Concept of Social Businesses - Research Paper Example

? Social businesses Grade (22nd, March. Table of Contents Table of Content Definition of Concept of Social businesses 3 Concept of Social businesses 3 History of Social businesses 4 Usage of Social businesses 7 Number of users 8 India 9 America 9 Africa 10 Income 11 Growth 11 The future of social businesses 12 Bibliography 13Social businesses Definition of Concept of Social businesses Social businesses are businesses and organizations that are non-loss and still non-dividend, which are established to fulfill a certain social objective, in the context of a highly regulated market (Yunus, 7)1. The fundamental difference between Social businesses and other form of businesses is that while the other form of businesses are meant to earn profits and increase the dividends and the shareholders value (For-profit organizations), or not earn any profits at all (not-for profit organizations),Social businesses seek to generate modest profits, which are then used to improve the businesses’ reach to the targeted people or groups of people, to improve the products and services the businesses offer to the society, or to subsidize the course for achieving the social mission (Alter, 42). Concept of Social businesses The actual concept of a social business entails the establishment of an entity that has a social objective, rather than a financial objective, although it applies a business model to generate the necessary resources that will help it achieve the social objective. Nevertheless, Social businesses are different from the Non-profit businesses and the Not-for profit organizations in that, while the Non-profit business depend on outside funding to be able to accomplish their social missions and objective, the Social businesses operate under a self-financing mechanism, meant to generate moderate profits, which then helps the business to expand its social offerings and reach more of the recipients in the society (Bari, 116). Thus, a social business eliminates the burden of dependency of financiers, donors, charity, and well wishers, to place the responsibility of meeting certain designated social objectives on its shoulders, through generating moderate profits that enables it to achieve the social mission. Simply put therefore, the fundamental differentiating characteristic for Social businesses is that while other business and organizations with a social objective can be funded by philanthropy and government, Social businesses are self-sufficient and self-sustaining (Alter, 46)2. History of Social businesses Charity, philanthropy and social assistance are concepts that are as old as the history of human being. Man has always engaged in supporting the plight and the needs of the others, starting from the family level up to the highest levels of societal needs. This has been achieved through charity and donations, and mainly through the works of philanthropists. However, in 1974, the actual concept of Social businesses was born and actualized, through the idea and effort of Muhammad Yunus (Yunus, 44). In 1974, Bangladesh experienced a terrible famine, which has come to be referred as the Bangladesh famine of 1974. During this period, the citizens of this country suffered much, and needed a system that would revive them, and enable them to earn a descent living. Looking at the conditions of predatory lending that existed in this country where the lenders only extended loans to the borrowers under high interest rates making it difficult for the borrowers to prosper in their investments, Yunus developed the concept of lending to a group of poor villagers who could not afford to repay interests on loans, so they could start small businesses (Yunus, 27). The concept was operated with the borrowers repaying the loans granted to them at very low interest rates, which could then be loaned to more others. This was meant to create a system of self-sufficiency, where the lender could not depended on the donors and other funding from the government and organizations, to run the social businesses. Starting with a loan of $27, the lending of the Grameen Bank had grown to lend to a tune of USD 7.6 billion to the poor, by the close of 2008 (Yunus, 54). The concept of Social businesses then advanced starting from this point, and has been picked up by many other organizations to date. Following the success of Yunus’ concept of social business, the Aravind Eye Hospital was founded in 1976 in India, with the objective of granting eye surgeries and treatments at a very low fee, and at times, even offering it for free. The hospital has addressed the plight of over 32 million eye patients in a span of 36 years of its operation, having offered over 4 million of eye surgeries (Beck, 31). The hospital operates under the concept of social business, where patients are charged low fees, which are then used to expand the operation of the hospital and reach more needy patients, without a great emphasis on the financial benefit of the hospital. Similarly, the Ashoka foundation was born in 1981, with the aim of addressing the poverty levels in different countries of the world (Stanley, 25). The Ashoka foundation operates under the social business concept, through supporting social entrepreneurs, who in turn supports the citizen sector in different countries, and helps it to rise to a competitive level that is similar to the business sector (Doherty, 64)3. The organization has managed to extend its operations to 70 different countries of the world, offering support to over 2000 leading social entrepreneurs, who in turn support the citizenry by uplifting their lives through financially and ideally supporting them to establish enterprises that go a long way in eradicating poverty (Gidron and Yekeskel, 157). The trend of establishing social businesses continued throughout the 1990s, with social businesses such as The George Foundation being established