BackOpinion | Lessons from the past decade on accelerating social impact
If there is one thing that has defined the past 10 years, it has been the growth of technology, especially use of mobiles
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The impact investing industry made its beginnings in India about 10 years ago. If there is one thing that has defined this past decade, it has been the unprecedented growth of technology, especially mobile phone penetration.
We also have Aadhaar and the “India Stack" infrastructure such as eKYC, eSign, and the low-cost payments infrastructure, Unified Payments Interface (UPI). Technology is ubiquitous and has become the source of fundamental transformation in our society. It is creating inclusivity for many, instead of exclusivity for the few.
At the same time, there has been a significant push towards inclusive growth. Thanks to a series of policy initiatives and landmark judicial decisions, the focus has moved from opening bank accounts to financial health, from school enrolment to learning outcomes. Moreover, issues like ease and affordability of owning a home, right to privacy and data protection have taken centre stage.
These developments are driving entrepreneurship in a big way. A new wave of purpose-driven entrepreneurs is bringing innovative business models to improve the lives of the aspiring middle and lower-income Indians. They will define the future of Indian entrepreneurship over the next few decades. As impact investors, we have six key learnings from our work in India over the last 10 years.
One: the mobile phone is one of the biggest drivers of social impact in India. As smartphones become ubiquitous and data costs decline, both businesses and governments can easily reach populations that they could not before. Many of these people have previously been excluded or underserved. Today entrepreneurs can provide a range of services via the mobile phone to this population segment—access to information, education, healthcare, financial services, transportation, jobs and government services.
Two: learn from failures, but ensure that failures don’t lead to undue risk aversion. Failure rates in early stage investments will inevitably be high. Investments can be written off due to a variety of reasons and several investments will not have the intended social impact. Reasons for failures can include the lack of a robust investment thesis, underestimation of the capital intensity of a business, large bets on unproven models, and inadequate probing of concerns mentioned during founder reference checks. However, even as we learn from failures, it is important to ensure that failures don’t inhibit us from making the bold bets that are needed to drive disruptive and positive social impact.
Three: funding quality research can inspire change in many ways. It can sensitize entrepreneurs to new opportunities. Research can also bring valuable data and insights to inform policy decisions and debates. Reports like Impact Investing: Purpose-driven Finance Finds Its Place In India by McKinsey in 2017 helped dispel many myths about impact investing, including the financial returns from impact investing.
Four: unlocking supply of capital is catalytic in nascent markets. Organizations like the Impact Investors Council have played a key role in creating a greater awareness of impact investing and enabling a greater flow of capital to impact investing. Organizations such as Dasra also help philanthropists in defining their vision and developing a more strategic approach to giving. Similarly, organizations that evaluate progress and impact of corporate social responsibility or CSR and philanthropic funding are also helping increase funding availability for social impact.
Five: a large and complex country like India needs a local approach. A team on the ground with a deep understanding of the local context and with strong connections with the players in the Indian ecosystem is critical.
Six: focusing on the whitespaces is vital, because pioneering businesses have a multiplier effect. Entrepreneurs spearheading ideas and business models—introducing new products or unlocking new markets—can accelerate impact beyond just their immediate customer base. They can open new markets and drive increased inclusivity and affordability. They can also crowd in other entrepreneurs and funders into the space.
Despite India’s major strides over the last decade, a young and aspiring India wants even more rapid change. Increasingly, people from different walks of life are now confidently stepping up to tackle some of India’s most difficult challenges. They believe that India’s growth and prosperity should benefit not just the “top of the pyramid" but all Indians. And so, their focus is on the underserved, excluded and disempowered in an India that is becoming increasingly digital. Over the next five years, 500 million Indians are going to come online for the first time through their mobile phones, a population we refer to as the Next Half Billion. Thanks to this, the coming decade will offer an even bigger opportunity to impact investors to back bold entrepreneurs who are helping every Indian create a better life.
Roopa Kudva is MD at Omidyar Network India, an investment firm seeking to achieve social impact.
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