Social Entrepreneurship in India – Reality Check
[In continuation with our fortnightly theme on Social Entrepreneurship, here is presenting an article written by Sanjay Anandaram, entrepreneur-turned-investor. ]
“How many national scale, socially relevant, market oriented, impact making businesses can you name in India?” is a question that I asked at a recent gathering of friends. This is partly due to the fact that the only answer that springs to my mind is “Amul“, partly out of a certain confidence that the other person too cannot name any other business and partly out of a genuine desire to know. This question has intrigued me for some time now. Why haven’t there been many more Amul’s in our country? God knows there are enough and more social problems to be solved!
Amul was created by government initiative and by the passion of people like Dr Kurien. It wanted to bring out change in the way milk was produced and distributed on a massive scale. The vision was big, there was passion, there was capital (direct and indirect), there was terrific leadership, sustained and involved engagement with the grass-roots, and the formation of partnerships to create the impact via the business. If we are to get out of depending on the government for everything we have to think entrepreneurial.
Amul Ad on Michael Jackson's Death
So the question can be reframed to: cannot similar and more impact be delivered by engaging and unleashing the entrepreneurial energies of millions by providing the right leadership, vision, management, partnerships, and capital?
After all, how different are the basics from any other vision of a passionate entrepreneurial team? India, according to some estimates, has the largest number of NGOs per capita. Most of them are doing a glorious job in their respective domains, impacting the lives of citizens in localized spheres of activity. But given the size and multitude of problems confronting India a different approach is also surely required. One that unleashes the entrepreneurial energies of the people and dove-tails into the market economy. One that creates financial sustenance if not independence. Entrepreneurship is an acknowledged method of job creation and income (if not wealth) creation.
One such approach is micro-finance. Micro-financial institutions focus on creating micro-entrepreneurs by providing access to micro-credit. While there are mixed reports on the overall impact of such programmes (which have a lot to do with the operational aspects of programme implementation) MFIs as vehicles have the ability to impact very significant numbers of people as the Grameen Bank has shown.
But what if one could create a socially relevant “for-profit” entity with all the discipline and rigour of any market driven capitalist venture? One who’s mantra is scale, growth, brand building, market competitiveness, quality, and so on? One whose sole objective of profit making is to benefit the vast numbers of producer groups that develop the products for the entity that in turn drive revenues and profits?
For this to happen, the following attributes are desired:
a) Focus: Laser like focus and clarity on the objectives of the entity -market facing and social. Example: “We will build a profitable branded national children’s garments business with revenues of Rs 1000 crore in 10 years” is a market focus while “We will positively impact 250,000 producer groups in these 10 years by ensuring that 90% of profits are ploughed back into these groups” is the social focus.
b) Scale: Inherent in the goals above is scale viz, Rs 500 crore, 100,000 producer groups.
c) Transparency & Integrity
d) A well rounded, passionate, relevantly experienced and qualified management and advisory team
e) Measurement systems and processes
f) Leveraging of technology to drive scale and bring in efficiencies
g) Partnerships with providers of complementary goods and services
h) Developing a unique value proposition for its offering based on design, quality, price competitiveness
Interestingly enough, investment capital is usually attracted to profit making businesses that demonstrate the above attributes. Making profits is critical because it ensures sustainability of efforts. No one can keep pouring money into ventures without being able to measure outcomes. Profits are a key measure of outcomes.
Abandoning the charity mind-set is another key matter. Asking people to contribute for a “good cause” and for the sake of the soul is one thing while asking them to be investors in a socially relevant profitable business is another. But then what will the investors get out of this venture apart from feeling good? What if investors were entitled to say, 6% dividends after the social obligations were met? What if a detailed business plan was made available to investors explaining the business logic like in the case of any other entrepreneurial venture?
I believe that the entrepreneurial energies of producer groups, socially sensitive management teams, and other stake holders will be harnessed for a new paradigm in social entrepreneurship. Capitalism is an efficient creator of wealth while socialism ensures more equitable distribution of this wealth. A marriage of the two is surely desirable but needs integrity, capability, efficiency, and transparency. The good news is that such ventures are already being conceptualized even in India and the day is not far off when we will see the creation of many 21st century Amul’s in different sectors.
What do you think?
[Guest post by Sanjay Anandaram, entrepreneur-turned-VC, Republished with author's permission]
[Reproduced the article (was published a year back), since it's relevant to the current fortnightly theme]
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Related posts:
- Social Entrepreneurship – Interview with RangDe Founder (on Business Model, Startup Journey..and more)
- Defining Social Entrepreneurship – What it is, What it is not.
- Understanding Social Entrepreneurship and Traits of a Social Entrepreneur
- Social Entrepreneurship – Definition and Examples
- Seed stage investment in India : Reality check
About the author - Ashish Sinha is a Startup Mentor/Product Strategy Coach, and the founder/chief editor of pluGGd.in.
He has launched/managed couple of products (consumer as well as enterprise) in US and India, and now consults with startups/small businesses on their product/media strategy. He can be reached at: ashish (at) pluGGd.in [+91 98452 06443]
I'd love to see more...
