Social Entrepreneurship in India

7/31/2019 Social Entrepreneurship in India

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Social Entrepreneurship In IndiaThe CompleteGuide To Funding, Profitable Sectors [And More]

[We have coveredSocial Entrepreneurshipin depth and here is a great article written by Aarti

Shrivastava covering the various aspects of Social Business]

The major boost in social entrepreneurship was given by the Nobel Prize winner Dr. Mohammad

Yunus when his brain-child Grameen bank became successful in helping people lift themselves out

of poverty in rural Bangladesh by providing them with credit without requiring collateral. Yunus

developed his revolutionary micro-credit system with the belief that it would be a cost-effective and

scalable weapon to fight poverty. It was soon realized that profits can be made along with serving

the society, provided you treat profits as a means and not the end result.

The impact of such enterprise largely depend on its successful implementation to those that need it

the most, those at the Bottom of the Pyramid. And of course a discussion about the BOP wouldnt be

complete without mention of India; where hundreds of millions critically need a compelling movement

in social entrepreneurship to improve their welfare. There is a natural predilection towards rural

areas as 70% of the population lives in the hinterland. Recently, the rural scenario in the country has

emerged as a lucrative option for the mainstream economy. Various organizations are viewing rural

areas as potential markets, resulting in a gamut of innovative solutions within the social

entrepreneurship space that focuses on and emerges from rural areas.

The popularity of SE is growing at a very high pace in India even through the current economic

downturn. In the last three years more and more youth are developing interest in this field including

those from prestigious Stanford, MIT and Oxford. This new evolving field has also got early venture

capitalist interested in funding with many seeking out such enterprises that hold out huge potential.

Earlier, organizations solving social problems were often assumed to be idealistic, philanthropic and

lacking business acumen or the ability to be entrepreneurial. However, as the social sector has been

coming in touch with the private sector, both have begun to realize that just one approach either

pure philanthropic or pure capitalist is inadequate to build sustainable institutions.
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In recent years, not-for-profit has been pushed to the back partly because of responsible lenders

and social enterprises are being run more like businesses today. The focus is on enterprising micro

groups which want to transform their own, and the communitys, circumstances but cant access any

finance.

Fast company in their March 2010 listed top 10 by Industry. And four of the top 10 most innovative

companies in India were standalone social enterprises or have socially entrepreneurial initiatives.

In India alone social entrepreneurship space has a countless mixture of models with a one billion

thinking structure. One billion thinking requires cost-effective models involving the bottom of the

pyramid. The majority of these models are scalable and replicable.

Few for-profit Social Business Models

Company Activities Impact Future Plan

VNL

Makes telecom

equipment that helpsmobile operators reach

rural markets profitably

70 station in

Rajasthan

Replicating and scaling

it worldwide

Narayan Hospital

India

Delivering affordablehealthcare to the

masses worldwide

5000 bed facility

completed in phase 1

Health city with 30,000

bed facility by 2016

A little world

Empowering microbusiness through micro

banking

Customer base

crosses 3 million

Touch a billion peoplethrough innovative

technologies

Barefoot College

solar energy, water,education, health care,

rural handicrafts,

peoples action,

1,000 Barefootexperts in 1,000

villages, reaches

500,000 people with

10,00,000 people by the

end of 2016
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communication,

womensempowerment and

wasteland development

basic services such asdrinking water,

health care, and

education

Childline

Countrys first toll-free

tele-helpline for streetchildren in distress

9.6 million calls, 3

million children, 73cities, 10 years 600 + districts by 2013

BASIX India

Sustainable livelihoods

to the rural poor and

women

Over a million and a

half customer -

CraftsBridge

A bridge between

customers worldwideand crafts persons,

designers N/A

To tap 6 million villagepeople associated with

the handicrafts sector

Arvind Eye

Hospital

Eliminating needlessblindness by taking its

services to rural India

In last year alone 2.5million patients were

treated and over 3lakh surgeries were

performed

To replicate it in all

states of India

COMAT

Empowering rural

citizens by creatinglocal

economies and

enabling access toinformation and

services

Deliver Citizen

records and

Government benefitsto over 50,000 rural

citizens every day

75,000 by the end of

2011

D light

High quality solutions

for families livingwithout reliable

electricity 10 million 50 million by 2015

IDE India

Providing long-term

solutions to poverty,

hunger andmalnutrition 19 million

Ending poverty in thedeveloping world

RangSutra

Sustainable livelihoods

for artisans andfarmers, by creating

top quality hand-made

products based on theprinciples of fair trade Approximate 2500artisans Employ 5000 by 2015

Lijjat Papad Women Empowerment

4600 women

employed

Plans to employ 6000 by

2010

Selco Solar India

Sustainable energysolutions and services

to under-servedhouseholds and

95,000 villagescovered

Bring down the cost of

solar equipment by 75%by 2012


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businesses.

Unltd India

Angel investor and

incubator for socialentrepreneurs

Each of the projects

has, on average,

created 1.6 new jobsin the economy

World where individuals

take action to bring

about positive socialchange

SKS Microfinance Small loans withoutcollaterals 5.3 MillionCustomers Take Micro finance toevery village

Suminter IndiaOrganics

Internationally certified

organic agriculturalproduce

Premium crop price

to more than 7000farmers

Scale this modelnationally

VortexEngineering

Rural Solar PoweredATMs 750 ATM

One ATM/ Village i.e6,50,000 ATMs

The other notable change is the involvement of mainstream financial institutions in social

entrepreneurship. Various venture capital firms are investing in for-profit entities with social

objectives. Interestingly, specialized social investors provide capital, networking, marketing and

business expertise to such ventures.

This trend was kick-started in the area of microfinance when Sequoia Capital invested in SKS

Microfinance.

