With growing social capitalism, impact investing is picking up pace in India. Omidyar Network, a philanthropic investment firm co-founded by eBay founder Pierre Omidyar and his wife Pam, is looking to invest $200 million in for-profit and non-profit organizations across India in three-five years. On the other hand, Gray Ghost Ventures, a large impact investor globally, plans to invest $60 million in the country over the next five years.
The Rockefeller Foundation recently provided a $480,000 grant to Dasra as part of its commitment to develop the Indian impact investing industry and unlock more impact capital originating from within the country. Besides, it has given a grant of $200,000 to Villgro Innovations Foundation towards the costs of its social entrepreneur and enterprise development programme, which trains early-stage social entrepreneurs to refine their business model and scale their social impact to create positive benefits for poor or vulnerable people in India.
For Acumen, India is its largest portfolio where it has invested $31 million out of cumulative global investments of $84 million, across sectors like health, energy, agriculture, water and education. Acumen is also actively exploring the affordable housing sector. While Acumen does not have an India-specific goal, its aim for its cumulative global investments is to reach $150 million by 2015.
Under impact investing, money is used to deliver social benefits alongside financial returns. A key factor why India is an attractive market for impact investors is the accessibility to consumers at the bottom of the pyramid (BoP), which has triggered the need for socially impactful market-driven solutions to development issues.
At the same time, the number of high net worth individuals (HNWIs) in India has increased, and they seek to invest their wealth with both a financial and social bottom line. With over a dozen domestic and international funds operating in this space, the segment has grown steadily over the past few years.
‘India is the epicentre of impact investing. In a way, the future of the impact investing industry globally is going to be established here,’ said Jayant Sinha, partner & managing director, Omidyar Network India Advisors. Omidyar Network has a sector-based approach to impact investing and is focused on supporting organizations that are scalable, sustainable and have the potential to create large-scale opportunities.
‘The potential is that the word “impact” goes away, that the practice of serving 800 million low-income people with quality products and services in a timely and affordable way becomes standard procedure for Indian business,’ Bob Pattillo, founder of Gray Ghost Ventures, told the Times of India in a recent interview. The firm has already invested around $60 million in India in areas like education, creating jobs, women empowerment and sparking innovation that serves low-income communities.
‘Between affordable education and mobile services, we’ll invest another $60 million over five years. India is the place to be, and we’ve got some of the best partners in the country. Half of the new money will be in debt as our enterprises mature, at the same time our commitment to grow our equity investment is high as well,’ said Pattillo, whose school ratings venture, Gray Matters, helped 630 schools across the country improve quality over the last 26 months.
According to research by the Rockefeller Foundation, impact investing generated around $100 million (roughly Rs 530 crore) of capital in India in 2012 and is said to be growing at 30% per annum. The potential for impact investing in India can be gauged from the fact that Dasra, a strategic philanthropy foundation, has received a large number of strong proposals that address many areas of impact investing, such as unlocking capital, creating common platforms for investors and social enterprises, creating industry bodies, supporting and replicating incubators, according to Natasha Oza, director, talent management of Dasra.
Despite the recent surge in the number of social enterprises, the section of BoP being served by these enterprises is still very small. This in itself suggests the need for a massive scale-up of existing enterprises as well as more innovations being brought to the low-income consumer. ‘Neither of these will be possible without the right type of capital supporting the growth, and hence the potential is significant. As impact investing is becoming an established asset class, there is more focus on returns and commercial opportunities. But in order for the sector to grow and have sustainable social impact, we need a full spectrum of capital from grants to returns-based capital,’ said Sachindra Rudra, India director of Acumen.
This article was originally published by the Times of India and later appeared on the Artha Platform blog