By Pramod Bhasin and Vikram Gandhi, Founders Asha Impact
Asha Impact’s first Annual Leaders Meet held in Mumbai on 31st May brought together a close group of like-minded individuals — business leaders and philanthropists, successful social entrepreneurs, leading impact investors, VCs and policymakers — to discuss the state of the Indian impact investment industry and deep dive into a few sectors including Affordable Housing, Waste Management and Financial Services. The Asha Impact model has a two-pronged approach — to invest in India’s leading social enterprises that are solving critical development challenges, and to take actionable business insights from these inclusive business models and move the needle on specific policies in collaboration with local and state governments, as well as to unlock new sources of development capital. The event aimed to collectively deliberate on key action items that can inform our investment strategy and advocacy agenda for the coming year.
The key insights from the day can be summarised as follows:
1. Growth in the Indian Impact Investment Industry: The Indian impact investment industry has seen tremendous growth since 2010, cumulatively touching USD 5.2 Billion in investments by December 2016, and is further poised to grow at a 20–25% annual growth rate. However, the flow of capital has been heavily skewed to the financial services sector- both in terms of number of deals and value. While the sector has seen significant diversification in pipeline, making successful exits outside of financial services still remains a major challenge. Additionally DFIs and foreign institutions continue to dominate as the primary source of capital for the sector. There is a significant need to grow the domestic pool of funding available for impact investments and direct money to critical capital starved sectors such as agriculture, affordable education, rural healthcare and technology for development.
2. Solving the Affordable Housing Challenge: The latest urban housing shortfall is estimated to be 10–12 million with 95% in the lower income segments (less than 6 lac HH income p.a.). The government has made significant strides in trying to address this gap through measures like giving infrastructure status to the affordable housing sector and facilitating an increased flow of formal credit for both end-users and housing finance companies. However, a number of challenges still persist relating to non-availability of land banks with adequate trunk and social infrastructure, delays in approvals and limited developer finance. We need to start thinking more creatively about solving these issues. The panel brought to light some interesting suggestions on exploring rental housing and mixed-income, mixed-use housing projects to catalyse affordable housing for those who need it the most. Additionally developing a platform that enables local and state governments to share their learnings and best practices with each another can hasten the process of building a robust housing market in the country.
3. Replicating the success of the Financial Inclusion Story: The financial services sector has seen tremendous investor interest and is the poster child of impact investment in India. Unlike other sectors, the standardized business models, availability of high quality talent, flow of capital through Priority Sector Lending and strong on ground execution by teams has made the sector ripe for rapid scale and thus there are many success stories. Moreover, clear and stable policy guidelines from financial regulators have given entrepreneurs enormous comfort to operate within clearly defined bounds and templatize their models to attract large sums of capital. Thus, to witness similar kind of exponential growth in other sectors, the primary building block of having a stable policy environment is vital to spur growth.
4. Converting India’s Waste into Wealth: India generates ~175,000 tons of waste per day and recycles only ~25% of this. While the sector has traditionally not seen many economically viable models, innovative social enterprises like Nepra and Saahas have built business models that are profitably ensuring proper disposal of waste and creating wealth for stakeholders across the value chain. This has been helped by enforcement of Solid Waste Management and Extended Producer Responsibility regulations as part of the Swachh Bharat push, and provided a boost to efforts to formalize a sector that has historically been highly informal. The latest Swachh Bharat Survekshan rankings highlight Indore’s achievement in retaining its prime position across two consecutive years as the cleanest city in India. The success of the city demonstrates the catalytic role that can be played by local governments to implement polices and mobilize citizens to actively engage in segregation of waste at source.
5. Exploring the Future of Philanthropy: India is witnessing three key trends that are redefining engagement amongst governments, corporates, and philanthropists. First, even though the government remains the largest impact funder, it cannot solve all social challenges alone. Many HNIs, family offices, and impact funds have deployed significant capital to fund innovative approaches such as outcome based financing to provide basic amenities and services. Second, India is in a unique position as it has mandated corporates to contribute 2% of net profit towards charity under the CSR law. Even though a large pool of money is mobilized each year, the funds are not used in the most effective manner. Third, global movements such as the Giving Pledge are re-shaping the face of philanthropy in India.
Besides bringing in more capital, this represents a stark shift in the ‘giving’ philosophy — from an emotional, short-sighted charity mind-set of cutting cheques to a much broader understanding of strategic levers that can address socio-economic challenges in a holistic manner. Initiatives like the billion-dollar India Education Outcome Fund and India Impact Fund of Funds aim at mobilizing philanthropic domestic capital through standardizing impact oriented products to garner participation from new retail investors and donors. We need to increase the pools of capital — CSR monies, family offices, retail — and identify more efficient ways of deploying the resources that results in high social return on the investments. Additionally, we also need to go the extra mile to find high quality enterprises that are spread across the country and have the ability to solve developmental challenges while building sustainable business models.
The candid and insightful conversations from the Asha Annual Event have clearly given us a lot to reflect and act upon. We hope to organize the event annually to share our learnings and measure our progress. Along the way, we hope to engage meaningfully with like-minded partners who are equally passionate to find sustainable solutions to these critical development challenges.
We invite comments and would urge you all to connect us to social enterprises that you believe are creating tangible impact on the ground through profitable business models.
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