Social venture funds measure their investments on social, environmental and the traditional financial

returns. Acumen fund expects to make an impact on million people with every investment in a five-

year time frame. The fund measures returns in terms of financial, operational (internal processes

and systems) and social impact (outcome and output). Output is number of people who are impacted

and outcome is how it has affected them. For example, if 1,000 people have had access to clean

drinking water, the investors also check if the rate of diarrhea has come down. More heartening is

the fact that the mainstream venture capitalists are also recognizing this as a business opportunity.

So far, VCs have invested $220 million in 77 social businesses in India. But there hasnt been a

single exit. In conventional commercial ventures, VCs work with a holding period of 3-5 years. In

social businesses, the holding period is longer typically, 6-8 years.

Funds Currently Available

Acumen Fund : It supports sustainable enterprises providing the poor with critical goods and

services at an affordable price. Primary focus on healthcare, housing, water, energy and agriculture

Companies invested in: 12 Fund size: $40 million (approx)

VenturEast: It builds profitable businesses that cater to under-served markets. Focuses on meeting

Indias domestic needs (primarily rural and semi-urban markets) by backing early-stage / rapid-


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growth businesses Companies invested in Over 50 (including 25 social enterprises) Fund size $250

million

Oasis Fund: It supports enterprises that develop innovative solutions that provide the poor with

better access to critical goods and services. Invests mostly equity, with some debt. Investments

generally range between $1 million to $6 million Companies invested in 4 Fund size $30 million (stillraising)

Song: It supports entrepreneurs in high-growth sectors like education and training, agriculture and

food, healthcare, financial services, basic utilities (waste, water, rural telecom, affordable housing,

etc) that are aligned with inclusive growth Companies invested in None Fund size $17 million

Aavishkaar India Micro Venture Capital: It creates sustainable change by increasing economic

activity at the bottom of the pyramid and boosting the entrepreneurial spirit. Investments to date

have focused heavily on the rural and agro technology sectors Companies invested in 17 Fund size

Rs 60 crore (approx $14 million)

Gray Matters Capital: It invests in the information, communication and technology space to bridge

the urban-rural digital gap Companies invested in 4 Fund size $12 million

Elevar Equity II: It creates market-based solutions for poverty eradication. Focuses on sectors like

healthcare, education and information Companies invested in 1 (another two in micro-finance

ventures) Fund size $40 million (additional fund-raising on)

The above figures simply state that there is an estimated $100 million (Rs 400 crore) chasing deals

in Indias social enterprise space.

But there is a divide between those that have access to mainstream and/or commercial funds andthose that rely on personal connections and grants/donations to raise money. The ratio is about

50/50.

Foreign grants: 8%

Domestic grants: 8%

Debt (credit loans): 11%

Government Funding: 3%

Charitable Organization: 5%

Bank Loan: 13% Loan from Family and friends: 21%

Equity Investors: 21 %

Others: 10%

As per Beyond Profit survey, Forty-five percent of respondents obtained funds from commercial

sources whereas 21% of respondents source their funds from personal connections such as family


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members and friends; another 21% rely on grants and donations from charitable organizations.

Arranging finances for a social enterprise in India is still very difficult. And knowing in which sector to

finance is even more difficult. In bar diagram mentioned below is a mention of profitable sectors and

a trend which clearly states areas to divert funds.

Social Entrepreneurship in India Profitable Sectors

Education: Sector with a track record of profit: The Education sector has shown a marked degree of

financial stability and growth potential. There are two key elements. First, the sector represents thehighest number of profit-making enterprises (38%) among others, and also has one of the lowest

numbers of loss-making entities (24%). Second, the observation says that there is a good growth

potential; 38% of education enterprises are breaking even which means the number of profit-

making enterprises in this sector could increase in the coming years.

Health: Sector with large growth potential: Although the sector currently produces a very small

number of profit-making entities, it has the lowest percentage (13%) of loss-making enterprises.

Most importantly, at 73%, the Health sector has the largest segment of break-even businesses.

If/when these enterprises begin to turn a profit, the Health sector could sustain a multitude of

successful, profit-making enterprises.

Rural Development: Sector to watch out for future growth: Despite the fact that the largest number

of social enterprises are in this field, it is the biggest loss-making sector at the moment. However,

Rural Development demonstrated the largest revenue increases last year, so there could be more

surprises in store.
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There are more enterprises that are loss-making (34%) than those earning a profit (25%). And 41%

percent of enterprises are currently breaking even. If you look at the profitability by measure of years

in operation, you can clearly see that making profit through social enterprise is no easy task.

It is true that the percentage of loss-making enterprises steadily goes down as the companies get

older. But there is virtually no disparity in the number of profit-making entities across age categories.

Many enterprises stop making losses as they grow older but do not begin to turn a profit; they merely

start breaking even. Surprisingly, even after 11 years or more of operations, the percentage of profit-

making enterprises is only 27%.

Social entrepreneurship in India is emerging primarily because of what the government has not been

able to do. The government is very keen on promoting social entrepreneurship not necessarily by

funding it or by advising on it or enabling it. What they do do, is not disable it.

For example, in Mumbai alone, non-profit organizations educate more than 250,000 children on a

daily basis. The government has not told these organizations not to do it. Whereas in some

countries, when someone takes it into their own hands to start a facility for education or healthcare

or empowerment, the government often puts in place barriers to prevent this from happening.

Our country does not have a homogenous people or geography, so the impact largely remains

regional. With the current economic climate, it is very likely that social needs will increase and,
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consequently, the number of people committed to addressing them will increase. Definition of social

entrepreneurship has changed over time. From corporate philanthropy to non-profit and now to self-

sustainability, Social Entrepreneurship has evolved and will keep evolving with time and needs of the

world

Documents

Social Entrepreneurship in India