Social business and the limits to growth

Donnie Maclurcan

This article was published in Living Ethics: issue 82 summer 2010

Microcredit has been shown to be an effective way to help the world’s poor create sustainable small business opportunities. But Donnie Maclurcan asks whether the concept helps us reach long-term sustainability outcomes.

Earlier this year I attended a presentation by Dr Muhammad Yunus, Nobel Laureate for his pioneering work in microcredit. Titled Abolishing Poverty - the Human Rights Priority, the central messages in Dr Yunus’ presentation, to an enthusiastic and highly receptive Sydney crowd of more than 500, were simple.

He believes access to credit is a human right; that we can end poverty by channelling the market forces of capitalism; and that we can ‘solve’ all the world’s problems if only private enterprise would be more widely accompanied by ‘social business’ - a term he uses to describe commercial activity whereby businesses, whose primary goal is to help ‘the poor’, reinvest their entire profits back into their work, rather than into shareholder pockets. Holistically speaking, I am not convinced.

Dr Yunus’ track record is as incredible as his ideals are worthy. His present-day work began in 1974 when he loaned $US27 to a Bangladeshi woman who made bamboo furniture. Viewed as a ‘repayment risk’, traditional banks were not interested in considering such individuals for the provision of small loans.

This experience was to prove life-changing for Dr Yunus. Nine years later he established the Grameen Bank that has since disbursed US$6.6 billion in micro-loans averaging US$130 to ‘the poor’. Bypassing the traditional method of a customer needing to demonstrate collateral before a loan can be administered, the Grameen bank uses a customised approach to solidarity lending whereby each drawer must be in a five-person group that merely serves to encourage repayment. The results have been stunning. The bank boasts a repayment rate of 98.35 per cent and 97 per cent of its members are women. As Dr Yunus noted with a smile in his Sydney presentation, the global financial crisis showed who you can really bank on when it comes to repayments.

The Grameen model has now been replicated in over 100 countries, with proposals on the table for its extension to poverty-stricken cities in the ‘developed world’ such as Glasgow, in the UK.

There is no doubting that Dr Yunus’ approach continues to challenge attitudes of business in both the ‘developed’ and ‘developing’ world. But does it challenge these views enough to ensure our longer-term sustainability as a species?

Thinking ahead, perhaps Dr Yunus’ approach sets us up to hit a fundamental ceiling in which inequity-creating businesses continue to thrive, removing hope for ‘poverty alleviation’ and sustainable futures, because their image in the community is largely defined by publicly-embraced subsidiary social businesses.

For me, Dr Yunus’ presentation reinforced frustration with what I see as ultimately atomistic arguments made by ‘poverty champions’ like Jeffrey Sachs, Bono and Hugh Evans. When the floor opened up to questions I asked how, in a world with serious biophysical limits, can any growth-based financial system - including microcredit - ever be truly sustainable?

Dr Yunus replied that human creativity is an amazing thing and that I should not be so grim.

I sat down. Given the chance, I would have responded by saying that his answer is the kind men have been giving ever since anthropogenic global warming became accepted by mainstream audiences and the news on this front is not getting any better. At its heart, I believe Dr Yunus’ answer falls somewhat into the common habit of using the term ‘creativity’ as a pseudonym for ‘technological innovation’. In this sense, there is mounting evidence that such faith is misplaced; that the idea of de-coupling economic growth from environmental degradation at the speed required to avoid catastrophic effects from climate change is totally unrealistic.

All said and done, I remain critically hopeful. I think Dr Yunus is inspiring and well-intentioned, and I like his concept of social business - similar to what we, in Australia, call not-for-profit social entrepreneurship.

In fact, I like his concept so much that I propose we be brave enough to entertain the thought of a not-for-profit world in which every business is a social business. From large multinationals to small cafes, what could we create if the ‘developed world’ unhooked itself from its addiction to quantitative growth and the ‘developing world’ was free from ideological and physical coercion to adopt unsustainable ‘development models’? As Dr Yunus is quick to note, when you take the individual profit motive out of it, anything becomes truly possible.