For social ventures in Bahrain, a community is growing.

The Family Bank has planted the seeds of Bahrain’s social business movement by organizing the Bahrain Social Business Week—the first of its kind in the region—in partnership with the Economic Development Board, Ministry of Social Development, Tamkeen, the Bahrain Chamber of Commerce and Industry, and the Bahrain Development Bank.

The transformational four-day event, which took place from 16th – 19th September 2012, began with a panel featuring world-renowned Nobel Peace Prize Laureate and pioneer of the microfinance movement, Professor Muhammad Yunus; Hans Reitz, Founder of the Grameen Creative Lab; and Dr. Atef Elshabrawy, CEO of the Bahrain-based Family Bank—a social business in and of itself, and the world’s first Islamic microfinance institution.

Having had the privilege to hear Prof. Yunus speak before, I was no less inspired by his words last week. Among his oft-spoken phrases were: ‘Ask: are the banks people-worthy, rather than, are the people credit-worthy?' and ‘The seed of poverty is in the system, not the person.’

Prof. Yunus started Grameen Bank, a microfinance and community development bank in rural Bangladesh, almost 40 years ago after lending US$27 to a group of 42 families so that they could create small items for sale without the burdens of predatory lending (loan sharks). Since its inception, Grameen Bank has loaned over US$11.3 billion to 8.35 million borrowers, with an impressive repayment rate averaging 95 percent.

Taking the concept of empowerment one step further: the Bank is majority-owned by the rural poor whom it serves, with borrowers constituting 90 per cent of the bank’s shareholders—96 percent of whom are women. 

“Each time I see a problem, I start a business,” says Prof. Yunus. The Grameen portfolio of companies addresses issues ranging from malnutrition (in partnership with Danone Yogurt) to malaria prevention (in partnership with petrochemicals giant BASF). Other Grameen companies, and private sector-social business partnerships are listed on the Grameen website.

The Grameen model of social business can also be found in developed nations. For example, Danish company Specialisterne employs high-functioning individuals with Autism Spectrum Disorder (ASD) to provide IT and software services to the business sector. Discovering Hands in Germany leverages the sensory skills of visually impaired women, trains them to detect the early signs of breast cancer, and deploys them to hospitals and medical practices.

And that’s just the tip of the iceberg in terms of the vast potential social business holds for governments trying to further sustainable socio-economic development; corporates looking for a more effective alternative to philanthropic corporate social responsibility; and NGO’s in search of better ways to tackle social issues. 

Compassionate Capitalism

In Prof. Yunus's definition, a social business is a non-loss, non-dividend company designed to achieve a social objective within today’s highly regulated marketplace.

For those confused about the difference between social business and social enterprise: while both use entrepreneurial methods to address social problems, a social enterprise can be a non-profit or for-profit, driven by a social mission. Whereas, a social business—which would be considered a sub-set of social enterprise—should seek to generate a modest profit that is reinvested to expand the company’s reach and impact.

In this sense, a social business is sustainable on every level: in its direct environmental impact, its impact down the value chain, and in its financial independence.

Prof. Yunus and Hans Reitz, co-founder of Grameen Creative Lab, developed seven guiding principles for social business:

1. The business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society, not profit maximization.
2. It should be financially and economically sustainable.
3. Investors will receive back their investment amount only; no dividend is given beyond investment money.
4. When investment is paid back, the company’s profit is reinvested within the company for expansion and improvement.
5. The business is environmentally conscious.
6. The workforce will receive market wages with better working conditions.
7. Build it with joy.

In contrast to the theories of 1976 Nobel Laureate and prominent economist Milton Friedman, who argued that the social responsibility of business is essentially profit-maximization, Prof. Yunus’s seven principles paint a just and optimistic vision of the future.

The seven principles of social business also deviate from the approach of many conventional NGOs and donor organizations, which inadvertently end up making their beneficiaries aid-dependent rather than building sustainable solutions. 

Social business not only ‘teaches the man to fish,’ as the adage goes; it gives the man (or woman) ownership of the fishing industry and enables them to revolutionize it. 

Prof. Yunus’s confidence in Bahrain as being ‘well-placed to become a regional social business hub’ fills me with pride and joy, and is a harbinger of more collaborative and creative Arab economies that use entrepreneurial ways to dually solve social problems and generate economic growth.