+ How is YSB structured?
The operating structure of Yunus Social Business Global Initiatives consists essentially of two units which work in partnership with local YSB country organisations:
Yunus Social Business Funds gGmbH is a charitable limited liability company registered in Frankfurt, Germany which can receive tax-deductible donations from EU, UK & USA. YSB Funds achieves its charitable goals by supporting and financing early-stage social businesses in developing and emerging economies with its philanthropic venture fund team. Local YSB teams provide early-stage social businesses with a package of investment readiness programs, long-term patient financing, and strategic support. Yunus Social Business GmbH is a for-profit limited liability company registered in Frankfurt, Germany which acts as a Social Business. YSB GmbH acts as an advisor to large and medium-sized public and private corporations to help them use their abilities for social good and strengthen their internal social entrepreneurship capabilities. Additionally, the organisation pursues a range of strategic ventures with the goal of promoting and supporting social business models, including; innovative finance tools and research projects. YSB GmbH pursues its activities under the brand name “Yunus Social Business Corporate Innovation”, with its dedicated Corporate Innovation team.
The Corporate Innovation teams and Philanthropic Venture Funds teams work entirely separately to achieve their goals. In order to comply with the legalities of each country we operate in, we hold different in-country entities to manage our operations and loan disbursement.
+ How is Yunus Social Business connected to Prof. Muhammad Yunus’ work?
Prof Muhammad Yunus is YSB’s Co-Founder and Chairman. As Yunus Social Business - Global Initiatives, we are part of the family of Yunus / Grameen organisations. You can see all the operations under the Yunus name (including the Grameen Bank and Grameen social businesses) at https://www.muhammadyunus.org.
+ Which countries do we operate in?
With our Philanthropic Venture Funds, we are actively financing entrepreneurs through local teams in Uganda, Kenya, Brazil, Colombia and India. Our Global office is based in Germany (Berlin & Frankfurt). We have network teams that manage our current portfolio in Haiti, The Balkans and Tunisia.
Corporate Innovation support social business ventures in almost any region in the world, with dedicated teams based in Europe, Brazil and India and a large network of collaborators all around the world that work with us on a project basis. See our contact page to get in touch with a local office.
+ What is our definition of social business?
A social business is a company 100% focused on a social problem. It provides either essential products and services like healthcare, safe water or clean energy or higher incomes for the poor. A social business combines the mission of a charity with the business acumen of a for-profit business. Unlike a charity, it generates profit and aims to be financially self-sustaining, while the profits are reinvested in strengthening the social mission. Social businesses allow the poor the freedom to choose and supply themselves the services and products they want rather than being the recipients of aid. It is a revolutionary way of seeing business, not as a tool to drive profits, but a mechanism to efficiently achieve social change.
Philanthropic Venture Funds
+ How do our Philanthropic Venture Funds support social businesses?
They support social businesses in two ways:
Patient Finance, which targets early-stage social businesses in the missing middle with investment sizes between $100k and $500k USD. Growth Support and technical assistance (TA) programs, pre and post-investment.
The patient finance we provide is geared to match the needs of early-stage social businesses and to fill the gaps identified in the market. We provide long-term debt at rates that are made just enough below market rate so as to be accessible to these entrepreneurs. Our loans are made on flexible repayment terms that can be rescheduled in cases of drought, political instability, etc. We also offer better options for collateral that are accessible to budding entrepreneurs who may not have extensive assets available.
We also offer all our portfolio entrepreneurs ongoing growth support free of charge, playing a pivotal role in preparing them for scale. Our goal is to help them maximise their social impact while reaching financial sustainability. This includes access to our mentor and expert networks to help them overcome specific business challenges and connecting them to pre-vetted service providers. Our programs include both formal cohorts and informal one-on-one coaching and aim to improve business performance across impact management, financial planning and monitoring, fundraising, management team, HR and governance, sourcing, production and operations, product, marketing and sales.
+ Why do we finance early-stage businesses?
We occupy a gap in the market called the “missing middle", where businesses are too mature for microfinance but not mature enough for commercial loans. There are far fewer funds that want to support earlier stage companies as the risk of failure is very high, due diligence costs are too high, the investment amounts are small, and the support they require is much larger. At YSB, we do labour intensive work to ensure the market around impact investing is built up and hence by contributing to the ecosystem as the pipeline creator. We bring social businesses from a start-up phase to a scalable phase by focusing on building the management, governance, and critical processes and systems (for example Finance, Governance, KPI’s, HR development).
+ Why do we need philanthropic donations?
There is a major gap in financing for social businesses. Early-stage social businesses hold massive potential for uplifting their communities and focus on the needs of the very poor. This is not always a profitable field. YSB occupies a vital space in the continuum of support for social entrepreneurs, by supporting visionary, early-stage entrepreneurs who are not yet ready for larger, more commercial investment.
