A New Social Business Idea

While we are here in Bangladesh we are planning on visiting a number of social businesses. Social businesses are profitable businesses that are self sustaining without donations, but are not concerned with making huge profits. Instead they just want to cover costs and provide the most benefit to their customers.

I have mentioned a couple on the blog, but some examples are Grameen Knitwear which provides more comfortable working conditions to its employees, Grameen Veolia which provides arsenic free drinking water to rural communities, and Grameen Fund which provides venture capital to struggling entrepreneurs who need bigger loans than what Grameen Bank provides and can’t go to a commercial bank.

If these businesses make a profit, then that money is reinvested back into the business so that they can expand, it is not paid out in bonuses to the directors or anything. It goes back to the people who need it the most.

The branch we stayed at on our overnight village trip was located at a local bus stop, and there was a fairly big market there. They had a number of buildings with stalls set up for people to sell good from, or produce something in. When we interview a number of micro-enterprise loan borrowers from the Grameen Bank it was apparent that none of them had used their loans to buy the building. They had all inherited it from their father or some other family member.

The Mustard Oil and Rice Mill Factory! Inherited from his father

No one seemed able to make that step up from the rural villages around the market, to actually owning a building in the market. My idea is that a social business would build new buildings, or they could buy existing ones, and then offer to lease-to-own them to the borrowers of the Grameen Bank. For example someone who was currently operating a grocery store or a tailoring business could move that business to the bigger, more popular market.

A Medicine Shop, also inherited from his father

Some issues might be that in order to get the repayment instalments small enough for the borrowers to be able to afford the term would probably have to be at least 5 years, if not more. When these borrowers are used to dealing with 1 year loans, this might seem like an extra long loan, and a much greater chance that something could go wrong, like a death or a flood. Also once a villager has an established business and farmland in the village, she may not even want to move her business to the local market. Also having such a long payback might make it hard for the social business to grow fast enough to make a real impact.

It would also allow borrowers to expand on some businesses, there were some people that had rice mills and processed rice. If they had a stall in the market, they would be able to do this on a much larger scale and buy rice paddy from more farmers which they could then process and sell to wholesalers. The same would be true of grocery store and tailoring businesses.

Cheers,

Mike