Author: Arvind Agarwal, Founder & CEO – C4D Partners
Publication: Times of India
The growing demand for impact-driven finance and socially responsible enterprises has led to new ways of putting capital to work worldwide. In the past decade, an emerging asset class – Impact Investment has challenged long-standing norms and influenced a paradigm shift towards people, planet and profit. In 2020, the global impact investment market surpassed $715 billion in assets under management. With a deluge of investments sweeping the globe, impact investment is showcasing the potential to leapfrog the gaps traditional financing is unable to fill, and in the process, bringing new markets into existence.
At a time like this, India is fast becoming a breeding ground for many impact-driven innovations. Home to more than 600 impact enterprises, India has attracted over $11 billion impact-driven capital since 2010 that has affected over 500 million lives. As India’s startup ecosystem continues to grow and evolve, the desire to solve for impact is sparking innovation which is unlocking several market segments once considered difficult or unprofitable to serve.
For long, formal lending institutions and banks have held the notion that people living in poverty were not worthy of credit. However, since Bangladesh’s microfinance model of Grameen Bank, countless micro financing ventures have erupted and are tapping this high potential market segment which was once considered unserviceable. Since then, social enterprises in India like Ananya Finance, and Aviom India Housing Finance are facilitating underserved communities to access formal credit. Purpose-driven finance is helping these social enterprises to reach sections of the population such as women, smallholding farmers and low-income groups that were previously excluded from the ambit of financial inclusion.
More than half of the Indian population resides in rural areas, and most of them still find it inconvenient and expensive to procure contemporary products and elevate their lifestyles. Capitalizing on this rural-urban disparity, social enterprises like RubanBridge provide rural customers access to a village commerce network and offer last-mile delivery services by employing the local rural youth. Fuelled by aspirations for a better life, this market offers an opportunity of over $50 billion. Similarly, Mirakle Couriers, a last-mile delivery enterprise employs low-income hearing disabled people to destigmatize deafness and overcome logistical challenges. India has approximately 63 million individuals with hearing disabilities. While there is a dearth of work opportunities for people with disabilities, innovative startups like Mirakle are enabling them to earn an honest living and become financially independent.
Home to the second-largest population in the world, India generates over 960 million tons of bulk of waste each year. Municipalities have been facing issues related to the collection, treatment, and management of solid waste. Owing to an improper waste management system, this waste ends up adding to the large mounds and landfills, posing serious environmental and hygiene threats. This is where impact investments in social enterprises like Saahas Zero Waste have proven to successfully address the challenge through innovative waste management solutions. With the availability of purpose-driven capital, such social enterprises can address larger markets to resolve environmental challenges while generating employment.
At the frontier of impact are the sustainable development goals pledged by nations across the globe to accomplish by 2030. With less than a decade remaining and an annual investment gap of $2.5 trillion, the SDGs seem more like a Utopian dream. However, where private and public investments fall short, social impact investments are filling this gap. Social enterprises like Freyr Energy, Ecolibrium Energy, WEGoT Utility, Swajal and S4S Technologies, among many others, are paving the way towards affordable and clean energy, clean water, no poverty, zero hunger and climate action. These companies are expanding the scope of sustainable and inclusive social, environmental and economic development to newer markets and projecting robust growth opportunities.
India is a nation swarming with social, economic and environmental issues and there is plenty of room and potential for purpose-driven finance to alleviate socio-economic issues while unlocking new market segments. While the innovation demonstrated by unicorns receives applause and capital from investors worldwide, the impact generated by social enterprises and impact funds touch a billion lives. Impact-driven innovations are playing a crucial role in unlocking viable opportunities otherwise overlooked by traditional investors and entrepreneurs. In this digital-first world, investing with an impact-first lens can go beyond offering capital or forging new markets; it can change lives.
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