The analysis of Monitor Deloitte’s Beyond the Pioneer report in the June issue of Alliance highlights an interesting debate. The report suggests that real scale for innovations for low-income markets cannot be addressed effectively by any individual firm.
While the report makes extensive use of examples from the MFI industry to substantiate these lessons, Vineet Rai raises the valid point that these conclusions cannot be drawn from the MFI industry alone. This is because MFIs would never have achieved their current level of scale without Priority Sector Lending norms that facilitated easy access to credit from banks. The role played by regulation in the success of MFIs is evident, especially in the state of Andhra Pradesh, where the industry faced its biggest crisis due to poor state legislation.
Further, Audrey Selian and Ken Hynes share an important opinion that impact investors need to focus on cooperation rather than competition. In sectors other than MFIs, minimum government and regulatory support continues to be a challenge and impact investors can play an important role as market facilitators in creating a stronger ecosystem for enterprises working in low-income markets. Sharing information with one another pre- and post-investment and syndicating investments can particularly help to reduce the cost of due diligence, especially for investors based outside India.
Ennovent, realizing this need to collaborate, has played an active role in working with enterprises, enablers and investors to accelerate innovations for sustainability and to scale their growth, both by working with enablers to facilitate the discovery of new innovations and by developing communities such as the Ennovent Circle. Through the Circle, impact investors can co-invest in early-stage social enterprises to manage risks and share due diligence costs as well as mentor those that have potential but are not yet investment ready.
Through increased collaboration rather than competition, the barriers to scale within low-income markets can be tackled effectively, thereby increasing the pace at which these innovations grow.
Director – Communities, Ennovent, India