Social business is a company set up to solve a specific problem to the benefit of poor or disadvantaged members of society.
PIC: Nobel laureate Muhammad Yunus in Kampala. (Credit: Denis Dibele)
Uganda’s large businesses should also run social business ventures on the side to reduce unemployment and slow down growing income inequality, which Nobel laureate Muhammad Yunus has likened to a ticking time bomb.
Social business is a company set up to solve a specific problem to the benefit of poor or disadvantaged members of society. Unlike a charity, social businesses generate profit and aim to be financially self-sustaining.
While speaking in Kampala at a forum organised by the Nile Competitive Initiative (NCI), a public private think tank that advises President Yoweri Museveni, Yunus noted that unless poverty and income inequality are nipped in the bud, they will wreak political and economic havoc.
Yunus said that conventional banks cannot transform society since they exist for the rich, which therefore calls for the need for micro and nano-credit institutions that cater for the poor, who have no capital but have brilliant ideas.
He pointed out that the Grameen Bank, which is he started in 1976 after the deadly Bangladesh famine of 1974, was established to overcome loan sharks by giving small loans to the impoverished without requiring collateral.
Yunus started the bank with a small loan of $27 (about sh98,829 - current rate) to a group of 42 families as start-up money so that they could make items for sale and escape the clutches of poverty. Several years later, the bank, which specialises in micro credit, has grown to over 2,568 branches around the world.
“We did not wait for government, because it was busy with bigger issues. We started doing things individually, but the effect was eventually large. If a business can solve the problems of five people, it could be replicated more efficiently for more people elsewhere,” he said.
The Gramean bank founder noted that large firms should start venture capital funds to provide startup capital for firms, especially by the large mass of unemployed youth that solve social challenges profitably.
He noted that the venture funds should vet good business proposals and then recoup the capital but not profit of successful social business ventures. Yunus said the capital can then be reinvested into fresh ventures to recreate a rotating fund.
“We should not go and complain to government to solve the problems in society, we must do it ourselves. We need self-contained social businesses. Businesses should create no dividend, social business on the side."
A 2017 United Nations Economic Commission for Africa (UNECA) report titled Urbanisation and industrialisation for Africa’s transformation noted that income inequality is on the rise in Uganda, but is better than in Kenya and Rwanda.
Relatedly, the Uganda National Household Survey 2016/17 showed that the national poverty level had increased from 19.7% in the financial year 2012/13 to 21.4% in 2016/2017. This meant that eight million Ugandans cannot afford three meals a day.
The think tank that is headed by Stephen Kaboyo, a financial markets expert, and includes businessmen Pradip Karia, Andrew Rugasira, Odrek Rwabwogo, Ben Mugasha of Bemuga Logistics and Kamuli district chairman Thomas Kategere was set up in April 2017 to improve Uganda's competitiveness and attract investment.
Rwabwogo, the director Tomosi Group of companies, noted that Uganda is not lacking in skilled human resource or resources for economic success, but is simply held up by the wrong mindset.
He pointed out that adopting a similar mentality that saw the rise of Bangladesh after the country was written off as a failure; the mentality of getting things done with little resources will enable Uganda to prosper.
Bemuga Forwarders’ Mugasha noted that there is a lot of potential to earn top dollar in the oil and gas sector for Ugandans that are ready. He noted that there is room for internationally accredited trainers to train over 2,000 skilled technicians such as rig operators and over 20,000 drivers.