DHAKA – The global financial crisis of recent years has exposed serious flaws in the world’s financial system. Credit markets that were originally created to provide businesses with capital were manipulated by a handful of individuals and companies to serve the selfish goal of earning unrealistically high returns through financial engineering. People in developed countries have suffered as a result – witness unprecedented levels of unemployment in countries like Spain and Greece – but so have countless millions in developing countries that played no part in causing the crisis.
In fact, the persistence of many of the world’s social problems reflects our collective misinterpretation of the idea of capitalism. As a result, businesses are run for the sole purpose of maximizing profit, and humans are conceived as one-dimensional money-making machines.
But there is a missing component in our conception of the economic marketplace: social business. A social business is a non-dividend-paying company whose entire purpose is to solve a particular social or environmental problem. Shareholders can recoup their initial investment over time, but nothing beyond that. All profits are plowed back into the company to increase its reach or to improve the product or service that it provides.
The company’s board, management, and employees are focused on addressing the problem that the company was established to solve, and it measures its success and impact accordingly. Profitability serves the company’s need to cover its costs and its desire to grow, not investors’ wish to make money. The entrepreneur and investor in a social business is motivated by the desire to do good rather than to do well.