Social Business - a new way of doing CSR and funding for NGOs

Prior to the 1960s, the main source of funding for social causes was charity. This changed around the 1960s with NGOs emerging as an instrument for funding social issues. NGOs formed in the ‘60s and ‘70s such as BRAC, Grameen in Bangladesh and Sarvodaya made a major contribution to social causes. For example, Sarvodaya revived shramadana as a tool for community empowerment, introduced pre-schools in rural areas and initiated a first best practice micro finance programme in the island. BRAC ensured girl’s child education in Bangladesh and contributed largely towards eradicating infant death from diarrhoea. Grameen introduced access to savings and credit facilities to the poor.

However, funding for NGOs has sharply reduced in present times. This is due to the current economic crisis in the West and also as a result of some countries been labelled as middle income countries in recent times. At present, there is a major shortfall in funding for NGOs in Sri Lanka. Major local NGO/CBO funders like Novib, Forut and Helvetas have withdrawn from the country.

Is funding still a necessity for poverty alleviation and social causes? One can question whether Sri Lanka still needs funding for social causes when it is a middle income nation. However, the reality is that even the richest nations in the World have poverty pockets and social causes which require assistance. Examples of some funding needs in Sri Lanka are for livelihood and housing support for war affected, basic infrastructure needs of plantation workers and prevention of environmental degradation.

Social businesses

In an environment of reduced international aid, social business is emerging as a new way of funding social causes. The key difference between a social business and a business is that investors do not seek a profit or a return on their investment and secondly that it is undertaken to solve burning social issues. One of the leading proponents of Social Business, Bangladesh Prof. Muhammad Yunus of Grameen fame, has now set up seven social business centres and six funds with partners to promote and fund social business.

Some of the most famous social businesses started by Grameen Group includes Grameen Danone where a top notch French milk food company Danone partners with Grameen to produce vitamin fortified yoghurt to reduce child malnutrition in Bangladesh whilst also providing jobs for Grameen borrowers (women). BASF Grameen works to reduce mosquito borne diseases by producing and marketing treated mosquito nets.

CSR differs from social business in several ways, CSR is mere charity while in social business the company gets a return on its investment and thereby charity is performed in the best possible way by running a business or assisting some on to do so. Private sector organisations, NGOs or individuals seeking further information on the subject can look up the website of Berendina Development Services on the following link www.berendina.org/social. Information on an upcoming workshop on the subject due to be held in December can be found on the website.

(The writer is a freelance consultant on micro finance and livelihoods and is Chairman of Berendina Development Services Ltd and Berendina Micro Finance Institute Ltd and holds a MBA from Florida State University, US).