in 1995, to offer several projects for humanitarian assistance such poverty alleviation, promoting health and championing for a clean environment. This was followed by the establishment of the Schwab Foundation for Social Entrepreneurship being established in 1998 (Gidron and Yekeskel, 160)4. However, the boom of the social businesses concept was experienced starting the year 2000, which saw many social businesses being established. Better World Books, a USA social enterprise venture was founded in the year 2000, as an online book seller, which then generate finances and channels them to humanitarian project organization, especially those that support literacy and education in the world (Beck, 33). It applies the social businesses concept, by operating as a for-profit organization, which then channels its profit to serve social objectives. The same trend was adapted by many other social organizations, which has seen many social enterprises being established by the close of the last decade, such as the Better the World a social enterprise that was established in 2009 to create an online platform for companies to achieve economic, social and environmental social objectives (Doherty, 67). Therefore, the history of social business has extended over several decades, with their establishment being on the rise in the recent past, and the trend is bound to continue, owing to various social needs that exist in the world, which needs to be addressed. Usage of Social businesses The usage of the Social businesses occurs based on the seven principles of social business, which were developed by Prof. Muhammad Yunus and Hans Reitz (Yunus, 17). According to these principles, a social business is only useful to the society, when it is self-sufficient, thus able to finance its operations and offer the social assistance it aims to offer to the society. Therefore, the first principle of the usage of social business is that it overcomes poverty or many other social impediments, which include inaccessibility to education, health facilities and services, technology and poor environmental conditions (Beck, 35). Through overcoming such impediments, the social business helps the society to advance and improve its standards, while overcoming the issues that threaten the welfare of the society. Therefore, the fundamental usage of social business is to achieve social objectives, at the expense of financial benefits. The second principle of social business usage is that it eliminates the financial burden from the government, the donors and the well wishers, through the application of an entrepreneurial model that generates finances for the business, which are used to sustain the offering of the social assistance to the society, as well as expanding and reaching more of the societal constituency (Hinchcliffe and Peter, 28)5. This way, the social business usage becomes financial generation and giving back to the society. The third principle of social business usage is the no-dividend principle, where the lender only get back the amount they have lend, without any dividend or interests, so that the earnings generated from the funds lend, can be used to achieve the social objectives and missions, while also expanding the operations of the social business and reaching more social constituencies. Further, the usage of social business extends to improvement of the products and services offered by the social business, such that the society continues to enjoy more benefits from the offerings of the social business (Jager, 22). If a social business only operates within the same cycle of product or service provision, without making any improvement, then, there is less of the social business usage by the society. Environmental consciousness is another principle of the social business operation, where the social business is deemed useful, when it benefits the society with its products and services offerings, while also preserving and protecting the environment (Price, 77). In circumstances where the offerings of the social business are conflicting with the environmental protection objectives, then, the usage of the social business is non-existent. A social business is useful, where the working conditions of the workers is favorable and he benefits optimal. Therefore, under circumstances where the social business realizes its objectives at the expense of the welfare of the workers, the usage of the social business is then lacking. Finally, a fundamental principle of the usage of social business is joy. Therefore, any social business is expected to promote joy in the course of meeting its objectives and mission to serve the society (Jager, 35)6. Number of users The number of users of social businesses can be discussed based on the operation of the social businesses in different regions of the world. While it may not be possible to give an accurate number of users of the social businesses in the world, focusing on their usage in different regions of the world gives significant information regarding the number of users of the social businesses. Therefore the number of users of social business will be discussed in the context of different regions of the world, namely Asia (India), America and Africa. India To start with, social business has a high number of users in India, with 41% of the whole Indian population, which was 1.22 billion by the close of 2012 being the number of people who live under the poverty level. Therefore, social businesses have gained great usage in India, with a total population of 0.5 billion people being users of the social businesses (Stanley, 393). The major social business that are in usage in India include the Ashoka Foundation, which has been actively involved in granting funds to leading Indian social entrepreneurs since 1982, so that they can in turn extend the social assistance to the Indian society (Pathak, n.p.)7. The Augmentation Network (GIAN) joined as a socially