Creating Value at the Bottom of the Pyramid

Thursday, July 26, 2007

Acumen has been spotting entrepreneurs keen to invest money in low-income markets in the areas of health, energy, housing and water.

Can markets work for the poor? Acumen Fund, a non-profit venture fund, believes so. In Mumbai, the fund has tied up with the pharmacy chain Medicine Shop, which has 140 shops in high-end locations like Gurgaon bordering Delhi.

The tie-up has given Medicine Shop, a new identity. It has opened new branches in the slums of Mumbai. The shops have also been renamed Sehat. Eight Sehat pharmacies started functioning in the past year and the number is likely to go touch 200 in three years.

Sehat has been equipped with a vision centre and a doctor?s clinic. The fee charged is Rs 20. Pathology and health insurance services are also available. The medicines are provided free.

The facilities are on a par with many of the government?s primary health centres. Qualified doctors man the clinics and there are three patient counselors too.

The entire basket of Acumen’s health investment in India is worth $2 million (Rs 8 crore).

Varun Sahni, country director, Acumen Fund, explains the commercial angle behind this seemingly philanthophic endeavour.

“The cost of real estate is a deterrent in setting up medicine shops in cities. Besides, the social impact of providing such a facility is going to fetch long-term returns on the investment. The poor spend huge amounts on medical bills and often get into debts.”

With a team of five people, Acumen has been spotting entrepreneurs keen to invest money in low-income markets in the areas of health, energy, housing and water.

Sahni says Acumen?s aim is to do philanthropy not raise money from the market. The fund is celebrating the fact that 25,000 pairs of glasses were sold in rural India last year. And it had a role to play in it.

The glasses were sold in the villages of Andhra Pradesh through 300 entrepreneurs of an NGO, Skojo Foundation, which was supported by Acumen through loans. Acumen provided a loan of $1.2 million for the project.

In Andhra Pradesh, again, 100,000 people in 50 villages have access to safe drinking water, thanks to 30 community water filters.

The community pays 10 paise a litre, and if a person paid Rs 2 a day the returns would be enough to pay for the cost of the filters, the maintenance and also for the setting up of more filters. Each filter costs Rs 20 lakh and has a capacity of 10,000-30,000 litres and serves 500 households in each village.

Acumen has made an equity investment in the project and it expects to recover its money in five years.

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Source: Business Standard (link opens in a new window)