India most important for us outside of the US: Omidyar Network
For impact investment fund Omidyar Network, India is the most important country outside the US, and financial inclusion is one of its major interests here, a top company executive said.
“Outside of the US, India is the geography that we are the most excited about and that we feel most committed to. There is no other place where we have a team of this size. There is no other geography where we have the type of portfolio, across all our areas, as we have in India,” said Tilman Ehrbeck, partner at Omidyar Network. Omidyar, which invests in both for-profit and not-for-profit businesses, focuses across five broad areas of interest globally—governance and citizen engagement, education, financial inclusion, property rights and emerging technology.
“India is the one geography where we work on all of these issues, where we have investments across all of these issues and where we have a team on the ground for all of these issues,” Ehrbeck said in an interview.
Since its inception in 2004, Omidyar Network has invested more than $1 billion, of which $480 million went into for-profit companies and $560 million in non-profits. Its India investments add up to $200 million.
For Omidyar Network, financial inclusion is a major area of interest in India, said Ehrbeck, given that in the last couple of years, India has leapfrogged from being a financial inclusion innovation laggard to being at the forefront of the technology-led inclusion movement.
“Financial inclusion is one of the bigger topics that we embraced. When we started, globally, half of the working age adults were outside of the formal financial system. India, until 3-4 years ago, was not at the forefront of the technology led financial inclusion revolution, globally. However, over the last couple of years, India has catapulted itself to the forefront,” said Ehrbeck.
Ehrbeck cited three factors for India’s recent performance which has put it ahead of the pack in financial inclusion innovation—changes in regulation, a tech-savvy government and the development of India-specific digital infrastructure.
“The Reserve Bank of India (RBI), through the financial inclusion committee report, came out with a number of important changes such as the narrow bank licences, which was a way to bring the telcos to the table in a regulated way. The RBI has put in place a lot of enabling pieces,” he said.
The financial inclusion committee headed by Nachiket Mor in 2014 proposed differentiated licences to operate small finance banks and payments banks.
At the same time, the new government at the centre embraced technology and accelerated some of the things that were already underway, including the desire to switch to direct, electronic benefit transfers, said Ehrbeck.
The development of the so-called “India Stack” that includes digital infrastructure such as the unique identity card programme “Aadhaar” and the Unified Payments Interface (UPI) too have been catalysts for financial services innovations, he added.
These factors have also seen Omidyar reorient its financial inclusion strategy towards technology-enabled financial services business models, away from its legacy investments, which was focused on SME lending businesses.
In the last one year, the firm has invested in companies such as Scripbox, a mobile and digital-only wealth management company and ZestMoney, a digital lending platform.
In India, investments in technology-enabled financial services business models that further the financial inclusion goal will only continue to grow in importance for the firm going ahead.
“We are very excited about models that use the flexibility that the digital infrastructure allows you, and use that flexibility to come up with new customer value propositions and deliver them at far lower cost. And in order to do that, you typically have to leverage technology,” said Ehrbeck.
Nearly $270 million, or one quarter of the firm’s total amount invested globally, has gone towards the financial inclusion theme. Around 15% of that capital commitment has been made in India.
“Within financial inclusion, India is a bigger priority now than it may have been in the past. It will be a fair prediction to say that we will invest more in India,” he said.