“In addition to social venture funds...there is also capital inflow from institutions such as IFC (International Finance Corp.), Nabard (National Bank for Agriculture and Rural Development, a government-owned funding agency) that will be directed at social sector projects this year,” says Rai.
Yet another global support group, Aspen Network of Development Entrepreneurs, or ANDE, is looking to build synergies between those wanting to set up a social venture and intermediaries who can provide capital, mentoring and organizational support for such fledgling projects.
“In about a decade’s time we expect social investing, which is estimated to be worth around $4 billion in developing markets, to reach the size of the microfinance business, which has loans outstanding of almost $25 billion currently,” says Randall Kempner, executive director, ANDE, who expects to set up training programmes in India over the next 12 months in areas such as investment management for its members. “We also have a $1 million re-grant facility for members, and I will be shocked if a significant amount of that fund is not granted to India-focused projects,” says Kempner.
Co-investing: Varun Sahni (left), India director, Acumen Fund Advisory Services India; and Anant Kumar, chief executive officer, LifeSpring Hospitals. Bharat Sai / Mint
This flurry of activity centred on the social enterprise space in India is in line with similar trends unfolding elsewhere.
The Investing for Social and Environmental Impact report released in January by the Monitor Institute, the social enterprise arm of the Monitor Group, a global advisory and capital services firm, says profit-seeking investment to generate social and environmental good is moving from the periphery of activist investors to the core of mainstream financial institutions. The report estimates that in the next 5-10 years, investing for social impact will create a market worth approximately $500 billion globally.
This focus on the social sector does not in itself indicate the emergence of a new industry. However, what sets this current wave of social entrepreneurship apart is the slew of new and innovative models of doing business aimed at social and environmental good.
For instance, Earthy Goods has in the last 18 months focused on helping small enterprises in rural India build distribution networks to scale up their operations. “We begin with the basic quality compliance, how to label, how to pack, how to dispatch and once we have that in place, the next level is to ensure that they have adequate working capital,” says Anand, whose company sometimes takes an equity stake in the business to help bring them up to scale. It is a model that has won them approval from the Chennai-based IFMR Trust, which is supported by the ICICI Foundation.
“We invested Rs3.5 crore in Earthy Goods as part of our overall focus on making investments in organizations that are strengthening rural supply chains,” says Bindu Ananth, president, IFMR Trust.