Muhammad Yunus, the Bangladeshi social entrepreneur and recipient of the 2006 Nobel Peace Prize for his pioneering work in microcredit got a message one day from the office of Franck Riboud. Riboud was the chairman and CEO of the Danone Group, a French food conglomerate whose American brand is most familiar to us, I suspect, for the yogurt in our grocery stores and refrigerators.
Riboud had heard of Yunus’ work in Bangladesh creating a banking system that made small loans available to people full of ideas, but too poor to qualify for traditional bank loans to fund them. It began in 1976 when Yunus lent $27 from his own pocket to 42 women in the Bangladeshi village of Jobra. By 2007, the Grameen or “village” Bank had issued over $6 billion to more than 7 million borrowers, with more than 94% of Grameen loans going to women.[i]
Grameen Bank put into action Yunus’ belief that, very small loans could make a disproportionate difference to a poor person. Contrary to the practices of our Western system which is built on the assumption that the more you have, the more you get, Yunus believed, that the poorest of the poor, given the chance, would not only take the opportunity to improve their lives and escape from poverty, but that they would be at least as reliable as other loan recipients in repaying their loans. And he was right. To date, less than 1% of Grameen loans have defaulted, and the system of microcredit has exploded across the globe, even extending to a number of branches in New York City.
It was October 2005 when Riboud reached out to Yunus who tells of the meeting and the handshake that led to the creation of one of the first social businesses. Unlike most of our businesses in the west, organized around the primary goal of making money for its investors, social businesses are created to meet a social goal; they are built around a mission. They pay no dividends. They sell products at prices that make the business self-sustaining. Owners get back their investment over time, but no profits, which instead stay in the business to finance expansion, create new products, and do more good. [ii]