Usually when people talk about making money in the stock market they don´t think about how to generate passive income, instead they think about capital gains. However, today I want...
Muhammad Yunus is a remarkable man, he has made life better for millions and millions of poor people in his home country Bangladesh and throughout the world. He has coined the concept and expression of social business. In 2006 he won the Nobel Peace Prize for his work with the Grameen bank in Bangladesh which has the objective to help the poor escape from poverty. He keeps on working on building social businesses that makes a social impact in different ways. He has written books on the subject of social business, one of them being the one on the picture named “Building social business”. Yunus also travels around the world to hold lectures and educate in schools and in front of business executives about social business trying to encourage more people to get involved in it. What Muhammad Yunus is doing works, companies like Intel, Danone and Adidas are now to some extent involved in social business and new companies are added to the list at an increasing pace.
The birth of the Grameen bank idea
Like in most countries in the developing world there are a lot of poverty basically everywhere you go and Bangladesh is not different. Back in the seventies the situations were of course a lot worse and as Yunus describes it you could see poverty everywhere around you. He was a university teacher, teaching about the poverty problem at the time. But as with most things it doesn’t help a lot to just talk about the problem, what really helps is to do something about it and show by example. Yanus decided that he needed to do something to help the poor people in the neighborhood around the university.
The following part is taken directly from the book, Building social business.
“In trying to discover what I could do to help, I learned many things about the village Jobra, about the poor people who lived there and about their helplessness. I came face to face with the struggle of the poor to find the tiniest amounts of money needed to support their efforts to eke out a living. In particular, I was shocked to meet a women who had borrowed just 5 taka (7 cents US) from a moneylender and trader. She needed this small amount to buy bamboo, from which she crafted stools to sell. The interest rate on such loans was very high, 10 percent per WEEK. But still worse was the special condition imposed on the loan: She would have to sell all her products to the moneylender at a price he would determine.
That 5 taka loan transformed her into a virtual slave. No matter how hard she might work, she and her family could never escape from poverty.”
Yunus decided that he was going to look into the width of this moneylending practice that was going on in the village and started making a list of the people who had borrowed from the moneylenders. As it turned out, there were 42 people that together had borrowed the amount of about $27. $27 had basically made slaves out of 42 people, disgusting!
To free these people from their misery Yunus picked up his wallet and paid of their debt. The excitement that was created in the village by this small action was of course very touching. Yanus thought that if this little action can make so many people so happy, why not do more?
So he went to some different banks and spoke with senior banking officials but they all gave the same answer “The poor do not qualify to receive loans from the banks, they are not creditworthy”.
To solve this problem Yunus offered to become a guarantor for loans to the poor, after a lot of hesitations one bank agreed to accept that proposal. In the mid-seventies Yunus started giving out loans to poor people in the village signing the papers to guarantee the loans personally. He came up with a system to make sure the poor borrowers would find it easy to re-pay the loans, things like small weekly paybacks and letting the bank officer visit the villagers rather than the villagers visiting the bank. The concept worked, people paid back their loans on time, every time. Later Yunus wanted to expand the program but even though the loans were paid back in time the banks wouldn’t let him expand over his personal borrowing limit.
Finally Yunus decided to create a separate bank for the poor and with the support of the then-finance minister of Bangladesh Grameen Bank (Meaning village bank) was created, the world’s first bank to serve the poor.
The Grameen bank in Bangladesh today has over 8 million borrowers with 97% of them being women. Early in the banks history they decided to focus on lending to women as a protest against the conventional banks that were against lending to women even if they were high income earners. They did also see that women were more eager to create businesses and become income earners. (The same pattern is seen in Kenya where the micro finance bank that Better Globe funded is operating.)
“To me, poor people are like bonsai trees. When you plant the best seed from the tallest tree in a tiny flowerpot, you get a replica of the tallest tree, only inches tall. There is nothing wrong with the seed you planted; only the soil base that you gave it is inadequate. Poor people are bonsai people. There is nothing wrong with their seeds, but society never gave them the proper base to grow in. All it takes to get poor people out of poverty is for us to create an enabling environment for them. Once the poor people can unleash their energy and creativity, poverty will disappear very quickly.”
– Muhammad Yunus
What is a social business?
The concept of it is simple, to solve social problems with the power of a sustainable business. For it to work the business shall be/become profitable but the company share owners shall not be paid dividends, the profits shall be used to develop and expand the social business and the social impact it does. A social business can be operating in any field where it can make a social or environmental impact, fields like agriculture, renewable energy, employment services, education, forestry, health, livestock and many similar areas and sub areas of them. Any already profitable operating business can fund and start up a social business with the purpose to solve a social problem.
Social businesses that are operating well today
Grameen Danone is a joint venture between Grameen and the French dairy company Danone. The company was created in 2005 to reduce malnutrition among the children of Bangladesh. The idea was to create a yogurt containing all the micronutrients that are missing in the children’s ordinary diet: iron, zink, iodine, and so on. With just 2 cups a week for an 8-9 month period the child gets all the needed micronutrients and becomes a healthy and playful child. To make this available and affordable in the rural areas, tests, tweaks and a lot of smart people’s ideas were taken into play. They figured out that the yogurt could be sold at a little bit higher price in the cities to shave of a bit of the price in the poor villages. Also, instead putting the yogurt in stores like they do in the city, they let “Grameen ladies” sell the yogurt as a home based business where they get a part of the profits from the sales.
