Since I launched the idea of microcredit in 1976, I have created many other businesses to help poor people help themselves. These experiences were summed up in the concept of social business, problem-solving companies without taking personal dividends beyond the investment money -- a new form of capitalism designed to solve social problem around the world.
Application of social business concept in overcoming unemployment can produce a sustainable solution.
In Bangladesh we are addressing the problem of unemployment among the second generation of Grameen Bank borrowers. We are trying to turn the unemployed into entrepreneurs through equity investment from social business funds created for this purpose. In Bangla we call them NobinUdyokta -- i.e. New Entrepreneurs.
The need for the New Entrepreneurs initiative grew out of the frustration of millions of young people, including the educated youth from Grameen families, who'd completed their college training through education loans from Grameen Bank -- but were unable to find jobs. We tried giving them loans to set up businesses. It did not take off.
A new approach was clearly needed. We moved away from loan to equity. We redesigned it in the form of equity financing from social business funds. We created these funds and developed a methodology to do it in large numbers, and in a sustainable and replicable way. We created a platform where New Entrepreneurs could present their business ideas to potential investors (the funds). Yunus Centre launched a platform called Design Lab in January, 2013 to bring the New Entrepreneurs and the funds face to face. Encouraged by its success, we decided to hold the lab every month. During the last 15 months we have held 14 such labs.
The New Entrepreneurs initiative offers an innovative, replicable model for tackling the problem of youth unemployment that promises to be more direct and effective than traditional approaches. Rather than creating jobs as the uncertain by-product of a corporate project or a government program, it helps young people create their own jobs by launching businesses with equity funding from investors. The investors are also providing additional support in form of advice, training, and guidance.
In a social business (as explained in my books Creating a World Without Poverty and Building Social Business), the investor owns the company, but he doesn't claim profits produced by the company as in traditional capitalism. Instead, he receives dividend payments from company revenues until the total received equals the amount originally invested. Then he can sell the shares at the market value. But since this is his social business he cannot, and does not wish to, take more than face value. Any additional value that he receives he has to invest in another social business. In the New Entrepreneurs initiative we simplified this sale of shares. The fund sells the shares to the New Entrepreneurs at face value and charges an additional fixed fee of 20 percent on top of that. We call this additional amount the share transfer fee; it serves to recompense the fund for taking on the risk of the business as well as for the support services it provided. None of this fee goes to any individual as a personal profit.
Next phase of our work is to deepen and expand the New Entrepreneur initiative by creating Social Business Villages. Each Social Business Village will be an autonomous, economically viable entity based on the lowest local government unit in Bangladesh, a cluster of about 20 villages known as a union. Each Social Business Village will have a Social Business Fund. This fund will receive money from individuals, corporations, foundations, and government. Purpose of the fund will be to provide equity to the unemployed, including New Entrepreneurs, and invest in all types of social businesses. Ultimate objective would be to create a village which will be free from unemployment and social problems.
Replicating the social business equity investments with unemployed youth around the world can help solve the age-old problem of unemployment, not just in the poor countries but in any country and can turn job-seekers into job creators. Entrepreneurship allows everyone to be an active citizen, saving people from state dependency or reliance on charity.