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Business of making a difference turns profitable for firms

Business of making a difference turns profitable for firms
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First Published: Fri, Jun 22 2007. 01 33 AM IST
Updated: Fri, Jun 22 2007. 01 33 AM IST
At Hansiba, a store near Connaught Place, the silk stoles and handmade evening bags don’t come cheap. An elaborate bedspread costs just under Rs4,000. But the staff is quick to explain: It was painstakingly made by seven female artisans in Gujarat, each adding her special touch.
Besides cashing in on India’s retail boom, the store represents an example of social entrepreneurship—the idea that addressing social ills can also be profitable. Hansiba, named for the first employed artisan, sells the branded clothing, home accessories and bags of the Sewa Trade Facilitation Centre (STFC)—the for-profit arm of the Self Employed Womens’ Association (Sewa), a female trade union.
The Centre says it will likely turn a profit next year—as will its 15,000 artisans that hold an equal stake in the six-year-old firm, which has made goods for retailers from Shoppers’ Stop to Fabindia.
“It’s about equity,” says chairwoman Reema Nanavaty, noting that the workers, mainly from earthquake-ravaged districts, hold 80% of the business.
“This way the artisans directly own and manage the company. They see how the market is growing and changing because they are part of the process,” she adds.
From handmade crafts to technology kiosks to microloans, companies equally focused on making a profit and making a difference are on the rise as the distinction between businesses and social initiatives recedes, observers note.
“You will invariably see a lot more blurring of business and social—the divide will go away,” says Sushmita Ghosh, president emeritus of Ashoka, the foundation that coined the term “social entrepreneur” and provides venture capital to them. “You’re going to see more and more businesses that have a completely social motivation at their core, as well as more and more social operations that run like businesses.”
Some of these firms are among the fastest-growing businesses in the country, often buoyed by the growth and sophistication of rural India as a market.
Technology outfit Drishtee Dot Com Ltd and microcredit giants SKS Microfinance and Basix, which tout socially conscious business models, have all attracted outside investors.
SKS, aiming for a 20% return on equity in the near future, has grown from a non-profit organization providing small loans to poor rural women into one of the world’s leading microfinance organizations, extending credit to almost 700,000 clients across India since its 1998 founding.
Drishtee, which has added about 1,200 kiosks over the past two years, has seen turnover grow eightfold over the past four years to the current $1.1 million (Rs4.51 crore).
Basix has provided more than Rs1,000 crore of credit to 200,000 households across eight states since 1996 and has doubled its size in the past two years.
As home to a third of the world’s poor, India provides fertile ground for socially motivated entrepreneurs willing to tap poor markets.
“Here, even if you’ve never personally experienced poverty, you live cheek by jowl with people who are deeply, deeply disadvantaged,” says Basix managing director Vijay Mahajan. “Combine this with the go-go-go spirit in India these days, and this whole phenomenon starts to make a lot of sense,” he adds.
The firms tend to believe that they may be better able to address poverty and other social problems than the non- profit sector because they will spend start-up capital wisely and efficiently, and are more likely to create sustainable operations, says Mahajan, who worked in development before he founded Basix.
“There is always going to be a segment of the population whose needs are best met in a business-like manner,” he says.
Another key factor is that for-profit businesses have readier access to loans. Grants and donations might come with strings, and NGOs are restricted on both how they can receive and spend money.
“The most important thing is the ability to tap into capital markets,” says Drishtee’s managing director Satyan Mishra.
Drishtee provides Internet connectivity through its kiosks to an estimated 1.5 million villagers across nine states in rural India.
The focus is not only giving the villagers access to information about products and services outside the village, but also allowing information to flow out, according to Mishra.
Each kiosk is operated by a village-level entrepreneur, who owns the franchise.
Both Drishtee and STFC were initially financed by a World Bank grassroots business initiative that provides start-up capital.
Already, the Sewa Centre broke even on sales that doubled to Rs1.5 crore last year and is on track to top Rs4 crore in sales this year “largely on the back of strong growth in the business to business segment”, according to CEO Mona Dave.
“The women have definitely seen their incomes go up and their lifestyles improve,” adds Nanavaty. “For the first few years, we have put all the dividends back into the company, upgrading our facilities and machinery.”
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First Published: Fri, Jun 22 2007. 01 33 AM IST
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