minded venture capital fund, to extend lending to the Indian entrepreneurs seeking for ways to alleviate poverty in 1997, followed by Aavishkaar, which joined the Indian social business community in 2001, as a for-profit organization, pursuing social objectives of alleviating poverty and improving the livelihoods of the Indian people (Neil, n.p.). America Special business in America and specifically the USA, serves a large percentage of the population. Over 50% of the USA population benefits from the usage of social business in one way or the other. The American social businesses operate to benefit both the domestic population and even the communities abroad, making it complex to determine the actual number of people who benefits from the American social businesses (Chilvers, n.p.). Nevertheless, there is no doubt that billions of people all over the world have largely benefited from the American social businesses, especially in the underdeveloped countries mostly in Africa and Asia. The Ashoka and Echoing Green are the major and largest social businesses in the USA, which support and create an enabling environment for the social entrepreneurs and other philanthropists to reach out to the needy people in the society, from all over the world. While the Ashoka foundation generally supports the already existing and running social businesses, the Echoing Green generally supports the emerging social businesses startups (Chilvers, n.p.). Africa The number of users of social businesses in Africa is the highest, with close to 0.9 billion people in the African continent benefiting from the activities of social businesses, both local and international (Alila, 27). The state of poverty in Africa is high, with an indication that 239 million people in the sub-Saharan Africa were hungry by the close of the year 2010 (Johnson, n.p.). Apart from hunger, education, health, infrastructure and environmental degradation are yet other major social issues that are in a deplorable condition in the African continent. By the year 2008, 47% of the population in the Sub-Saharan Africa was living under poverty conditions, with the population living on $1.25 a day or even less (Ogbor, 551)8. This is just a show that social businesses have greater usage in the African continent, more than they do in the rest. The efforts of the social business have been great in Africa, which has led to the improvement of the poverty and living conditions of most of the African population by the close of the decade ending 2010. The prospective are high that the situation will continue to improve in the future, courtesy of high usage of social business, philanthropy and government efforts. Income Social businesses all over the world do not generate high incomes, considering that they focus on the social objective, more than the financial objective. Nevertheless, the amount of income that has been spent by social businesses to meet their social objectives and missions are high, starting from when the concept of social businesses was generated. Such incomes that has been spent by the social businesses amounts to billions of US dollars, and the prospective for increase is high, since the boom for social businesses started in the year 2000, and it has been on the rise since then (Shapiro, 53). Growth The growth of social businesses has been immense, especially from the year 2000, when many social businesses were founded. Between the period 1972 and the year 2000, many social organizations were operating as charity and donor agencies, deriving their funding from the governments, donors and philanthropists, to discharge their social obligations (Underwood, 29)9. However, from the turn of the last decade, many social entities adopted the concept of social businesses, and started operating as for-profit organizations to obtain financial self-sufficiency, and thus finance their operations, to meet their objectives and accomplish their social mission of eradicating poverty and improving the welfare of the people. Such social business have registered exponential growth, with a good example in the USA, where 60% of the USA social business were created in the period after 2006, with a stunning 29% of the social businesses being established in 2011 (Thornley, n.p.). The future of social businesses Going by the trend registered starting from the year 2000 regarding the increase and growth in the number of social businesses, there is no doubt that the future growth of such enterprises is bound to be even higher (Volkmann, 37)10. Considering the fact that 60% of all social businesses in the USA were created after 2006, and considering that 29% of all the social businesses in the USA were established in 2011 (Thornley, n.p.), then, the future trend is expected to register a high increase in the number of social enterprises, and thus an increased usage of the social businesses and a rise in the number of social businesses users. Works Cited Alila, Patrick O, and Poul O. Pedersen. Negotiating Social Space: East African Microenterprises. Trenton, NJ [u.a.: Africa World Press, 2001. Print. Alter, Sutia K. Social Enterprise: A Typology of the Field Contextualized in Latin America. Washington, D.C: Inter-American Development Bank, 2003. Print. 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New Delhi: Allied Publishers, 2004. Print. Thornley, Ben. “Social Entrepreneurship”. Huff Post, 2012. http://www.huffingtonpost.com/ben-thornley/social-enterprise_b_2090144.html Underwood, Sarah, and Alan Murray. Social and Sustainable Enterprise: Changing the Nature of Business. Bingley, U.K: Emerald, 2012. Print. Volkmann, Christine K, Kim O. Tokarski, and Kati Ernst. Social Entrepreneurship and Social Business: An Introduction and Discussion with Case Studies. Wiesbaden: Gabler, 2012. Print. Yunus, Muhammad, and Karl Weber. Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs. New York: Public Affairs, 2010. Print. Read More