Face To Face: Muhammad Yunus talks to Liam Black

• Miscellaneous
• 26th May 2009
• YC

Professor Muhammed Yunus has made his name as one of the most successful and innovative social entrepreneurs in the world.

In 2006, he was awarded the Nobel Peace Prize for setting up the Grameen Bank, which has given small loans to thousands of people in Bangladesh, helping them to start up their own businesses and lift themselves out of poverty. Now, he is transforming the world of big business by joining forces with multi-national dairy firm, Danone, and water services company, Veolia, to bring nutritional yoghurt and drinking water to the masses. Here, he talks to one of England's own social success, Liam Black, about the future of social business, the battle with fat cats and what he would do with a magic wand.

Liam Black

I'm a social entrepreneur and have been running a busy restaurant chain called Fifteen, which was set up by one of our top chefs, Jamie Oliver. We take on young homeless people and those coming out of prison and turn them into chefs. We invest in their business ideas when they leave us. Before that, I ran a charity called the Furniture Resource Centre in Liverpool, which we turned into a social business, so I knew all about you. We grew from a small, very traditional charity, but moved into selling products and services to enable poor people to furnish their homes. I have just given up the Fifteen role and set up a business which banks on the same idea as you. People say they love the social business idea, but really it's crap, isn't it? Capitalism's not going to change. Danone could afford to do it. There are people out there who believe in it though. The challenge you have is how to turn people onto it. I believe in it.

Muhammed Yunus
At least we have one.

LB
The future of the world depends on it, doesn't it?
But my questions are more specific. What if I ran a social business and I go to commercial businessmen, but they say 'that's great Liam, but how are you going to prove a social return on my money?'. It's a big debate in the UK. What's your thinking on how to prove it?

MY
Once you accept this idea, it all follows. For a profit maximising company, the bottom line is how much money you make. But when you run a social business, it's about impact. Ours was about impact on malnutrition in children. But you need to have measurement and we needed to understand the measurement of nutrition. If you have 100 units and you reduce it by one unit, it's still a reduction. Measuring your success is different between a social business and other businesses. It is purpose driven and objective driven, not money driven. Measurement is a process and you have to build up to these things, but it can be done. If there's a problem, it has to be measured. If we can't measure it, we can't do anything about it.

LB
I'm a great believer in social reporting and accounting and we (Fifteen) have just published our report. I have found a lot of people in the social enterprise sector reluctant to engage with reports and provide them. It's where the cynicism from capitalism comes from.

MY
This leads us to talk about the social stock market. It has to be measured to gradually define the improvement.

LB
You have a very exciting power and vision, but social businesses can be very small and vulnerable.

MY
But they are the starting point. For me it was easy. Danone put on a meeting and said here's a million dollars. For me, it was a question of how seriously they took this idea. If it's not taken seriously, how are those flood gates going to open? Luckily, I know how to do it now. But you have to think, 'we are a nutritional dairy company, we can provide nutrition, or we are a water company, we can bring water to the people'. They make a lot of money from their products and now they can do something good with it.

LB
Is it all about the innate goodness of people?

MY
The point I make is it's everybody's heart, not just special people. Even the most greedy businessmen who make every pound for themselves feel that way. But there is only one road and the only thing we do is make money or charity. The companies making money are the big lorries speeding up the road and overtaking the small farmers pulling their carts. Now that I have built a new road, people say to me 'here I am'. Social business will come with an unexpected amount of enthusiasm. People like doing things for other people and they want to do it, so why deprive them of that enjoyment. Life is about enjoyment and I am depending on that. These who take the first step are the ones at the front line.

LB
I have set up a company called Wavelength, where we are bringing together people from the sector. I enjoy that we all have this desire to do good, but we also have the desire to compete. What if I went to Nestle and asked them to compete in social businesses in Bangladesh; take these women you give loans to and pay them a little bit more?

MY
Yes, there will be competition, but if Nestle is competing with Danone, and they are on the same side of the road, it is fine. In a social business we are purpose driven, not money driven. If I am trying to bring water to these people and they are trying to bring water to these people, then we are friends. We reach more people and we can provide even cheaper water.

LB
But what if we have a payroll to meet every month? I have seen it in the social businesses I have been involved in.

MY
What is the competition? If I am a charity and I go to a donor and don't get the money, I close the shop, but in social business, you never close the shop. In the charity world, I go to the donor, spend the money and then go back to the donor. In social business, the money is recycled. There are thousands of people that need help. Why should microcredit compete if we are not interested in profit?

LB
But we need the profit to innovate, don't we?

MY
If we are recovering the cost, we can repeat endlessly. This is a great year because we have reached another 20,000 people. They are safe and they don't have to drink nasty water. On the financial side, we made a five per cent surplus, but the owners can't take dividends, so no one can take that away.

LB
Innovation is driven by making money. Do you think the good heart of a chief executive of the social business is enough to drive innovation and create good products and services?

MY
My assumption is making profit is a driving force to push us into lots of things, like expansion. Similarly, doing good is a strong driving force. Can I make it easier? Do people have to walk a mile to get their water? Could I bring it closer than half a mile? Can I do it near their home?

LB
But you also have staff saying 'I want a pay rise'.

MY
That is exactly like any business. If it's a qualified person and we need him, we will give him a raise. He is bringing enough revenue to pay for himself. It doesn't come from my pocket. You show me that I can keep you and raise your salary. You work hard to make it work.

LB
Not everyone will be lucky enough to win a Nobel Peace Prize though. They might not be that successful. How easy is to going to be for them to succeed?

MY
You're hitting me below the belt now! The Wright Brothers designed the first plane. They had to work hard to make sure it worked, but once it flew, everyone said 'oh, it's easy. All you've got to do is this'. The first one is always the most difficult.

