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What a small place the world can be! In the course of her field research, Kerstin Humberg from Hamburg met Samantha Morshed, who, as some of you might know, writes for our partner blog “ClearlySo in Bangladesh”. Both of them are excited about social business, and they exchanged lots of thoughts and ideas. Some of those we would like to share with you, but before we start, some information about Kerstin and her research project:

After finishing secondary school, Kerstin completed a journalism education facilitated by the Catholic Journalism School in Munich. Before studying Economic Geography, Politics and Psychology in Hamburg she worked five months for the German Press Agency (dpa) and the Second German Television (ZDF) in South Africa. Since January 2006 she has been working for an international business consulting firm. Up to April 2011 she will be on educational leave from her job in order to focus on her Ph.D. in Economic Geography at Cologne University, which is where Muhammad Yunus comes in…

In the context of her research on “Poverty Reduction through Social Business – Lessons Learnt from Bangladesh” Kerstin is collaborating with the Yunus Centre in Dhaka. Actually, Kerstin just returned from a 5 months field research in Bangladesh, where she prepared two social business case studies  on “Grameen Danone Foods Ltd.” and “Grameen-Veolia Water Ltd.”. Her research is financed through a Cusanuswerk scholarship for doctoral studies.

Our interview with Kerstin will show the similarities and differences between the German and Bangladeshi understanding of social business. But in the first place it is an article about Kerstin and her exciting research project.

Why did you decide to write your doctoral thesis on “Poverty Reduction through Social Business - Lessons learnt from Bangladesh”?

Inspired by Muhammad Yunus’s book, Creating a World without Poverty - Social Business and the Future of Capitalism, I realized that a dissertation on social business would be a fascinating opportunity to combine my interest in development topics with practical business skills and knowledge. I got really excited about the potential opportunity of social business as a new market-based approach to reduce mass poverty in developing countries.

Could you briefly tell us something about your field research in general?

Sure. At the heart of my dissertation are two case studies; one is covering Grameen Danone Foods Ltd. (a social business trying to fight malnutrition among children in rural Bangladesh) and the other Grameen Veolia Water Ltd. (another Grameen social business addressing the high incidence of arsenic poising and other water born diseases in Bangladesh). The case studies’ purpose is to explore the ground realities of high-profile social business examples in order to generate lessons learnt for future social businesses working in similar contexts. In both cases, I am conducting a business model analysis as well as a livelihood outcome appraisal. While the business model analysis aims to identify major challenges in business operation and mitigation strategies, the livelihood outcome appraisal employs rapid appraisal techniques including focus group discussions with all relevant stakeholder groups (e.g., suppliers, residents, customers).

What were/are your experiences with social businesses in Bangladesh?

Bangladesh can be considered as a laboratory for social business. Yunus’ Grameen Bank and his joint ventures with multinational companies such as Danone, Veolia or BASF might be the most famous examples. However, alongside Yunus, a vast number of private social entrepreneurs is exploring new sustainable models in the fields of waste management, information technology, rural employment generation, tea production or education for street children. Check out the websites of Waste Concern, CellBazaar, Hathay Bunano, Kazi Tea or StreetWise.

Do they all have the same understanding of social business?

No. The general idea of finding sustainable business solutions to societal challenges is an appealing, but extremely broad concept. Everybody seems to have a slightly different understanding of the term. While Yunus is defining his joint ventures with multinational companies such as Danone or Veolia as “no loss, no dividend” businesses with a social purpose, the Bangladesh Rural Advancement Committee (BRAC) is running its own profitable “social enterprises”. BRAC is describing them as a “unique model of sustainable business that defines corporate social responsibility”. The biggest debate is however not around the wording, but around the distribution of profits: Where does the profit of a social business go, and what proportion (if any) should be distributed to investors?

Do you think social businesses can actually contribute to fighting poverty?

Yes, they can. My research indicates that they can contribute to poverty reduction in terms of the sustainable livelihoods approach. They can create access to economic opportunities, positively affect poor people’s economic, human or social capital and reduce their vulnerability to stresses and shocks. To give an example: Although the net income effect for Grameen Danone’s sales ladies (distributing yogurt in rural villages) might be limited to 50-100 Taka (i.e. 50-100 Euro Cent) per day, they benefit from having a regular source of income, new social capital related to their formal job, more freedom to move in public space, and an improved self-concept. During one of our focus group discussions one sales lady said: “I had never been to our neighbouring villages before. Now people know my name and invite me for lunch”. Another woman said: “If you contribute to your family’s income, your husband will love you”. However, as early social business examples are still struggling to achieve profitability, their reach and impact is limited so far.

In the course of your research, you met Muhammad Yunus, the often-called “Banker of the Poor”. What impression did he make on you?

Professor Yunus is an extremely charismatic man with impressive communication and marketing skills. At the same time he is very much down to earth. Whenever we sit together to discuss my research, he behaves like my former Economic Geography professor – asking challenging questions, giving advice, making jokes. But he always stays focused on his overall goal: Creating a world without poverty.

What is the difference between social business in Bangladesh and social business in Germany? Is there a difference at all?

In Germany the term social business is strongly linked to Yunus’ way of thinking and collaboration with multinational companies such as BASF, Otto or Adidas. This is however only one kind of social (business) entrepreneurship – which is why I would prefer to call it “Grameen social business”. In Bangladesh, Yunus’ concept seems to be less famous than in Germany. When I asked Yunus for the reason, he said: “It’s not surprising, because people in Bangladesh basically think knowledge always came from the west. They don’t pay attention to somebody who is doing crazy things next door”.

Let’s say I wanted to set up a social business, but had to choose to do this either in Germany or in Bangladesh. Which country would you recommend?

It depends on your social mission and networks. If you want to reduce mass poverty, you might want to go to Bangladesh. But make sure that you find local partners with market and customer insights. Otherwise it’s extremely challenging to create a low-cost driven social business model with a promising value proposition for the poor. If you want to combine your philanthropic motivation with a professional future in Germany, try to connect with social entrepreneurs or get in touch with institutions such as Ashoka.

Social businesses: a replacement or a supplement to charities?

A supplement; social business is a new way to overcome societal challenges in addition to existing business and charity approaches. Projects based on philanthropy will always depend on external support. Once the money is spent, it is gone. In a successful social business the money can be used much more effective in the long run. However, traditional charity has its own value and will always be needed for ultra poor that do not have a single cent to spend on a social business product or service, or in response to natural disasters, famines, etc.

What is your view on a social business concept that integrates social (environmental/ethical) and commercial objectives (like profit maximization) and therefore differs from Muhammad Yunus’s approach?

Any social business requires a profitable business model, but in a “Grameen social business” the social mission always comes first. With reference to other concepts, the question is to what extent profits are maximised within the boundaries of the social mission and how they are used. Who is benefiting how and why? As soon as economic value creation (e.g., shareholder value) starts to dominate, I would rather call the organisation a socially responsible business or a business practicing corporate social responsibility.

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