A few months ago, in a high-profile interview (with The New York Times on April 17, 2013), Nobel Laureate Dr. Muhammad Yunus, the pioneer of microcredit, and the founder of Grameen Bank, talked about his dreams and his most recent innovation – “Social Business” (SB) - and envisaged his plans for it.
Dr Yunus called upon global policymakers and charity foundations to support his new effort, his specific appeal, first, to create a “social business fund,” and second, to encourage both young and retired businesspeople to come up with business ideas which can be supported by those funds.
Global leaders keep the gist of his innovative ideas in their thoughts and praise him unconditionally for his innovations. Unsurprisingly the global policymakers have already started adopting his new approach, with some of the initiatives already at the implementation stage; while surprisingly the policymakers from Bangladesh, his own country, have so far remained silent on this novel approach.
But how long can they simply watch, while others are already well into following our hero’s way of thinking?
Well, the significance of social business rightly goes with the overall policy objectives of the country. Bangladesh has been fighting for long to find its footing in the ethical world as well as to come out from the curse of poverty.
Unwarranted and “super-normal” profit motivation and labor exploitation have always been part of our business culture. The negative repercussions are quite evident within the persistent inflation we have been facing over the years and of course the continuous labor unrest, but now a solution is here.
Social business not only ensures that a business has the highest ethical goals and standards, but also guides the business towards keeping a lower profit motivation. The significance of Professor Yunus’s idea should thus be the priority for Bangladeshi policymakers, especially those who work at top positions in the central bank.
So, one might be interested to know the possible link between social business with the monetary policy of Bangladesh Bank. Certainly, there are clear links. The monetary authorities have long been promoting “inclusive growth” through introducing measures such as priority credit to agriculture and SME sectors, and female entrepreneurs.
Implementing the idea of “financial inclusion” has been the interest of Bangladesh Bank in the recent past. However, the idea of social business is solid enough to capture the two sizzling buzz-phrases of the Bangladesh Bank, “inclusive growth” and “financial inclusion”, and to combine them under one umbrella.
As described in Building Social Business, written by Dr. Yunus himself, Type I social business focuses on producing a product or service with a specific social, ethical or environmental goal. While Type II social business is a profit-oriented business that is owned by the “poor” or otherwise underprivileged segments of our society.
While funding Type I social businesses will ensure “inclusive growth,” promoting Type II social businesses will support the “financial inclusion” agenda of the central bank.
The high-ranking policymakers in Bangladesh Bank have been tutoring the corporate sector on their ethical duties through adopting corporate social responsibility. Now, time comes at the footstep of the central bank to show its own commitments on setting an ethical standard by policymakers through promoting a well-recognized business model.
Taking social business in regular agendas of the central bank may ensure its high ethical commitments, but it also makes it entitled enough to provide directions to the private sector.
Several windows are there through which social business may push for improvement in the conduct of monetary policy. Adopting social business may ensure the two goals of the central bank are met: lower and stable prices, and higher production.
First, the conduct of monetary policy commonly works surrounding the idea of managing inflation dynamics through having a stable price level. Inflation remains stable with the stability in commodity prices. Lesser profit motivation by businesses pushes them to tag the price of the final product at low levels. In other words, prices will decline when businesses will leave the motivation of super-normal profit.
The philosophy of social business clearly focuses on making lower-than-super-normal profit by businesses by keeping the price level lower than the market price. Thus the more the monetary policy focuses on social business, the more one can expect lowered prices of commodities, the long-term goal of the monetary policy.
Second, there is a clear direct link between lower prices and higher production. Having a lower price encourages consumers to consume more, that is of course if other factors remain the same. Higher consumption will encourage producers to produce more.
While adopting and implementing social business ensures lower commodity prices, through the same channel social business leads to higher commodity production. Moreover, social business focuses on those product or service which has special social, ethical or environmental motivations.
Through the adoption of a “reformed” monetary policy, Bangladesh Bank may incorporate the idea of social business in its regular activities. As Professor Yunus suggested, Bangladesh Bank may create, like its other priority funds, a “social business fund” to channel credit flows to those business entrepreneurs who are ready to implement the idea in their business endeavours. The initiative could be a new business venture or an expansion to an existing business.
Aiming for a viable approach to social business promotion with the collaboration of Yunus Centre should be a priority for Bangladesh Bank. A joint initiative can make an open call to those who are interested in being donors for the “social business fund” and those who have appropriate proposals for social businesses in being able to tap into those resources.
Bangladesh Bank and Yunus Centre can then jointly scrutinize all proposals and select the best, which will be hopefully be qualified enough to enjoy this special fund. Priority should be given to those proposals which properly follow the philosophical background of social business as defined in Building Social Business.
While making a proposal for a social business, business innovators in countries like Bangladesh should look for those areas of the economy which need urgent focus, areas such as agriculture, physical and social infrastructure, power and energy.