Ashish Gupta

Social Capital Markets 09: Indian Social Enterprises

Editor’s Note: This post also appeared on ThinkChange India, a partner of NextBillion during the coverage of this year’s Social Capital Markets Conference.

From what is one of the most exciting laboratories for the social enterprise movement,SoCap09 brought together examples of successful “experiments” from India in a panel entitled “Indian Social Enterprises head towards Sustainability, Scalability.” Charly Kleissner, co-founder of Social Impact, moderated a well attended panel of three entrepreneurs that Social Impact supported this year: Annapurna Mamidipudi from Dastkar Andhra, Rajendra Joshi from SAATH and Jabeen Jambughodawala from SAHAJ. These three inspirational social entrepreneurs have also been accepted to theGlobal Social Benefit Incubator (GSBI) program for high potential social entrepreneurs.

The panel kicked off with the social entrepreneurs introducing their work. Jabeen described how SAHAJ provides home-based employment to migrant, tribal women by selling their skilled traditional handicrafts to national and international markets. Rajendra described how SAATH serves the urban poor by providing vocational training for youth, operating an MFI and running urban resource centers in slums, all with a revenue model. Annapurna from Dastkar Andhra provides weavers in the declining handloom industry with employment by retailing handwoven, naturally dyed and eco-friendly garments. She also displayed her entrepreneurial skills by showcasing shirts and newspaper bags to “her roomful of potential customers.”

The magic word with social enterprises is “scale,” and the three entrepreneurs have bold plans of achieving it. Rajendra hopes to expand the reach of Saath’s urban resource centers from 30,000 people in one city to 1 million people in 5 cities. SAHAJ aims to scale from 3000 women artisans to 15,000 artisans by 2014, or 20% of skilled migrant population. As Charly remarked, in a country where big numbers are common, these plans are still quite ambitious in comparison. Annapaurna described the role of her mentors at GSBI in helping her answer the “how” of scalability – in her case, they developed the idea of building a market by developing a recognized brand for her products.

Prefacing that “scale without sustainability is not scale at all,” Charly asked each of the panelists to describe their approach to sustainability. Annapurna challenged the audience to think beyond short-term financial sustainability. She acknowledged that while the handloom industry is not financially feasible on its own, the alternative of urban migration is not socially sustainable. Jabeen has been able to achieve profits of 40-100% for Sahaj by selling through various distribution channels, but is still frustrated by the massive percentage of revenue that the middlemen retain. She hopes to develop a brand and connect directly to the market, potentially increasing profits to 150%. Rajendra mentioned that with a USD100,000 grant, he could only serve 3000 households. However, if he could provide services that people could pay for, he could serve 100,000 poor families.

Rajendra’s answer to the sustainability question resonates with me because it aptly summarizes a common theme between the three panelists – they view revenue-based models as simply a tool for expanding and sustaining their missions. Coming from the MBA world, this is a refreshing viewpoint. It reminds me of the recommendation of the2nd generation BoP protocol to think beyond “Selling to the Poor” and engage the BoP as a business partner, not just a consumer. Jabeen echoed this when she expressed how it made her “fully unhappy” that the majority of conversation at the conference is around investing in businesses to sell solar panels and mobile technologies to the poor.

While the conference has been highlighting the gradual maturation of impact investment as a sector, a theme that emerged from the panel was the disconnect between the investors and the practitioners in the field. When asked by an audience member on “How would you value your enterprise,” Annapurna again challenged the audience to think of value beyond financial terms, and think of how to value the lives of weavers who wouldn’t eat if Dastkar didn’t provide them with work, and of the 18 years of her life dedicated to this endeavor. Rajendra again put it quite aptly, “just because we don’t understand IRR doesn’t mean we’re not investor-ready. We will have to take time to learn these concepts, or you will have to talk to us in our language.”

Given that the newly formed social enterprise world tries to bring together two extremely disparate communities of grassroots community workers and financial investors, the “storming and norming” phases may take longer than for most teams. As Alvaro Rodriguez-Arregui from IGNIA mentioned on the opening day, what’s cool is that SoCap09 is bringing these different definitions of “social capital” to work towards a common goal.