A. Mannan :
The concept of Microcredit (MC) has around the world gained a momentum. To some it sprouted forth economic resilience at a great speed. Contrarily, some did not hesitate to dub it as ‘rise and fall of the microcredit.’ We are, however, yet to analyze it in numerical terms and quantum as to which segment outweighs the other. Be that as it may, we tend to concentrate on the far reaching offshoots by M.C envisioned of late i.e. Social Business Economics (SBE). Knowing it at length and breadth of ‘no risk no gain’ we must not play loose shots. We have got to filter and calibrate historical background of industrial revolution of the earlier days, capital formation, rise of entrepreneurship and individual incentives, equity and capital market development and a host of other relevant issues.
To abridge, however, the whole gamut of the three broad based areas of the title of this write-up having been so vast and widespread as well as their extrapolated ramifications will be comprehensively a tough job. Necessity knows no bound. I have, therefore, kept the spread within a limited bound.
As a matter of fact, neither I support the idea of the forecasted microcredit model of Nobel Laureate Prof. Dr. Mohammad Yunus having undergone a ‘rise and fall’ as explained and envisioned by consultant M. Bateman and Prof. Jnraj Dobrila nor I reckon with abetted appreciation of the rise of M.C itself. In the early 90’s I organized some short and random surveys in Nawabgonj U.Z. of the Dhaka District and to my utter surprise outcome revelations were as follows:-
i. Interest rate hovered around 30% p.a.
ii. Loan recovery had been almost around 97/98%
iii. M.C. was mostly used as relending financing rather than directly for a productive sector for example such financing was literally refinancing scheme by the primary borrowers of M.C. to women in distress i.e. for marriage arrangements, health care, reconstruction of houses and so on. The sub-borrowers repay this refinanced loan usually on time upon loading 50% more of the loan amount to the primary borrowers upon harvesting of crops, as if all back to square!
Social Business Economics: “Social Business as an answer to crisis of Capitalization”- writes Nobel Laureate Prof. Dr. Mohammad Yunus. He further writes quote Business world was given a very clear mandate by the economic theory. Their only mandate was to make money, leaving the people’s problem to be addressed by governments and charities. A businessman is supposed to be driven by self-interest………………. .
Human beings are not money making robots. They are multi-dimensional beings with both selfishness and selflessness………….. . My point is if human being has selflessness in his DNA, why should it not be allowed in the business world. Business world should be an unbiased playground for both selfishness and selflessness. Economics text book should introduce two types of businesses to the students, self-interest driven business and selflessness-driven business. Let the young people decide whether they would like a cocktail of both businesses mixing them in various proportions, or enjoy each one separately unquote.
It is needless to elaborate and synthesize to advocate only the social side of the business motto lest we forget the continued and consistent development of business and economic growth in our progressive mindset.
Selfishness and selflessness run parallel like rail lines. The state of parallelism is essential.
Human beings eversince primordial days have perhaps been driven more by individual incentives rather than otherwise, for example in community projects and small industrial projects of early era, the ultimate aim having been at least individual aggrandizement. To think anything less than that, the world would have stayed put within the primordial era’s horizon.
An American story says that a grandchild wrote to his grandpa as to what does constitute ‘profits’. Reply came to the kid that a valley had no water source. The women force used to climb up a small hill to collect water of a mini lake up the hill and in this process women work force used to spend much of their day’s time having been left with little time to do other works. A young bright man under-took a survey and dug a narrow drain down the hill up to a suitable mini waterhold like low area wherefrom the villagers enjoyed collecting water. The youngman started collecting small revenue for water and the villagers engaged themselves otherwise during more spare time they now enjoyed. Revenue collection is profit accrued to the youngman whereas benefit accrued to the villagers was tantamount to profit for themselves.
The process of making profit even today’s world goes on and on in different modalities and forms in view of the changing geo-politics economic scenarios but in a broader spectrum the process is on and is likely to prevail. Prof. Dr. Maohammad Yunus has advocated compromise scenarios for both selfishness and selflessness, though common phenomenon is that one cannot amalgamate water and oil as perfect combination. Rotary International enjoys a theme that says Rotary renders service to the society and community and amongst its mottoes ‘service above self’ has been ranked atop. Thus, Rotary’s theme makes good sense, more mundane and realistic. Social Business Economics will hold good much better should it embrace ‘Service above self’ as one of its prime mottoes rather than selflessness approach in business.
Capital Formation: Of the factors of production the most scarce is ‘Capital’. It has been so in the past, so is now and will remain so in the future. GDP flourishes upon its growth which in turn much depends upon primarily, inter alien, the availability of capital/investment. In a world of ours scarcity of capital, save a few, has extended to every hook and corner of the globe. An equilibrium is much needed between scarcity and availability of capital.
An old adage goes on to spell that a human being is born with two working hands to produce more than he/she can consume resulting into a surplus economy. In practice it is far from it, for capital scarcity, poverty mainly due to less education and less training and less jobs opportunity dominate everywhere. Thus higher GDP growth, enlarged productivity, and better benefits remain an eloping shadow. Scarcity of capital is likely to dwarf the progress, modernization, expansion and rehabilitation of an existing enterprise.
Individual Incentives: The concept here is a little away from that of an enterprise/entrepreneur,- an enterprise gains substantially from higher productivity of the employees who upon adequate individual incentives work hard and achieve higher productivity. It is interrelated.
Of the various modalities worth awarding/recognizing, the following are a few to cite as unelaborated examples: Piece rate system, promotions, productivity bonus, incentive bonus, special increment, special recognition and so on and so forth.
Social economy and capital economy may be spelt in a nutshell, though it has its shortcomings in many areas: (jokes apart),— An accused after having been awarded a death penalty was asked as to whatmake of boilers he would like to undergo i.e. social economy made or capital economy manufactured boilers. Reply came opting for social economy one. When asked why did he chose the social economy boiler and reply came sharply, for social-economy boiler would remain dysfunctional.
Conclusion: Variations amongst people to people, country to country, culture to culture, people’s perception to perception in many avenues/areas are so wide and rampant, assorted and unquantifiable that it is almost impossible to generalize the concept of social business economics. Taking into account of the interests of all sides of the multiple-divide we can, under the impossible circumstances, draw a line of best fit in statistical theory by the following, inter alia, options for we need more capital formation, we need more social approaches in business, we do need also higher productively as well as progressive and consistent GDP growth. Imposition of more direct tax system instead of indirect tax; allowing more tax exemption/holidays on profits should investment be made of it with an apportionment of profits by the enterprise for new areas for growth of industries/agricultures/services; more tax exemption for C.S.R through a reform program to account for eligibility; providing jobs based on reasonable competency to the issues of the existing employees in order to create family loyalty(Japan used to follow this in the past), encouraging nonprofit social organizations like Rotary, Lions Clubs etc., if necessary through sharing in their charity projects undertaken by these social organizations particularly for projects in healthcare, education and job training etc.
This article has been written conceptualizing in mind that ‘easier said than done’. The process is never ending; it needs regular and constant exploration as well as exploitation thereof.
(A. Mannan, FCMA (UK), FCMA, CGMA is former President, South Asian Federation of Accountants (SAFA) E-mail : [email protected])
