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Social Business = Social Mission + Financial Sustainability

Social Business is 1) "social", driven by social good, rather than profit maximization, & 2) a "business", aims for financial sustainability (& perhaps growth) based on income generation, rather than being reliant on continuous donations/taxation.

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Social Business vs. Nonprofits vs. Traditional Business

It’s financial sustainability based on income that differentiates Social Business from traditional NGO & Government programs.

And it’s the prioritization of social good above profits that separates Social Business from capitalist business as usual.


Social Business Financing

In addition to Purpose & Income, Financing is another area that needs to be carefully considered in forming Social Businesses. Just as government, business, nonprofits, and Social Business are best suited to serving different needs; within the high-level Social Business framework, variation (including financing options) is useful for adapting to specific contexts.


Interest-Free Loans

Grameen’s Social Business Model, where investors lend money and are paid back their principal (but no dividend/interest/etc.), is a great way to multiply the impact of philanthropic dollars whether they be from individuals, foundations, corporations, or governments, as this enables any profits to be 100% reinvested into sustaining and growing the Social Business. A related model is also being used effectively by Kiva (consumer generated finance-end is based on no-interest loans, though intermediary microfinance institutions that distribute this capital to beneficiaries are generally charging significant interest).


Increasing Social Impact by Expanding Financing Pool

However, there are also situations where providing some level of dividends to investors can be beneficial for Social Businesses and furthering their social impact, such as increasing the pool of potential financing needed to experiment & scale (Social Investment Funds, Vendor/Customer Loans), and bringing previously excluded groups to the table to fairly recognize and motivate them for their contributions to the mission (Employee Ownership/ Profit Sharing, Community Partnerships). For example, Acumen Fund flexibly provides capital in a variety of ways including debt with interest, equity, profit-linked returns, royalties, guarantees, etc., and uses the returns to invest in other organizations (nonprofits, small & large companies) serving the “base of the pyramid”. Of course when money comes into play, it’s important to institutionalize values, processes, & culture that keep the mission sacred—such as founding/principle-based leadership, coop boards, and purpose-based organizational structures such as B-Corporations that legally commit to transparently pursuing & meeting various social & environmental standards.


KEY TAKEAWAY: To maximize the Social Impact of Social Business, we should consider financing mechanisms beyond interest-free loans (which is currently a required constraint as defined in Principle #3 of Grameen Creative Lab's Social Business Principles)Various currently submitted ideas for this challenge would potentially benefit from this approach, and 3 previous inspirations (linked to on the right) have also raised possibilities around innovating the model of Social Business as defined for this challenge.

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DeletedUser

Hello all, I have been reading lot on money and finance, where does it come from and how its utilized and interest rates and profits when it comes to any business as well as social business. But what I believe is, that we should think about how to generate wealth, I do not believe that huge financial investments always have a larger impact on any social or environmental cause.
With wealth generation, what I am trying to share here is, we should be looking into primary production. Production from resources, natural and human resources.
For example, food production. One seed cost almost nothing, but that seed produces 1000s of seeds, that plant wont need money to grow, all it needs is soil, water, nutrition and little care. And all this we can manage without financial investments. All we need is a good management of resources (I personally believe that the only reason we are here discussing about social business is because in the last couple of centuries, we have only learned how to Mismanage our resources.)
I also believe that every such communities are basically a farming community, they still earn their living by growing something and selling it to markets. So they do not have to start from scratch, all they need is a brief introduction to sustainable farming practices and smart use of natural waste. Introducing high nutrition plant varieties can show results in improving their health in less then 2 months. And other varieties of food and grains can generate income all year around, regardless of climate conditions and rain. The most important thing is to find the right kind of plant species for that specific region. And there are species of plants and grains which are drouth resistance, flood resistance, pest resistance, frost resistance, temperature resistance, climate resistance... you name it we have it.

http://en.wikipedia.org/wiki/Svalbard_Global_Seed_Vault

Seed Funding is a term used commonly, and it does make lot of sense. All we need to generate wealth is a healthy seed, and then nature does the rest.
Social Business is a holistic concept of exchanging goods and services, and I strongly feel that all social business should have holistic approach considering nature as our biggest asset.
Please feel free to comment and share your views!
Thank you all for participating in Social Business.

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DeletedUser

Adding more to it which I read recently!

A Resource Based Economy (RBE) is a sustainable social design that advocates intelligent management of the earth’s resources, humane application of technology and automation, and equitable practice of the scientific method, in order to create abundance and enable holistic love-based evolution of the human race.

RBE is an antidote for the corrupt profit-oriented society we live in today. It focuses single-mindedly on applying the scientific method for the good of all mankind. All understandings are based on logic, not opinion, and are constantly updated to present-day knowledge. All social systems such as energy, architecture, transport, education, research, recreation, etc., are derived from a thorough scientific, environmental and social understanding of all phenomena. This methodology is derived from the critical observation that people don’t need money to survive, rather they need the resources bought with money in order to live a healthy, happy and civilized life. RBE can create abundance and eradicate the concept of scarcity altogether – by declaring all the earth’s resources as common heritage of all the earth’s people, removing borders and false divisions, and using technology to abolish repetitive human labour. In RBE, there is neither any need, nor any room for scarcity, corruption, poverty, hunger, conflict, war, crime, prisons, riots, or any other fear-based evil we see in society today. Instead of offering temporary solutions for these symptoms (social evils), RBE treats the very root (scarcity and fear). Through sensible and ethical use of science and technology, RBE can deliver a life of abundance for each of the 7 billion people that inhabit the world, for multitudes of generations still to come, and for the ecosystem they call home.

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