Traditional forms of philanthropy being replaced by a more market-based solutions approach: Roopa Kudva

Edited excerpts from an interview:

What is changing in Indian philanthropy?

As I see it, there are three steps to philanthropy. Stage 1 is when people decide to give and start the process. The cause is seldom the focus and giving is mostly linked to personal interests and drivers. This has been happening in India for a while now. Stage 2 is when philanthropists start defining what they care about, when they want to see things improve in a sector, when they look for supporting particular organizations and are ready to make multi-year commitments. Several Indian philanthropists are at this stage. In the third stage, philanthropists start looking at impact investing (in for-profit social enterprises that are scalable and sustainability). These are now gaining traction but it is still early days in India for this stage.

How does Omidyar choose the organizations and causes it wants to work with in India?

We work in five sectors which include financial services, education, emerging technologies, property rights and governance and citizen engagement. We invest in three types of organizations— market innovator (for-profit enterprises), organizations that build sector infrastructure and organizations that do policy-related work. We provide equity capital to for-profit organizations and grants to non-profits. If an organization meets any of these aspects, we look at them closely, as they can change an entire sector and create impact.

What is it about India that is interesting impact investors?

There are three main drivers in the India story. The penetration of technology and mobile phones is at an all-time high. Three in every four Indians has a mobile connection. Technology platforms such as IndiaStack is a unique concept that gives 1.2 billion Indians a unique digital biometric identity and will create a new wave of entrepreneurship.

Secondly, the ecosystem for entrepreneurship is good. The best minds are turning to this field and the government is pledging more and more support.

The third is strategic philanthropy. Traditional forms of giving like grant making are being replaced by a more market-based solutions approach. All this is good news.

What can investors and grant making organizations do to help with the talent crunch in the social sector?

In for-profit social organizations, we see a lack of product management and marketing skills and lack of depth in technology-related skills. In the non-profit sector, core management skills like process and systems are not developed adequately, and human resources related gaps exist especially when it comes to developing the second line of leadership after the founders. To deal with these, investors and grant making bodies can play a big role. In for-profit organizations, especially in the initial stages when it is just investors and founders on the board of the company, they can concentrate on team building and assessing gaps and provide recruitment support and leadership development.

For non-profits, grant-making bodies, or donor agencies, must first build trust in the organizations they choose to work with.

If agencies keep insisting 99% of the funds must reach the direct beneficiary, the non-profit will have to keep looking for more funds to manage their day-to-day needs and will not be able to concentrate on their core job.