A new bank for a new era

MUHAMMAD YUNUS

The New Development Bank should not become a World Bank clone but focus instead on eradicating poverty, unemployment, and net carbon emissions

At their annual summit in Russia this week, BRICS (Brazil, Russia, India, China, South Africa) leaders will announce the world’s newest multilateral development bank — the New Development Bank (NDB), which will have U.S.$100 billion as initial capital to fund infrastructure and sustainable development projects both in their own countries as well as elsewhere.

  • Obviously, the NDB should not become another World Bank which finances the same types of projects in the same countries, using the same tools and mindset. At the same time, its purpose should not simply be to symbolise emerging countries’ desire to show off their financial and political power. The reason for its creation must be very substantive.

The NDB should be based on entirely new objectives, to be carried out with new strategies. It would be easy for the NDB to fall into the same track as the World Bank since it is in the same business. But the NDB must resist this from day one.

I propose three core objectives for the NDB which I feel are globally relevant. The primary objectives of the NDB should be to achieve three zeros by 2050: zero poverty, zero unemployment, and zero net carbon emissions. Every year the NDB could publish a report on the BRICS’ progress against these objectives.

Four strategies

The NDB could achieve these goals using four basic strategies. The first strategy would be to unleash the creative power and commitment of the new generation of youth. If the BRICS can mobilise the power of the youth, it will become easier to achieve the goals.

The second strategy would be to focus on technological innovations to solve human problems. Technology today is under the command of money-makers and war-makers. Socially committed drivers must take charge of technology. They are invisible today. Combining the power of the youth with that of technology will create an unshakeable force.

This brings us to the third strategy: building social businesses to mobilise their creative power to solve long-standing and complex social, economic, and environmental problems.

Social business is a new variety of business which delinks itself from a profit motive. This business is mission-driven, with non-dividend companies being exclusively devoted to solving human problems. After the company makes profit, the investor recoups his or her investment money but does not take any profit after that. Additional profits made are ploughed back into the business to expand and improve it.

Conventional businesses cannot solve social problems. Other actors such as the state and private charities may be unsustainable and inefficient. Social businesses are sustainable, efficient, replicable, and transferable.

This type of business has been created and promoted around the world with great results. I believe that the social business model should be the centrepiece of the NDB’s institutional structure and policy package. It is a model that can easily be replicated across a number of contexts.

Unemployment can be brought down to zero through social business initiatives. Unemployment is the product of a flawed and theoretical interpretation of human beings. Human beings are not job-seekers; they are entrepreneurs by birth. Entrepreneurship is in the DNA of human beings. They are go-getters and problem solvers. Social businesses can turn the unemployed into entrepreneurs. We are doing that in Bangladesh. NDB can adopt this as its prime programme.

Once the NDB creates a new window for financing and promoting social businesses, it will attract the young, old, men, women, individuals and organisations, with social business ideas. It can encourage each conventional business to undertake social businesses alongside their main business activities

The NDB could create country-level social business funds as joint ventures with local partners. It could create provincial-level social business funds in which it holds a minor equity with majority equity coming from local investors.

Ensuring financial services and healthcare to the poor can be done through creating social businesses.

Ownership by social businesses

While the NDB will undertake many types of infrastructure projects, it should give serious consideration to the ownership and maintenance of the same. We have now examples of major infrastructure being owned by money-makers. In the old days, this was the exclusive preserve of governments. Apart from government and commercial ownership, there is also ownership by social businesses. From the perspective of its users, ownership by social businesses will be much more satisfying than other two alternatives.

Finally, human rights and good governance should lie at the heart of the NDB’s operations.

At its inception, the NDB has the opportunity to create the right objectives and appropriate strategies for their implementation.

(Muhammad Yunus is a Nobel Peace Prize-winning economist and banker.)

http://www.thehindu.com/opinion/op-ed/annual-brics-summit-a-new-brics-bank-for-a-new-era/article7396012.ece

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