A Review of Creating a World Without Poverty


Creating a World Without Poverty - Social Business and the Future of Capitalism, by Muhammad Yunus - PublicAffairs; Reprint edition 2009.

This is one of the most inspiring and optimistic books about poverty that you will ever read. A true capitalist and humanitarian, Muhammad Yunus first gained fame as the founder of Grameen Bank, which makes small business loans to the poor of Bangladesh--loans as small as $50. These micro loans (Yunus was the first to develop the concept on a large scale) enable families to become entrepreneurs and/or expand their businesses. The repayment rate is 98.6%, which would be the envy of many big banks around the world. With the creation of Grameen, he has lifted millions of people out of extreme poverty. That story is told in his book, Banker to the Poor.

The important and often overlooked part of the story is that Grameen Bank, though created specifically to improve the lives of the poor, makes a profit. That's important to the thinking that went into Yunus' dozens of other businesses and is the basis for his book Creating a World Without Poverty. In it he introduces the world to his concept of the "social business."

A social business is one that has a specific social purpose as its primary goal. As opposed to a charitable organization, though, it must make a profit, because that is what makes it able to continue serving its purpose indefinitely.

As an example, lets suppose there are some places on the continent of Africa where residents could double their incomes if they had bicycles--which enable them to bring more fruits or other products to market each day, or to markets that are further away. A charity might donate bicycles, but as Yunus points out, charitable giving is fickle at best, going up and down with the economies of the countries that donors come from. It isn't reliable, and it is often inefficient as well. It requires the constant search for new money, which may or may not be found.

A better solution is for someone who cares to start a social business in the form of a bicycle factory. The goal would be to make exactly the kinds of bikes that the people need, and at a price they can afford. They might even be sold on a payment plan and so be financed entirely out of the additional profits a buyer makes from being able to transport more goods to market. Making a profit allows the company to exist forever, serving the needs of the poor. The profits first are used to repay investors. This is crucial in Yunus' scheme, because even though the investors get no profit, by getting repaid they can endlessly recycle there capital into new social businesses--a kind of virtuous circle of ever increasing good works. After that, profits are used to expand if necessary, or prices are lowered on the products, leaving just enough profit to maintain a margin of safety for the business.

Now, this may all sound very idealistic, but it far beyond being just an optimistic dream. Yunus has himself created a number of these social businesses. It is particularly fascinating to read his detailed account of developing a yogurt business in Bangladesh (partnering with the makers of Dannon Yogurt), in order to address the nutritional deficiencies of poor children and to provide jobs for hundreds of women who sell the yogurt.

It is a powerful book, and once you read it you'll understand why Mohammad Yunus won the Nobel Peace Prize.

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