Analysis: Why South Asia has Transformed into a Social Enterprise Hub
By Nidhi Chaudhary
There are hubs for social entrepreneurship around the world—from San Francisco to the United Kingdom to Nairobi to Mexico City. No one can deny that India has rapidly become a leader in social innovation, rapidly harnessing the momentum in the sector and developing an ecosystem that is supporting social entrepreneurs with incubators, mentoring, and financing.
In an April 2012 study of the social entrepreneurship landscape in India, Intellecap, a leading consulting company in the space, found that the sector has really taken off since 2005. While it is a young industry, existing social enterprises are working aggressively to secure funding to scale operations to bottom of the pyramid customers. Nearly one in three is in a growth stage, with the most dramatic increases for companies focusing on energy and agriculture-related solutions. Despite all of this, Intellecap found that enterprises are being challenged to meet investor expectations—while they are eager to grow operations, funders are not quite convinced that they are ready. So, while social entrepreneurs are excited to consider next steps, they clearly have a lot of learning to do—and must do a lot more to prove positive outcomes, financial and social. But, if they can, India could become a hotspot and global test ground for impact investing.
Dasra, UnLtd India, Villgro, and the Centre for Innovation, Incubation, and Entrepreneurship at IIM Ahmedabad are among the growing number of incubators across India that are cultivating and supporting local entrepreneurs in their own communities. Acumen Fund has invested $21.6 million across India since 2001 and started a local office in 2006. Omidyar Network established in-country operations in 2009 and has since invested over $60 million into Indian ventures, with a commitment to invest an additional $200 million by 2015. Aavishkaar, a home-grown venture fund, is the first in India to invest specifically in those enterprises focused on rural areas. From Khosla Impact Ventures to Unitus to LGT Venture Philanthropy, there are now eighteen funds specially targeted to supporting social ventures in India.
The annual Sankalp Forum brings together the who’s who of social innovation and impact investing in South Asia like no other conference in the region. From Gray Ghost to Acumen, to d.Light and Husk Power Systems, and even government agencies, the Forum provides access to investment opportunities, capacity building, and knowledge sharing—plus it gives you a chance to network and exchange business cards like no other.
It’s obvious that India, despite its challenges, is a burgeoning space for social enterprises. Lindsay Clinton, the editor of the now defunct Beyond Profit, offers several reasons why the country has been so successful in cultivating entrepreneurship: there is one NGO for nearly every four hundred people in India—given a population of one billion, a little math will tell you that there are 3.3 million NGO’s around the country. Social enterprises are a natural next elevation for this enormous sector. With forty percent of the population living on less than $1.25 a day, there is an obvious need and plenty of opportunity to pilot initiatives. Clinton also points out that the power of language should not be underestimated—with English as a national language, social entrepreneurs have a competitive advantage when it comes to international business competitions and other funding opportunities. Finally, the culture of community allows entrepreneurs to develop powerful support networks that can provide resources they may not have access to.
Year after year, Echoing Green receives a significant number of applications from the region and this year, we have more Fellows seeking to create impact in Indiathan ever before. From Avanti Fellows, a program to improve college readiness for disadvantaged students, toSaveLIFE Foundation (pictured left), an emergency response system that integrates layers of first-responders, to Frontier Markets, a sales front to educate and increase access to reliable, clean energy products, these social enterprises are reflecting the enormous growth (and potential) in the sector at large.
But, as we are discovering through our Work on Purpose program, Fellows are switching fields to address deep-rooted issues. Akshay Saxena and Krishna Ramkumar had careers at Boston Consulting Group before they discovered a passion for education and economic opportunity. Byomkesh Mishra, founder ofMedha (pictured left), was leading financial inclusion programs at The Royal Bank of Scotland where he discovered what mentoring and employability training could mean for India’s burgeoning millennial population. Zubaida Bai, founder of AYZH Health and Livelihood, is building on her expertise in healthcare and product development to create new, affordable technologies for women. And as our recent Harvard study found, while these Fellows are addressing large-scale issues of health, education, and energy, they are piloting in local communities and building solutions that are rooted in practice.
While India might be demonstrating the most rapid growth in social entrepreneurship, it’s impossible to ignore the progress of Grameen and BRAC, among the world’s largest NGO’s in the world, in the region. Innovations like Grameen Phone and Danone are quietly moving Bangladesh beyond microfinance solutions, yet systems-changing ideas from individuals are still slow to come to the forefront.
Pakistan presents a different story. In Echoing Green’s twenty-five year history, only a small percentage of applications have come from those in Pakistan and only in the past few years have they risen to the top for innovation and sustainability. Lack of infrastructure, support, and funding has made it difficult for social entrepreneurs to find a foothold in the country. Also, government support for preferential tax policies for impact investors lags behind other countries. Despite all this, and like any other country in the region, there is great need for social change and even greater entrepreneurial potential. With sixty percent of the population living on less than $2 a day and a population of 170 million, productive enterprises can go a long way to contribute to economic growth and development.
Sarah Belal (pictured right) is our first Fellow to focus on social change in Pakistan. A trained lawyer registered to practice in front of the highest courts in the country, Sarah created Justice Project Pakistan in 2009 to provide direct legal representation to the most vulnerable prisoners in the criminal justice system. Deep in the trenches of social justice, JPP is defending those individuals no one else wants to stand up for and stirring well-meaning debates about integrity, fairness, and due process.
But, what about Sri Lanka? Nepal? Or Bhutan? Why aren’t we seeing more social innovation coming out of these countries in the region? How can India play a role in advancing social innovation across its borders? Late last year, the Export-Import Bank of the United States announced a plan to invest nearly $200 million in India to support solar energy innovation. Maybe it’s time for India to take its successful social innovations to other countries.
The Heinz School at Carnegie Mellon looked at 800 socially innovative organizations across the United States and concluded that the size of the city, the presence of universities, and a high number of supporting organizations created hubs for innovation in New York, Boston, and San Francisco. How do organizations outside of these hubs gain access to investors, but perhaps even more important, where and how do they learn to become competitive on the international level—because let’s face it, that’s where you find the money. There is a debate among all funders, and perhaps even across the aid community—do you support brilliant individuals to go into other countries to offer solutions to big problems, or do you concentrate on cultivating passionate individuals in their home countries? What is the most effective way to address global issues?
As funders, should we focus on partnering with local incubators and universities to nurture local entrepreneurs? What if Stanford, Harvard, Duke, and IIM Ahmedabad developed affiliate incubators in Russia, Vietnam, and Thailand? Or should we focus on cultivating large diaspora populations that are now living around the world? Many are eager to find ways to contribute to their home countries and perhaps there is a great deal we can all do to foster and support an entrepreneurial spirit
Of course, there is no easy solution nor are any of the solutions so easily categorized. What we can do, however, is to take lessons from these hubs in India, Kenya, Brazil, and Mexico and find ways to translate their infrastructure, and frankly, momentum to drive entrepreneurship where it could create tremendous social change.
Graph source: Intellecap, On the Path to Sustainability and Scale: A Study of India’s Social Enterprise Landscape, April 2012
Nidhi Chaudhary is a social enterprise consultant. This article originally appeared on Echoing Green’s blog.