LB
Your book got a hostile review in the Financial Times. The reviewer said that funding a social enterprise proposition relies on people giving up a return on thier money, on the kindness of strangers. If the heart of the Grameen proposition is that a woman needs money to unleash her entrepreneurial drive and make money for herself, then it's proposing a social business model that retains the profit. Isn't that a contradiction?

MY
It's different profit. It's about her profit. She is making a profit to lift herself out of poverty and make a better life for herself and her family. When I brought this yoghurt to the children I didn't say 'we must get your parents to pay for it'. I said 'this is a delicious yoghurt. Are you going to pay for it?'. It's our conspiracy that whether they enjoy this lovely yoghurt or not, I give them some medicine. I didn't create the Grameen Bank or Grameen Danone Foods to make money, I did it for the good of others. But why does it work? Is it because Danone wants to make money out of it? No, there's no profit to be made.

LM
Well, I'm talking to the master here.

If there is a recession, what impact will it have on this?

MY
Some adjustment will have to take place. If we are looking for someone who makes a lot of money, they will be concerned about their money. They might wait until the next year to invest in something. Everyone will be cautious, but that will be everywhere in charity, business and social business. It will not mean everything closes down. The businessmen might say 'I could lose millions on the stock market, so I might as well put my money in a social business'. At least they get back what they put in.

LB
It's dependent on someone with enough money waiting to invest in social business. Will it be that that part of social business will always be dependent on capitalism?

MY
What's wrong with that? This is supposed to be the means to an end. The real picture is here we make money and this is our money to do good for the world. That will stay in tact. People say 'what am I going to do with these millions?'. Look at Bill Gates.

LB
We are sat in Kensington, one of the richest regions of London, if not Europe. People worry about what to do with their money. They don't want to pay tax and some don't want it to just go their children. Some don't want to just write a cheque for charity. Is social business good because people can see their money recycled?

MY
Of course. Their children can take that money away anytime if they need to. But until then, that money could make a difference. One little change can make an explosion.

LB
But people get suspicious if you're not making money. Even Corporate Social Responsibility started with good intentions, but then the businessman took over.

MY
It's true. Companies say they are doing good, when really, they could be contributing to the problem. It's things like investing in concerts for the environment, with all the stars arriving in private jets. It's just PR. It's not the same as a social business.

Book signingLB

You have become very well known in the west, the poster boy of microfinance. Did you deliberately say 'I am going to become a spokesman for this'?

MY
People were attacking me all the time. They said I was only helping marginally poor people and not the bottom line of the poor. But we have more than 100,000 beggars in our group. That's the most interesting part because we see amazing things happen to these people from giving them just $10. Eighty per cent of poor families have benefited from microcredit, but people always misinterpret it.

LB
I think the answer to all that is here's our social report and you can read it for yourself.

MY
If that's what they're saying, then maybe.

LB
What are the plans for the future of Grameen Danone Foods and do you welcome competition?

MY
If Nestle came along and tried to use me, I'd say yes, and I would use them. If I can set it up and had their money to spend, then why not? What's wrong with that?

LB
What I like about your approach is a hard headed pragmatism.

MY
I said 'are the cups in the company biodegradable' and they said 'no'. I said 'this has to be biodegradable because we are a social business. We don't want plastic cups'. They found corn-starch in China and it was very exciting. I needed edible cups. A poor person is paying for this. Why make them pay for something that has no use to them? I asked why they couldn't design something like that? The cup itself should be nutritional. They said it was not possible, but why not? It could be possible. We have a huge research department. I told them to find it in six months and now they are scurrying around to find these edible cups. They are selling this yoghurt all over the world in the same cups. If they can come up with edible cups, they will soon be used.

LB
That mutuality and level of intellectual property creation - if that does not happen, is there a future for it?

MY
As long as you are a profit maximising business, your thinking process is about how to make money. Imagine you came to a business where you don't have to make money, you just do good. Your thinking changes completely. A lot of things become relevant and irrelevant. If you are not making money, the packaging becomes irrelevant for example. You do not need to promote it. You use that money saved. You just think about delivering the real thing. People think that if they are not making money, they will not be interested in investing. It's a common question I am asked. But they are not giving me money, they get it back.

LB
Bangladesh, from what I know, is very poor and the public sector does not exist. We have to be focused to be innovative. In Europe and America, is there a role for social business?

MY
If I am poor and I lived here, then wouldn't a social business help me? In America, what about health insurance, which is a good sector to start with. We understand what it is, not being covered by health insurance and living in the US. I don't have to tell you. You can do it because you don't want to make money from it. Millions of people in the US don't have a bank account because banks don't see them as big enough. When they get their cheque from work, they don't put it in a bank, they have to get it cashed. There's a series of all these cheque-clearing shops and they rip them off. Loans are another one. Your car breaks down and you need it to get to work. For some, the only option is going to loan sharks, who charge you an extra 50 or 60 per cent. These are all uses of social business You have to look at the problems around you and be innovative.

LB
If it works with yoghurt, why not try it with other products?

MY
These are multi-national companies. Let them speak out. Taking a shed load of money home every year is not enough for some. But they have to want to do it.

LB
If you had a magic wand and there was one thing you could do, what would it be?

MY
To have social business recognised as a businesses entity and define what are the norms and standards. As soon as social business becomes established, the fake people will get involved. They think secretly it will bring them money. The future needs to be innovative. Ask students to enter competitions to design packaging. Everytime I speak to students I see overwhelming numbers who want to set up social businesses.

LB
Hopefully, you have helped bring some sanity to the world.

MY
I hope so.