In this space, there is a need for philanthropic capital to give early-stage social entrepreneurs in emerging markets the support they need. In doing so, our programmes are building the market for impact investors and larger institutions in the later stages. An early-stage fund focussed on poverty reduction, where the margins are much smaller, cannot be run effectively in a way that covers costs. Therefore, philanthropy has a role where it can be catalytic, building a market and taking risks that others don't want to take.
+ What is the “Missing Middle”
We know that appropriate financing options are essential for early-stage social businesses to reach their full potential on the market. However, very few options exist for businesses in the missing middle who are in need of financing of $100k - 500k USD. In 2017 YSB conducted our own research with the support of the Robert Bosch Foundation and found that the top issue expressed by entrepreneurs in emerging markets when it came to financing was the ticket size, which indicates that the limited availability of funding in this range is a serious inhibitor to overall enterprise and market growth.
A major reason for the scarcity at this level is the limited number of credit products that are suited to serve this segment. Available loan products become scarce and expensive, and banks have incentives to only serve the larger, more established and therefore more lucrative clients. As a result, loans from banks in these markets often come with exorbitant rates and untenable collateral requirements, making credit lines effectively out of reach for early-stage social businesses.
When narrowed down to impact-focused investors in emerging markets, the average deal size is still over $2.7m USD. Even at the lowest end, many of these funds are moving towards deal sizes exceeding $1m USD, and seek out businesses which are already relatively profitable. As most social businesses in this stage are seeking lower ticket sizes and are only nearing profitability, these businesses often fall outside of the remit of most funds and are declined for investment.
+ How does YSB provide non-financial support?
Our growth support programmes provide social entrepreneurs with much-needed guidance and access to resources by drawing upon the extensive international business experience of our teams and extended networks. Before financing social businesses, we work intensively with pre-selected entrepreneurs to build a stronger business case. In selected countries this means we offer structured Investment Readiness Programmes in selected countries (Colombia & Uganda) Post-investment, we see our role as active investors and provide long-term business development support in partnership with other key players in the sector. Our programs include both formal cohorts and informal one-on-one coaching and aim to improve business performance across seven key areas of Financial planning and monitoring, Fundraising, Management team and HR, Governance, Sourcing, production and operations, Product marketing and sales, Social impact management. Read our report with BCG, which further outlines these seven areas.
+ Which key sectors is YSB interested in?
At YSB, our goal is to reduce poverty using the power of social business. Hence, we finance social businesses that either increase income and improve livelihoods for the poor, or that provide essential services to the poor and disadvantaged population, such as access to clean water, energy, healthcare services, or education. As a consequence, most of our social businesses are active in the following sectors: Agriculture, Livelihood generation, Water & Sanitation, Clean Energy, Environment, Education. However we do not exclude sectors, such as the service sector, and we are open to all businesses which meet our criteria.
+ What are our funding criteria?
We look are impact-oriented companies that conduct their business with the mission to maximise their positive impact on society and the environment. They tailor their business in a way to maximize the social impact on the target group/beneficiaries they are focusing on – e.g. fighting malnutrition in children, making basic healthcare services available to the bottom 20% income group, generating jobs for disadvantaged groups in order to move them above the poverty line etc. Our high-level criteria for selecting and investing into social businesses are the following: Entrepreneur / Team; Social & Environmental Impact; Business Model and Game-changing potential. We have sub-criteria for each element, which we verify through our online application process, interviews and different stages in the investment process. A condition is that these organisations are or have the goal to become, profitable.
+ What does YSB mean by social impact and how does YSB measure social impact?
Social businesses are built with the sole purpose to create an impact by solving a social problem. Therefore, impact measurement is essential to our work and to improve the social impact of our investees. Prior to investing in every business, we agree on a reporting schedule which includes financial as well as social KPIs (key performance indicators). Reporting is submitted by the Social Businesses on a monthly or quarterly basis. As social KPI’s usually only track output rather than outcome, we selectively complement impact assessment with surveys or representative studies/interviews with beneficiaries. For more information on our impact measurements framework please see our joint study with BCG https://www.yunussb.com/s/BCG-Strengthening-Social-Bus.pdf.
+ What is our Local Partner Model?
Our approach has also been honed through the development of our Local Partner model. We believe there is no better way to support social businesses than by teaming up with exceptional local business leaders, that have deep knowledge and networks in the countries we operate. True social success needs local commitment, expertise and accountability. Our partners do not only commit local philanthropic capital, which we match with international donations, but also serve as experienced advisors and door-openers for our future portfolio companies. Additionally, they provide their local infrastructures - such as office space and connections to pro bono professional services - which helps lower our local infrastructure costs.
