Muhammad Yunus, who won the 2006 Nobel Peace Prize for founding the micro-lending institution Grameen Bank, spoke at Harvard Business School on Thursday about the importance of social ventures that depart from profit-driven business models.

Yunus also ate lunch with the ten finalist groups in Harvard’s President’s Challenge and visited Sociology 159, a class on social entrepreneurship.

At his talk at the Business School, Yunus discussed his work at Grameen Bank and urged students to consider pursuing businesses motivated by social causes rather than profit alone.

Yunus said that social businesses are a positive alternative to charitable efforts and government spending, the traditional methods of solving social problems. Unlike charities, which rely on external donations, social businesses use sustainable, self-perpetuating models, Yunus said. Profits from a social business feed back into expanding its operations, leading to growth so that the company can serve more people.

“It becomes a perpetual cycle. You recycle the money again and again and again. So in that way, the same money works infinite times, while in a charity, it only works once,” Yunus said.

Yunus’ own project, Grameen Bank, began in 1976, when Yunus loaned $27 to poor women in a village in his native Bangladesh so that they could pursue entrepreneurial endeavors. When the women repaid Yunus, he allowed them to take out larger loans.

His idea of micro-financing quickly gained traction among beggars in Bangladesh and led to the establishment of Grameen Bank in 1983.

Today, Grameen Bank has more than 8 million clients, 96 percent of whom are women. The average client borrows $100.

“People ask me, how did you figure out all the rules and procedures of banking? I always tell them that it was very simple,” Yunus said. “Whenever I needed a system, I just looked at conventional banks and did the exact opposite.”

Yunus was controversially removed from his position at the head of the philanthropic company by Bangladesh’s central bank in 2011 on legal grounds which he challenged.

After listening to students in Sociology 159 pitch their business ideas at the Innovation Lab, Yunus encouraged them to channel their creative energy toward social change.

“You are the luckiest generation of young people in the whole human history...because you came to life at a stage when technology is in your hands,” Yunus said.

One team of students told Yunus about their plan to launch a carbonated ice cream business that donates its profits to ending childhood hunger, starting in the fall at the Harvard Farmers Market.

“We have this idea of Harvard students who want to change the world, but it’s really hard to know where to start,” said Laura E. D’Asaro ’13, a member of the team. “[Yunus] said to start with a problem and do it bite-sized, which I thought was really good advice.”

Yunus expressed enthusiasm for the students’ projects.

“Don’t ignore these 15 ideas presented here. Some of these can be fantastic changers of the world,” he said to the class. “This is how every big idea comes. At first it’s sloppy, hazy, but after a while, it becomes a real gem.”

—Staff writer Brian C. Zhang can be reached at brianzhang@college.harvard.edu.