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The Future is Bright for Indian Social Enterprise - Here's Why

India is one of the world's most populous nations, and despite India's influence on the global economy and innovation sector, India's public and private sectors continue working on challenges to bringing the nation's almost 180 million residents currently under the poverty line to a healthy and safe way of life. The on-the-ground realities of running a social venture remain daunting, but high level are pointing to a bright future for India's social entrepreneurship scene. Here's why:

 

Digital India Initiative

The government of India under Prime Minister Narendra Modi launched the Digital India program worth INR 1,13,000 crores (or approximately USD 18 billion) with an aim of transforming India into a digitally empowered society and a knowledge economy by 2019.

Some of the focus areas include providing broadband internet connectivity to over 200,000 villages, making mobile connections and bank accounts available for digital and financial inclusion to 42,300 villages, and universal digital literacy. These movements will become game changing leverage for social entrepreneurs. In an article in Forbes magazine, Tom Watson opines that the rise of social enterprises in America from the mid-90s to present correlates almost perfectly with instant communications, access to vast knowledge, and the sharing of data and applications by many millions of people through open, freely-accessed yet commercially viable internet. This is the goal of Digital India: to create the foundation for social entrepreneurs in India as it was built in the United States.

With infrastructure like this, many social enterprises like Tana Bana, who work with artisans, traders, weavers, and other creatives in rural areas, will be able to substantially increase their business prospects by reaching out to national and international buyers through online channels. This will eliminate the need for middlemen and bring obscure rural handicrafts, textiles, and arts to the fore. Multiple ventures focused on knowledge gathering will also benefit, such as Project ECHO, which works on the creation of networks of rural and expert healthcare providers;  AISECT, which bridges the digital & educational divide between urban and rural India; and InVenture, which uses mobile technology to create a digital financial record of the rural poor. Deeper penetration of the internet in the Indian country-side will accounts for bringing almost 68% of the total population online.

Solving a complex social problem most often demands the involvement of many stakeholders. Large scale adoption and usage of digital technology as envisaged in the Digital India campaign will significantly aid an entrepreneur’s cause of bringing about social innovation and inclusion of remote populations in the mainstream economic and human development.

 

Growth of a Favorable Investment Ecosystem

Here again, the Government of India is playing a crucial role in igniting the entrepreneurial spark within the country. Under the Twelfth Five Year Plan (2012-2017), government has accorded priority to Bottom-of-the-Pyramid (BoP) focused enterprises and social good ventures by declaring the period between 2010 and 2020 as the ‘Decade of Innovation’. It is committed to help social enterprises in capacity-building by investing seed capital through a new fund called India Inclusive Innovation Fund (IIIF) in areas of healthcare, energy, urban infrastructure, water and transportation. IIIF has been capitalized to INR 5000 crores (USD 780 million) and will be allocated to social enterprises over the 10 year period starting 2010. 20% of a social venture’s funds will come from this fund while the remaining 80% will have to come from private investors.

Parallel to governmental intervention, the private investment ecosystem has significantly improved over the last decade, particularly in the last five years. Impact investors, social business incubators, and donor agencies are emerging as key players in the game. For one, according to a study conducted by German Society for International Cooperation in 2012, 70% of impact investors and 56% of incubators were within the first 5 years of their operations in India. Although overall figures on number of investors, both domestic & international, don’t compare favorably to developed countries, there is a flurry of activity in the impact investment space in India. The "Leveraging CSR Policy to develop the impact Investing Market in India" report states that the social good sector in India received impact investments to the tune of USD 1.6 billion in last ten years, funneled to support more than 220 enterprises.

As per the new Corporate Social Responsibility guidelines in Section 135 of Companies Act 2013, organizations have to spend at least 2% of their average net profit of last 3 years on CSR activities. Currently these guidelines prohibit investment in for-profit business models. However, this will still result in availability of an estimated USD 2.5-3.3 billion of CSR funds every year for Indian social ventures. With an estimated finance demand of INR 32.5 trillion (USD 650 billion) as of 2010, The Indian social good sector is grossly underserved and points to a humongous potential for impact investors in India and all over the world.

 

Myriad Opportunities to Create Impact

India has pledged commitment to 8 Millennium Development Goals to be achieved by 2015 as mandated by United Nations Development Program (UNDP). India’s achievement on these goals is a mixed bag. While it has exceeded targets on some indicators like halving the percentage of population below the poverty line and net enrollment ratio in primary schools, many other indicators like share of women in non-agricultural employment and proportion of population with improved access to sanitation are matter of concern. This situation presents an excellent opportunity for social entrepreneurs to identify avenues of positive impact in line with the MDGs and thus assist national effort.

 

India is a vast country with multifarious arts and handicrafts that have been practiced for centuries. It is estimated that there are more than 6 million artisans in the country; most of them being women and people from economically disadvantaged sections of the society. Out of these almost 77% are from rural areas, according to E&Y. Low literacy rate, lack of access to financing or modern production techniques, and international markets compounded by exploitative middlemen combined with competition from mass produced goods have virtually handicapped this industry.  However, this offers several opportunities to effective social entrepreneurs to connect artisans to the mainstream economy, harness their unique talents, and ultimately bring prosperity to their households.

 

The Sun is Rising for India's Do-Gooders

With its diverse and complex socio-cultural environment, high economic inequality between urban and rural areas, and low human development index, India definitely demands skillful navigation of its unique challenges. But in challenges lie opportunities: focused government policies, quickly rising investor interest, and a raw entrepreneurial energy waiting to be unleashed has positioned India to take these challenges head-on. The sun is indeed rising here!