beyond investment
money
Workforce gets market wage with better working conditions
…do it with joy

Difference between social business and other development model
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… different from the non-profit charitable model
which has an inherent weakness — its reliance for survival on donations
Profit making, which makes it sustainable…
Its revenues cover its costs, or there is a clear business plan to reach break-even within a reasonable
timeframe; can be financed by investment, rather than depending on donations.
…but it does not pay dividends
Any income remains with the company to be reinvested. An owner can take out their original investment
but no more.
Difference between social business and regular business
A conventional business goes out only to make money, and creates jobs as a byproduct. In a social
business for example, the main objective is to generate employment.

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Dimensions of social business:
TYPE 1:
Any business focused on providing a product
and/or service with a specific social, ethical or
environmental goal.
TYPE 2:
Any profitable business that is owned by the
poor and disadvantaged

Micro Finance and Social Business:
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Social Business is a much broader concept includes microcredit
It makes a fundamental change, where Business is built on the selfless
part of human nature; doing business for the benefits of society –
except the investor(s) get’s the pleasure of serving humanity. It is a
selfless business whose purpose is to bring an end to a social problem.

Social Business Sources of Funding:
Designing each small social business is like developing a seed. Once
the seed is developed, any body can plant it with appropriate soil
base and where it is needed. Since each unit should be self
sustaining eventually, funding is not expected to be a constrain.
Few probable areas to fetch social business fund are: Philanthropy,
Cross Subsidization, Corporate Social Responsibility, Joint Venture,
Crowd Funding etc.
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Grameen Telecom Trust
(GTT) was founded in
2010, as the flagship
entity responsible for
implementing and
facilitating Social Business
ideas.
GTT has identified
healthcare, education,
technology and
entrepreneurship
development as key areas
of Social Business.
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Transforming Ideas into Realities: Implementation in Bangladesh

Core programs of Grameen Telecom Trust
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1. Nobin Udyokta (NU) /New Entrepreneurs
2. Social Business Learning and Innovation Fund (SBLIF)
3. Investments and Joint Ventures

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New Entrepreneurship Program
Funding and Incubation for businesses of children
of Grameen Bank borrowers
~ Unemployment to Entrepreneurship
Nobin Udyokta Program

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Nobin Udyokta (NU)/ New Entrepreneurs
•Grameen Telecom Trust (GTT) has created a fund to support NU encouraging the
idea “We are not job-seekers, we are job-givers”
•The aim of this fund would be to support children of Grameen Bank members to
undertake sustainable business and become entrepreneurs.
•At present the size of this fund is BDT 100 million ($ 13 million).
•Presently, besides GTT, Grameen Shakti Samajik Byabosha Ltd, Grameen Trust,
Grameen Kalyan & Grameen Byabosha Bikash are implementing NU programs.

What is Social Business Learning and Innovation Fund
(SBLIF):
The Social Business Learning and Innovation Fund (SBLIF) has been
created to encourage innovative enterprise to undertake social
business ventures. New social business models are often deemed
risky to implement, hence, SBLIF initially intends to support such
ideas through on a pilot basis. The tested models that attain success
are gradually replicated and scaled.
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Characteristics of Innovative Enterprises:
• These enterprise activities should be novel and different from the traditional
enterprises.
•These enterprises ought to benefit directly or indirectly the disadvantaged or
marginalized communities through financial and social inclusiveness.
• The enterprise must be sustainable.
• Enterprises should create entrepreneurs, encourage job creation.
• Enterprise should encourage value chain process, eliminate middleman and offer
best price for products, labour and also addresses specific social problems or
issues.
• Enterprises which encourages modality of ownership to be transferred to the
producers, enterprise managers gradually is reckoned as innovative.
• The enterprise must be environment friendly.

