NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 20, 2013

Impact investment funds and social entrepreneurs are now targeting social ventures that cater to the urban poor segment. There is a visible departure from earlier practice where the focus of most impact funds was on funding micro finance institutions, catering largely to the rural poor, and similar base-of-pyramid ventures in a rural set up.

Although there is a slackness in overall investment volume and in number of deals in the first 10 months of current year in the impact investment segment compared to last year, urban poor-oriented social ventures have continued to receive investor traction, both at seed and early-stage. However, despite investor interest, most such urban-poor centred social ventures are still figuring out the path to a sustainable business model.

Hum, a group-buying venture, targets low-income communities in re-settlement colonies by offering them bulk discount on daily-use items and durables, ranging from five per cent to 12 per cent. “Most of these people are price-conscious, and buy in smaller quantities, paying a higher unit price,” says Vipul Prakash, an impact investor who seed funded the project in January this year with around Rs 2 crore. Currently, operational with 500-odd families in New Seemapuri, a re-settlement colony in east Delhi, Prakash says the model will become viable only when it reaches out to 25,000 such families.