New Delhi: Social Entrepreneurship is a Cinderella story in India. From an obscure notion it has grown into a global phenomenon with Indian social entrepreneurs holding centre stage.

Parag Gupta, head, (South Asia), Schwab Foundation for Social Entrepreneurship, an affiliate of the World Economic Forum

Development language has shifted from ‘subsidies’ and ‘charity’ to talk of social entrepreneurs and ‘base of pyramid’ customers rather than beneficiaries. For those who may confuse the term for an extroverted businessman, a social entrepreneur combines the entrepreneurial know-how of Naryana Murthy with the social heart of Mother Teresa.

Who is a social entrepreneur

S/he is an individual who builds a sustainable high performing organization with focus on maximizing social impact rather than financial profit.

Social entrepreneurs can be found in any sector from environment to youth development. They are agnostic of legal status, be it for-profit, not-for-profit, or a hybrid model of both.

Examples from the ground

Take the case of Harish Hande of SELCO. Around 57% of India’s population does not have electricity and for many more, supply is unreliable. In addition, the poor produce almost a billion tonnes in CO2 annually (through use of kerosene, burning wood, and so on) leading to a climate change catastrophe.

Harish has pioneered access to rural solar electrification for impoverished families through innovative doorstep financing, and an understanding of how to create livelihoods (selling solar lights on miner caps for mid wives and rose cutters).

So far he has reached 80,000 clients. He has seen first hand how solar electrification has led to better education outcomes for children who can now study at night, to increased livelihoods from night time vegetable vendors. It has also helped reduce carbon emissions. And this when SELCO is not an NGO, but a for-profit entity.

85% of its budget comes from sales and revenue to those Harish helps. Yet, SELCO remains focused on a social mission while exclusively serving the impoverished, rather than making a nice profit off high-end clients.

Bunker Roy, led by example

India’s social entrepreneurs served important roles nationally at different points in time. In the 1970s and 80s, Bunker Roy of Barefoot College led civil society in empowering citizens to gain skills they needed outside of a formal structure, when the government provided scarce services in the hinterland.

He, and others of his ilk demonstrated that beneficiaries must be stakeholders in their own development. ‘Social entrepreneur kind of thinking’, in the last two decades built upon this and found innovative models to create the same structure of accountability as capital markets, by creating customers out of those they serve.

The ethos is simple: “The poor can and will pay for services and goods which provide value." We see this all the time around us, as many impoverished citizens spend their hard earned money to send their kids to private schools, hoping to provide a good future for their child.Now more than ever, is an opportunity for collaboration with business and govt. Businessess are starting to explore the new field of ‘Base of Pyramid’ economics

Also, though the impoverished individual, living on less than $5 a day may seem like a poor business target, if one multiplies the figure by the 700 million individuals living in this category, you have a substantial consumer market – one with potential to increase spending power manifold.

Companies like ITC and Hindustan Lever have tapped into this growing market that has few competitors compared to the already saturated standard capital markets.

If companies have a long term vision of developing a client base and are willing to invest in the community, social entrepreneurs can be instrumental in building bridges and customer loyalty.

Take for example, the work that HSBC is doing with Chetna Sinha and Mann Deshi Mahila Sahakari Bank, Ltd. (MDMSB). MDMSB is the first bank in India run by and serving rural women.

It develops systems that rural women need to evolve as successful entrepreneurs and build financial assets. MDMSB helps HSBC meet its 18% rural lending requirement while receiving additional capital to provide more loans to rural women. HSBC, building on this partnership, has also invested in the future of the clientele by funding a rural business school programme that helps to build skills and therefore income of the same clients by creating opportunity for larger loan sizes.

Partnering with govt. and coming full circle

The same type of working relationship is also true of social entrepreneurs and governments. Indeed, even for-profit social entrepreneurs see tremendous value in partnering with government to encourage policy change, regulation, or act as a government contractor of services.

Take for example, Rajendra Joshi and Saath which through working in public private partnership, create mechanisms to empower the urban poor to become willing customers of basic services as they gain livelihoods.

Unprecedented urban migration in India has accelerated poverty in cities. In Ahmedabad, almost 40% of the city’s residents live in slums or under serviced chawls. In these areas, less than 5% have private access to water, only one in five have private latrines, only one in four have health service access, and almost 50% rely on informal livelihoods.

Joshi, working closely with Ahmedabad Municipal Government, collected user fees to upgrade basic sanitation, water, drainage, paved roads, and street lights and allow edfor monitoring of public services.

The new services along with livelihood programmes held in government buildings increased living conditions of slum dwellers and increased tax base for the government. Services were found so innovative that the Ahmedabad Municipal Government received the prestigious 2006 Dubai International Award for Best Practices to Improve the Living Environment.

Engage corporates to strengthen social entrepreneurship

However, there remain significant challenges for social entrepreneurship and its public private partnerships to truly have a transformative effect on Indian society. The first is Indian corporate engagement.

According to a recent McKinsey survey, 90% of Indian CEOs believe that business should play a wider role towards creating “public good". However, the feedback from social entrepreneurs indicates frustration in finding beneficial linkages with the majority of Indian corporates, especially compared to mutually beneficial partnerships with MNCs.

To move forward, Indian business and social entrepreneurs must figure how to meet both interests and embed “public good" into the value proposition and bottom line of Indian corporations. Finally, governments must be able to harness the impact of social entrepreneurs rather than view them as a competitive threat.

There is an attempt to bring about change, by making services more efficient, reaching rural citizens with quality services, and managing growth of the urban landscape responsibly.

Schwab Foundation tries to create awareness on social entrepreneurship through an annual ‘Social Entrepreneur of the Year competition ‘ held in more than 30 countries. In India, their partners are the Nand & Jeet Khemka Foundation, CII and UNDP.