Social Business Learning and Innovation Fund (SBLIF) -We invest/partner in
social businesses after a thorough due diligence process
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SBLIF Process Flow
1. Application for Social Business Learning and Innovation Fund through project proposal
2. Detailed assessment by Review/ Screening Committee
3. Presentation of the project proposal to the Social Business Design Lab
4. An 'assessment team' from GTT visits the field
5. MoU and other documents are prepared and signed by the parties
6. Initiative comes into operation, GTT plays its part in operational management, regular MIS
and AIS reporting and offline and online monitoring
7.Subject to the returns and impact of the initiatives, projects are turned into social business
companies, while existing companies are scaled up

SDRS Crafts Social Business
Revenue-generation for poor women through the
manufacture and export of embroidered products
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Ongoing Projects under SBLIF

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SKS Social Business
Income generation and asset building for poor
households by promoting sheep rearing

Aroni Limited
Production and sales of local mustard oil
by engaging the indigenous community
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Mobile Plant Nursery and Clinic
Mobile plant nursery which provides agricultural extension
services and undertake sale of fresh produce
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A BRIEF ON GTT'S INVESTMENT IN SOCIAL BUSINESS COMPANIES
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SN
Name of Social Business
Companies
GTT's Investment in Equity
Major Objectives (Activities) Main Products
Share (%)
Amount
(BDT)
Amount
(USD)
1
Grameen Distribution
Limited (GDL)
95.00% 142,500,000 $ 1,841,085
To promote sales and distribution of
products to the target group through
underprivileged rural women.
Mobile handsets & accessories, energy
efficient products, healthcare products
and some general consumer goods etc.
2
Grameen Fabrics & Fashion
Limited (GFFL)
99.93% 389,900,000 $ 5,037,468
To set up an environment friendly RMG
industry to encounter specific social
problems, to earn foreign currency and to
create employment.
Long Lasting Impregnated Mosquito Net
(LLIN), Sanitary Napkin (SOFTY), Knitting,
Garments etc.
3
Grameen Health Care
Services Limited (GHSL)
50.00% 150,000,000 $ 1,937,984
To extend quality health care services to the
low income households.
Eye care program, general health care
program, child and mother care, oral
health care etc.
4
Grameen Danone Foods
Limited (GDFL)
31.00% 243,750,000 $ 3,149,225
To provide nutritious dairy & other food
products to the children at affordable prices
especially for low income families.
Shokti+ Doi, Shokti+ Pocket (Yogurt for
nutrition) etc.
Total: 926,150,000 $ 11,965,762

From Microfinance to Social Business for Sustainability
Poverty has many facets. It has to be approached from many
directives, and no approach is significant. In more than one
way microfinance and social businesses are intrinsically linked
as both seek to empower the entrepreneurial sprit of people to
help themselves come out of poverty.
Social business can can trace its roots back to microcredit. In
Social Business for sustainability where:
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•Grant not encouraged
•Producers are offered best price
•Ensuring market linkages
•Ensuring value added services
•Holistic approach to address social causes

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Challenges: Microfinance
In Micro Finance regularly repaying installment by the
borrowers considered upgrading ones socio-economic
condition. This conclusion may or may not be valid. To verify
that it is essential to know how are they paying their
installments and what is happening to their socio-economic
status.

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Challenges: Social Business
Social Business recognizes that the responsibility for solving
a society’s problems is shared between the Government &
the citizens. Government should support to strengthen the
growth of social business.
Our legal & regulatory system does not currently provide a
place for social business. It needs specific rules regarding
organizational structure, governance and decision making
principles. Now, time for suitably adjusting the legal and tax
codes to allow such companies to come into existence more
easily.

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Way Forward
• Both microfinance and social business can compliment Governments development
work.
•Government will have an important role in promoting both social business and
microfinance through enabling healthy regulatory framework.
•It is expected that over a period of time, microfinance and the banking, non-bank large
financial sector, emerging social business sector, all will function effectively as the
development sector, with strong linkages between them and each playing an important
role based on their respective comparative advantage.

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Contact Information:
parveen@gtctrust.com
Visit:
www.gtctrust.com
Follow:
www.facebook.com/gtlctrust.com
Thank you

Microfinance as Social Business -- Parveen Mahmud

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