Social investing -- Innovating to bridge the gap between India and Bharat

As has been said by one of the greatest minds, Albert Einstein “You can’t solve a problem at the same level that it was created. You have to rise above it to the next level”. Therefore, to think of new ways to solve problems and come out trumps, one has to “INNOVATE”.

Innovation has historically helped to resolve many large-scale issues and bring about evolutionary changes as well as revolutionary disruptions.

Social entrepreneurship is trying to solve some of the global issues of financial inclusion, gender neutrality, providing access to livelihoods, education and healthcare to the less privileged.

This is a daunting task and the only way to expedite this journey is through disruptive ideas born out of innovation. The good news is that investors are showing an increasing appetite to bridge the India v. Bharat gap.

Social investing is a great merger of the “Head and the Heart” -- it thinks with the head and takes decisions with the heart.

Thus, it has the ability to take risks as an early mover, de-risk the business model and encourage an environment of change and innovation at a large scale. This approach opens the doors to making path-breaking innovations for solving new world issues of providing access to the less privileged through technology -- digitisation, artificial intelligence, data analysis and machine learning.

As per a Mckinsey report, historically, 62% of impact ventures are seeded by impact investors. Also, 33% of the investors and 58% of the fund managers in the impact space are keen to invest at Seed/Series A stage.

A high-risk investment by an impact investor succeeded when it seeded a dairy company that had a high demand for its products but was not considered commercially conducive by mainstream investors. The company now processes 40,000 litres of milk and milk products daily and supports ~10,000 farmers.

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How is innovation driving social change?

In India, impact investors have seeded various ventures across agriculture, healthcare, education and fintech, which, in turn, are creating large-scale impact. The impact funding is enabling these social entrepreneurs to innovate across various aspects of the value chain:

1. Customising products for the semi-urban and rural population.
2. Changing the go-to-market approach to improve penetration.
3. Altering the customer sourcing strategy to lower costs.
4. Use of technology to create out-of-the-box products or expand the reach and touch millions of lives.

Some fintechs are driving financial inclusion through innovation in a variety of ways:

• Simplifying digital tools and interfaces to enable low-literate users to independently use technology and access information, content and services
• Creating digital platforms for promoting savings and enabling peer-to-peer borrowing
• Creating simple, low value and easy to comprehend insurance products

In education, impact investors are funding players to create differentiated pre-primary and primary education models for semi-urban and rural areas to complement the poor government education infrastructure.

Particularly, the disruption created by the use of technology to reach students who do not have access to quality education has significantly changed the education landscape. Today, a student in a village can access content for higher education as well as test prep for competitive and government job exams. This saves him/her the cost and effort of moving to larger cities.

Healthcare too has effectively leveraged technology to create out-of-the-box products – tech-driven telemedicine platforms are bridging the need gap of primary care in Bharat. Similarly, MedTech devices which help to create step-down ICUs, monitoring devices or portable devices which can reach the patient are path-breaking innovations, especially useful during difficult times like the COVID pandemic.

To summarise, the following trends have helped impact investing drive change through innovation:

1. Increased appreciation from investors as they see the initial proof of concept fructifying in the last few years.
2. Rise of an ecosystem which helps create and promote more startups and social entrepreneurs – incubators, accelerators, foundations.
3. Increased advancement of technology-driven digitisation.

India is at the cusp of a major breakthrough in social innovation as the journey of its emerging ranking in the world will continue only if it is able to drive inclusive growth across the country.

This makes the role of impact investors even more critical as they are the pioneers in helping the government bridge the gap between Bharat and India.