Social Innovation- A New Way of Thinking About a Problem

On the cover photo, you’ll see a Bolekaja—a Yoruba term that literally means "Come down, let’s fight!"

Sometime last year, I took a tour of Lagos Island, an iconic part of Lagos State, Nigeria. We rode around in a Bolekaja—essentially a truck converted into a bus, with benches inside for passengers. Back in the 1950s, this was a common mode of transportation in southwestern Nigeria.

Seeing this Bolekaja serves as a reminder of how far innovation has brought us. And in today’s article, we’re diving into social innovation and the lessons we can learn from one of the greatest social innovation tales—microfinance.

What is Social Innovation?

At their core, the businesses shaping our world today are built on new ways of thinking about problems .This novelty could be in the technology deployed, the business model, or even streamlined processes that ultimately drive efficiency and create impact.

Social innovation is not much different, but the focus is on social impact. James Phills and co put it succinctly in their Stanford Social Innovation Review article from 2008. They define social innovation as:

“A novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals” — James A. Phills, Jr., Kriss Deiglmeier & Dale T. Miller (2008)

With social innovation, the focus is on a social problem and the benefit it primarily has to society at large. If you're thinking about building a social enterprise or innovating in the social sector, keep this definition in mind as a guiding light.

Now, let’s delve into one of the most interesting social innovation tales and some key lessons we can learn from it.

The Birth of Microfinance: A Social Innovation Tale

Let’s cast our minds back to the 1970s. The world was in an interesting place—think oil shocks,?rising energy prices and economic stagnation. Our story here is set in southeastern Bangladesh.

In 1971, Bangladesh had just gained independence from Pakistan. The economy was in a bad place, with extreme levels of poverty, political instability, food shortages, weak financial institutions, low industrialisation, and a struggling agricultural sector.

This story seems very bleak—so let me introduce our protagonist, Muhammad Yunus.

Yunus was an economist who was deeply disturbed by the perpetual cycle of poverty he observed. At the time, traditional banks in Bangladesh refused to lend money to the poor, viewing them as too risky.

Yunus sought to change this reality by providing small, collateral-free loans to marginalised individuals especially women to help them start income-generating activities.

He recognised something fundamental: financial inclusion and access to capital are key to unlocking economic potential and breaking the cycle of poverty.

The First Experiment

His first experiment in microcredit took place in Jobra, a small village in the Chittagong district of southeastern Bangladesh. Yunus was a professor of economics at Chittagong University where he was able to observe the harsh realities of the people in Jobra.

For this experiment, he lent?$27 of his own money to 42 poor women who made bamboo stools. With just this small loan, they were able to buy materials at a fair price, sell their products at a profit, and break free from exploitative middlemen.

Seeing the impact, Yunus realised that this model could scale.

A few years later, Grameen Bank was born in partnership with the Bangladeshi government—as the first formal Microfinance bank.

Lessons from Muhammad Yunus & Grameen Bank

Lesson 1: Test, Test, Test

A lot of innovation involves design thinking. You start with an idea, test it, iterate, and refine.

Yunus had an idea to fight poverty through collateral-free lending, but he didn’t just assume it would work—he tested it first. His $27 loan in Jobra was his first experiment, and the success of that small-scale test validated his concept before scaling up.

- Takeaway: Before launching a big initiative, start small. Test your idea in the real world, gather feedback, and refine it before scaling.

Lesson 2: Solve for the Root Cause, Not Just the Symptoms

Many poverty alleviation efforts at the time focused on aid and charity, but Yunus realised that lack of access to capital was a root cause of poverty.

Instead of offering handouts, he created a system where people could lift themselves out of poverty by investing in small businesses. This model emphasised self-sufficiency, showing that sustainable solutions create long-term impact rather than temporary relief.

-Takeaway: When tackling social problems, always ask: What’s the real barrier? Addressing the underlying cause leads to lasting change.

Lesson 3: Challenge Conventional Thinking

At the time, banks believed lending to the poor was too risky—the assumption was that without collateral, people wouldn’t repay loans.

Yunus challenged this belief by trusting the unbanked, and the results spoke for themselves. Grameen Bank achieved over 90% repayment rates, proving that low-income individuals are creditworthy when given a fair chance.

-Takeaway: Just because something has always been done a certain way doesn’t mean it’s the best way. Innovators question assumptions and reimagine possibilities.

The Impact of Grameen Bank

The impact of Grameen Bank is remarkable:

• Over 90% of Grameen borrowers are women, leading to increased financial independence.
• It has helped millions of families start businesses, generate income, and improve their quality of life.
• Today, microfinance is used worldwide as a tool for poverty alleviation, especially across Asia and Africa.

And all of this started because one man thought differently about how to solve a problem.

Final Thoughts

Muhammad Yunus’ journey is a testament to the power of social innovation. It’s about rethinking problems, testing ideas, and creating solutions that uplift society as a whole.

So, if you’re an entrepreneur, innovator, or change-maker, remember:

• Start small, test your ideas, and refine them.
• Solve the root cause, not just the symptoms.
• Challenge assumptions and think differently.

The next great social innovation could start with YOU. So what’s a social problem you see that needs rethinking?