Muhammad Yunus: Selling yogurt to rural Bangladeshis shows us the way forward

The real challenge of the economic downturn will be to create a strong new system that isn't dependent on a few major institutions in one main city, whose collapse could destroy the life of every person on the planet.

Today, I am going to share with you my ideas on what form the solution or new system might take. I believe it should be about a new type of business – I am calling it "social business" because it exists for the collective benefit of others. It is a second type of business that could operate in the same market as the existing profit-maximising businesses.

A social business is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss, non-dividend company. The investor can recoup his investment capital, but beyond that no profit is to be taken out as dividends by the investors. These profits remain with the company and are used to expand its outreach, to improve the quality of the product or service it provides, and to design methods to bring down the cost of the product or service.

I have experience that this model works. Grameen Bank has set up a joint social business with a French multinational company to bring nutritious fortified yogurt to the undernourished children of rural Bangladesh. The aim of this social business is to fill the nutritional gap in the diet of these children.

Danone invested $500,000, a sum that was to be refunded after several years, and all other revenue had to be reinvested in the project. The yogurt is sold at an affordable price, charging just enough to make the company self-sustaining. Currently, the project employs 50 to 60 women and provides income for approximately 1,600 local people. When children eat two cups of yogurt a week, in eight to nine months they get all the micro-nutrients needed to be healthy.

If the efficiency, competitiveness and dynamism of the business world was harnessed to deal with specific social problems, the world would be a much better place. Bilateral and multi-lateral donors interested in supporting economic development could easily create social businesses of this type.

Taken from a lecture by the Bangladeshi economist and Nobel Peace prize to mark the British Council's 75th anniversary