Our funds in India, Brazil and Kenya are supported by a number of business leaders who serve as our local partners, and we are currently in the process of identifying local partners in Uganda and Colombia. We have raised significant local philanthropic capital through the local partner model, with even more value created through time, expertise, and connections.
+ Do we provide larger ticket sizes?
Our own funding usually does not exceed $500,000. However, as our social businesses grow, we want to help them access larger pools of capital. For this we work with a number of impact first investors who make follow-on investments in our existing portfolio companies as e.g. the Global Social Impact Fund in East Africa.
+ What are the funding criteria?
To be eligible for investment, we are looking for social businesses with a focus on poverty in Brazil, India, Colombia, Uganda or Kenya:
Social Impact : Creating and maximizing social impact should be the primary purpose of your social business. We are looking for a big idea translated into a tangible solution that has the potential to improve millions of lives.
Game Changing Potential : An easily scalable business with clear application across regions and countries that’s highly innovative or unique.
Business Model & Financial Sustainability : A business at growth stage that is showing profitability with two to three years of track record generating growing revenues. You should have a product or prototype which has already been tested, and existing customer(s) and/or beneficiaries. The business should be EBITDA positive (or very close to).
Management & Team : You have experienced entrepreneurs with drive and natural leadership skills and a team with the talent and drive to propel your social business forwards.
+ How long does it take to receive funds from Yunus Social Business?
The investment process can take between 8 weeks and 12 weeks depending on the maturity of your investment proposal. Before financing, each social business undergoes a detailed, fact-based due diligence process:
Business Plan Assessment/ Review And Due Diligence: In an interactive process, the Investment Committee screens each proposed business, starting with an interview with the entrepreneur. The committee then works with country teams to make recommendations to entrepreneurs to advance their business plan. Financing Decision: The Investment Committee will take the final decision on financial support to the social business following completion of the due diligence process. The decision is based on an evaluation of the entrepreneur and team, social impact, financing sustainability and risk profile, replicability and scalability and maturity of each individual business. Formal Due Diligence: The YSB team conducts a formal legal and financial due diligence on the social business to evaluate the financial health, regulatory compliance and legal standing. This is conducted either in-house or with specialist partners. Negotiation Of Terms And Contracting YSB and the entrepreneur enter into pre-agreed binding contracts defining exact terms and conditions of the financing package. In agreement with the entrepreneur and their management team, a monthly, quarterly and annual reporting schedule is set. This includes financial as well as social key performance indicators (KPIs) most relevant to the specific social business. We rely on output indicators as proxies for assessing the actual impact of the business. Reporting also includes operational milestones, to allow close tracking of the social business.
+ Do we charge interest on your loans?
We charge a below-market-rate interest on our loans as we aim to cover our operating costs in the countries we work in. As well as patient, inexpensive financing we also provide hands-on growth support for the social businesses in our portfolio.
+ Where is the money spent?
100% of your donation goes to support pre-vetted social businesses. This includes financial support to unlock additional growth as well as hands-on advice through our local teams on topics like financial management, impact measurement and governance. The funding for our general operating expenses funding is provided by institutional donors. Furthermore, part of our operating expenses are covered increasingly through the interest earned on concessionary loans we are providing to social businesses.
+ How can you donate if I live in Germany?
If you want to donate from Germany, we kindly request you to use the following bank details
Recipient: Yunus Social Business Funds gGmbH Bank: GLS Gemeinschaftsbank eG (Frankfurt am Main) BIC/SWIFT: GENODEM1GLS IBAN: DE22 4306 0967 6018 6345 00 Reference: YSB Donation
For donations above €200, we can offer a donation receipt in Germany. This allows you to claim your tax returns in accordance with German Tax Law. Below €200 a donation receipt is not required for tax-deductibility.
+ How can you donate if I live in the EU, outside Germany?
We have provisions as a member of the Transnational Giving Europe (TGE) network that allows us to collect donations through organisations in all partner countries. This ensures substantial donors can receive a receipt from these organisations that allows them to claim their tax return in that respective country. Please inquire with your personal financial advisor or the local tax authorities in order to determine the tax relief you are entitled to according to the latest local legislation.
Please reach out to the partnership team at firstname.lastname@example.org so we can assist you.
+ How can you donate if I live in the USA?
We have provisions to collect donations from America through a 501(c)(3) registered and IRS approved partner organisation to allow American donors to claim a tax return in accordance with American tax law. Please inquire with your personal financial advisor or the local tax authorities in order to determine the tax relief you are entitled to according to the latest local legislation.
See our page for US donations here: https://www.yunussb.com/donate-usa
+ How can you donate if I live in any other country?
If you live in any other country outside the EU or USA we kindly request you to reach out to the partnerships team email@example.com so we can assist you further in supporting the organisation. Please inquire with your personal financial advisor or the local tax authorities in order to determine the tax relief you are entitled to according to the latest local legislation.