What is social business?

Social Business is a non loss, non dividend business. The main purpose of the business is not to
maximize profit like the profit seeking business. But it does not necessarily mean that it will not
earn any profit. It earns some profit but investors do not receive any dividend from the business
rather than the profit is reinvested in business. The main purpose of the business is to be engaged
in social welfare and all the profit is spent on the social welfare. This business believes in the
principle that The value of one individual is less than the value of the society. The concept of
social business was introduced first in Bangladesh through Yunus Centre. Social business can be
done by establishing church, mosque, hospital, education institution etc.

Some principles of social business:

These were developed by Professor Muhammad Yunus and Hans Reitz
Business objective will be to overcome poverty, or one or more problems (such as
education, health, technology access, and environment) which threaten people and
society; not profit maximization.
Financial and economic sustainability
Investors get back their investment amount only. No dividend is given beyond investment
money
When investment amount is paid back, company profit stays with the company for
expansion and improvement
Gender sensitive and environmentally conscious
Workforce gets market wage with better working conditions

How Social Business is different from profit seeking business?

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The main purpose of profit seeking Business is to maximize profit but the main purpose of social
business is to ensure social good. In a profit for profit business all the profit is taken over by the
investors. For profit firms also invest on social good but the reason behind is to maximize profit
in the long run. In the Global Capitalism main concentration is given on maximizing wealth
which can result in environmental degradation but in social business, policy is set in such a way
that the environmental safety is ensured. Prof. Wahiduddin Mahmud said that in market
based economy we are like voter where we vote about what goods and services do we want
and at what quantity but this is not a one person one vote policy. The person who has more
wealth to spend on gets more goods. So the poor people may not get anything where social
business ensures that poor people can also satisfy their needs.

Problems of social business:

Prof. Wahiduddin Mahmud pointed out some problems that social business faces.
Informational problems: Profit oriented businesses know the actual situation of market
such as, they know about the demand of product, appropriate price of it. But social
business cant sell its product according to the market price because its goal is not to
maximize profit.
It is not easy to protect a good from being purchased by rich people because goods in
social business are sold at a lower price to the poor people and rich people want to
purchase the good at that price from the social business.
As investors can not withdraw profit and profit maximization is not the ultimate goal,
they are not motivated to invest in this business.
Investors are not motivated to take any risk in social business.
Need to do more study about how to achieve ultimate social goal without making any
loss.

CSR & Social business:

According to Prof. Wahiduddin Mahmud, CSR can be a part of social business in which
businessman invests some parts of his profit on social welfare. But it is not mandatory for firms
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to invest in CSR each and every year in a constant way but social business is always focused on
the social welfare and all the profit goes to the social goal.

Social business Vs not-for-profit business:

Unlike a non-profit, a Social Business is not dependent on donations or on private or public
grants to survive and to operate, because, as any other business, it is self-sustainable.
Furthermore, unlike a non-profit, where funds are spent only once on the field, funds in a Social
Business are invested to increase and improve the business' operations on the field on an
indefinite basis.

Is NSU a social business institution?

NSU meet all the criteria of social business discussed above. The ultimate goal of it is not to
maximize profit but to produce qualified graduates. But in order to run its regular activity like
purchasing resources, providing salary to faculties etc, it needs to earn some profit otherwise it
will not be able to survive in the long run. The profit of NSU is not withdrawn by management
rather than it is reinvested. So it can be said that NSU is a social business institution.

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