Sankalp and Emerging Investment Trends in India
May 06, 2016
Last week in Mumbai, India, over 500 leaders converged for the annual Sankalp Forum. The conference has become one of the most important annual events for organizations, entrepreneurs and impact investors focused on the global base of the pyramid, or those living below, at or near the global poverty line of $1.25 a day.
The theme of the conference “Innovations for the Next 3 Billion” reflects the growing consensus among development professionals that innovation and patient capital will be the means by which global challenges of economic development, improvements to health and access to education will be addressed. The conference was full of entrepreneurs pitching technologies to solve these challenges and investors looking to strategically support their efforts. In addition, representatives of multiple governments – from the United States to India, Malaysia and Vietnam – all attended with the hope of learning how to nurture innovations connected to their national goals.
The India Investment Initiative sits at the intersection of many of these trends, and our presence at Sankalp was well received. Launched in 2015 by President Obama, the initiative provides a way for Indian Americans to invest, starting from $20, in businesses that foster social good across India. Through Calvert Foundation’s Community Investment Note®, investors can help support social enterprises in India and receive both a social and financial return (principal invested plus interest). To date, we have committed $10 million to financial intermediaries that finance small and medium enterprises in India that work on topics from health to education to access to finance.
There was excitement among the Indian entrepreneurs and impact investors at Sankalp that the India Investment Initiative is engaging Indian Americans in a new and unique way to unlock much needed capital. Private investments from Indian Americans are poised to be a game changer for social enterprises in India as a potentially large source of capital that comes without the constraints of grant or government funding.
Nish Acharya and representatives from the World Bank speak about the role of government in impact investing.
Although impact investing as a whole has been rapidly growing in India over the last few years — according to Amit Bhatia of the India Impact Investors Network, there are over 50 impact investment funds in India today that have collectively invested over $25 billion in the country — there are still significant gaps in the market.
One of the challenges that was repeatedly raised throughout the conference was the lack of follow-on capital for social enterprises and companies serving the base of the pyramid. While early stage impact investing is available and growing, there is a dearth of growth capital for moving innovations from “proof of concept” to the growth stage. For these enterprises, raising $5-10 million has been difficult. There are few foundations or governments providing that level of capital. Banks are hesitant to lend to social enterprises and there are only a few investment funds in this space. Entrepreneurs questioned how their enterprises could scale without this critical capital infusion.
It’s this gap of critical financing to grow small and medium enterprises — estimated at USD 7 billion (INR 469 billion) — that the India Investment Initiative is addressing.
Overall, the world of social enterprise and innovation for the base of the pyramid continues to grow and mature. Entrepreneurs, impact investors and development leaders continue to become better educated about business models, finance and public policy. This will be important as these innovations and enterprise become more mainstream in the upcoming decades.
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