Grameen Shakti (gremeen Energy) has become one of the fastest growing solar energy companies in the world. It sells over 14,000 solar home systems per month to villagers in Bangladesh. Already in the end of 2010 it had over a half million solar systems in operation in the villages. It also had a half million improved cooking stoves and 50,000 bio-gas plants in operation.
Grameen Kalyan (Grameen wellbeing) was created to provide good quality, affordable healthcare for Grameen borrowers and other villagers. It operates fifty-four health clinics and offer a health insurance program that provides basic healthcare to families for the equivalent of $2 per year per family.
Grameen shikkha (Grameen Education) was created in 1997 to provide education for the children of Grameen bank borrowers, including preschool classes that were held at the bank centers. In 2003 it had expanded to include a scholarship program with scholarships for poor children. By 2009 the scholarship fund was big enough to provide scholarships to 2500 poor students, the fund continues to grow and finance more scholarships every year.
The Grameen Adidas quest that was set up to provide affordable shoes for the poor. Adidas committed to create a basic but high quality shoe that should be sold for 1€. A lot of contagious diseases are picked up from walking without shoes. Just by using shoes the rate of illness will decrease drastically.
Grameen Veolia Water with the quest to bring clean drinking water to the poor. Polluted water is one of the main reasons for disease and death amongst the poor. In Bangladesh alone there are over 35 million people suffering from arsenic-tainted water which sooner or later will result in cancer. Grameen Veolia water are currently brining arsenic free clean drinking water to hundreds of thousand poor people at affordable prices.
As you can see Muhammad Yunus is an amazing person and well deserved the Nobel Peace Prize. The projects that are mentioned above are all social businesses where he had a finger in the game. He has surely set an example for entrepreneurs who want to do something good in this world and not only focus on making more and more money. He has shown so many times how it´s done and encourages all of us to do something, even if it’s just about helping a few people. If people start to help, a lot of the social and environmental problems that we see today could be fixed rather quickly. It doesn´t take a lot to make a big change. If you can end misery for 42 people with just $27 imagine what could be done with just a small business that is self-sustaining and with the goal to eradicate poverty or whatever social problem out there.
According to the World Bank there were about 900 million people living below the lower poverty line of $1.90 per day in 2012, reduced from 1.99 billion in 1981. The little bit higher poverty line of $3.10 per day still has about 2.1 billion people living under it, about 30% of the world’s population still has to struggle every day just to survive. It´s really moving in the right direction but there is still a lot to do!
Another Nobel Peace Prize winner
In 2007 (the year after Muhammad Yunus) Al Gore together with IPCC (Intergovernmental panel on climate change) won the Nobel Peace Prize. “For their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change”
A small part of the IPPC report for that year:
“Changes in atmospheric concentrations of greenhouse gases (GHGs) and aerosols, land cover and solar radiation alter the energy balance of the climate system.
Global GHG emissions due to human activities have grown since pre-industrial times, with an increase of 70% between 1970 and 2004
Carbon dioxide (CO2) is the most important anthropogenic GHG. Its annual emissions grew by about 80% between 1970 and 2004. The long-term trend of declining CO2 emissions per unit of energy supplied reversed after 2000.
Global atmospheric concentrations of CO2, methane (CH4) and nitrous oxide (N2O) have increased markedly as a result of human activities since 1750 and now far exceed pre-industrial values determined from ice cores spanning many thousands of years.
Atmospheric concentrations of CO2 (379ppm) and CH4 (1774ppb) in 2005 exceed by far the natural range over the last 650,000 years. Global increases in CO2 concentrations are due primarily to fossil fuel use, with land-use change providing another significant but smaller contribution.
There is very high confidence that the net effect of human activities since 1750 has been one of warming.
Human influences have:
- very likely contributed to sea level rise during the latter half of the 20thcentury
- likely contributed to changes in wind patterns, affecting extra-tropical storm tracks and temperature patterns
- likelyincreased temperatures of extreme hot nights, cold nights and cold days
- more likely than notincreased risk of heat waves, area affected by drought since the 1970s and frequency of heavy precipitation events.”
Since Grameen bank started and later Yunus got the Nobel Prize a lot of companies in the social business/social enterprise sector has popped up and one of them is Better Globe.
Better globe has taken the ideas of Muhammad Yunus and IPCC/Al Gore and mixed them together and made it so that anyone in the world can be a part of the solution. In Better Globes donation package there are a little bit of everything. One part goes to planting fruit and hardwood trees, 2 for you and two for poor villages in Africa (Kenya). The fruits from the trees are sold and you get predefined returns from your trees but the trees in the villages will give fruit for the poor villagers for 30-40 year (the lifetime of the tree). Not only that but the trees absorb carbon dioxide and if you contribute with one donation package per month for a full year you have made you and your family CO2 neutral that year. It is estimated that the emissions of an average family in the west are 22-24 tons of CO2 per year. 12 donation packages will contribute to 48 trees being planted and 48 trees will in a lifetime absorb about 24 tons of CO2.
Not only that, but a part of the donation package goes to fund a micro credit bank just like Grameen bank. The bank has so far given loans to thousands of poor people so they can open or grow their own business and create jobs for others. The bank has rules that says you have to be a saver in the bank to borrow money and the bank has been given to the poor savers, so the poor owns the bank and decides together who can borrow and the rules for borrowing.
Another small part of the donations package goes to renovating and building schools so the children have a better environment for learning.
So if you don’t feel like doing a big thing and start a social business on your own there are still smaller things that all of us can do, and a lot of small things will make a huge difference.
Together we can make a huge difference and the least we all can do is to become CO2 neutral so that there can be a world worth living in for the generations to come.
Passive income together