Hi Ashish
There are other similar ventures making significant strides in combining both the motives though at a much smaller scale as compared to AMUL. The first thing that immediately comes to my mind is Arvind Eye Care in Tamil Nadu.. they are providing quality to people at very nominal price ( even free for very poor people) for about 30 years now.
Then we have examples of Fabindia and Anoukhi .. both have been able to create successful ventures selling garments, handicrafts etc from procured from rural artisans and thus generating livelihood oppurtunities.
Then Mcleod Russel’s work in the field of Bio-diesels…n if u will search u will find many more such stories
Most of the readers of this post must be aware of the AMUL story .. would encourage you highlight other initiatives doable even without government help ..
@Yeshu:
Other Examples are “Shri Mahila Grah Udhyog Lijjat Papar” which gave us brands like Lijjat Papar ,Sassa Detergent Powder, Ghari Detergent Cake .
Grameen Bank by Mohd Yunis , Gonofone and GrameenPhone, by Iqbal Quadir
HLL’s Shakti Project for increasing distribution reach in rural hinterland using MLM model is another example .
Most of the time social entrepreneurship is confused with charity . thats the biggest problem .
and i think All this new hype about Micro financing is a joke .from the get go most of the banks who gets in to Micro Financing assign a very high NPA rate to the Micro finance funds so parent entity never bet serious money on Micro financing. these bankers organize conferences to understand the Micro Financing but they would do good to spend some time with local “Sahukar” in village . and let me tell you all the sahukar are not like the one portrayed in Bollywood Movies .
“The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits” by CK Prahalad covers this in great depth. Social entrepreneurship definitely makes sense and is getting a lot of focus off-late from Private Enterprise. I wanted to add a couple of points
1) Governments also need to come to the party with incentives for Private Equity/Venture Capital to invest in such causes.
2) The media needs to play a greater role in highlighting such efforts. Something along the lines of
– A “Social Entrepreneur of the Year” award (if one doesn’t exist already).
– Probably even a reality show which showcases such efforts.
@Srinagesh
… can u mail me dat book if u hv ny softcopy ..
[...] is a gutsy initiative and is a startup to watch out for – after all, social entrepreneurship is not an easy ball game in India. What do you [...]
What you just put across are words that have no social relevance unless put into action! A lot of people wonder why there have been so few “Amuls” in this huge country. If you just zoom out a little and look into a parallel universe, you would realize that hockey is the only game that India ever won a gold medal and those golden days are far gone! Isn’t the reason self evident?
As for the recent increase in the background noise attributed to social “for-profit” entrepreneurship, a lot of it is the outcome of pure greed and the reason for the vacuum is consistent, which ever sector you choose!
Hi,
Our Faculty Of Management Studies(BHU) is planning to organise one-day seminar on Social Entrepreneurship in India on 17th January 2009 at Varanasi. Any one enterested is welcomed to contact us.
Oju Welfare Association is a non-profit making, non-political, non-governmental philanthropic organization based in Nagalagun, Arunachal Pradesh. It works for the empowerment of women and the welfare of children to achieve a holistic socio-economic and environmental development of communities in Arunachal Pradesh.They also conduct health awareness camps to protect and promote tribal culture and traditional handicrafts.
The persons involved with it are really putting good effort.As Oju welfare is not located in mainland of country,so its not in the limelight.
Sanjay,
This is a fantastic post and I just happed to read it. As other readers mentioned, there are various other social enterprises in India which focus on solving a particular social problem.
The main reason for not many individuals venturing into this area is because of the lack of education. First of all, many people (including me) do not understand aspects of entrepreneurship and adding to that, Social Entrepreneurship is far away from the common man. Unfortunately, not many educational institutes in India offers courses on Social Entrepreneurship (EDI offers one post-graduate program)
@Srinagesh Eranki: Your post attracted me immediately as you brought out CKP’s name. The book itself is a great contribution, however, please be careful that not all case studies in the book are showcasing Social Entrepreneurship
This is just FYI. Case’s which can be referred to are Amul, Arvind Eye Clinic, Jaipur Foot, Cemax.
Coming to your point of Government initiatives, there are a plenty of them for people to take advantage. Our Indian Government has few of the best policies for people who work for social change. It is a matter of interested parties to understand them and make use of them.
Media definitely needs to play a greater role in many aspects of society, unfortunately, all organizations are only interested in making money and have no time for actual stories…a pathetic situation in almost all the countries around the world. Media has time, money and patience to showcase what Madhuri Dixit’s life is or recipes at Sachin’s restaurant…but have no time or avenue to showcase social change makers information.
Adding to your point of awards, there are quite a few global organizations, which come to India and award Social Entrepreneurs in appropriate way. I am listing few organization which have operations in India below:
Ashoka
Smile Foundation India
India Rural Development Fund
India Development Foundation
The George Foundation
The Nand & Jeet Khemka Foundation
Bhagavatula Charitable Trust
Karuna Trust
Vivekananda Girijana Kalyana Jendra
SELCO
The Nanad & Jeet Khemka Foundation gives away Social Entrepreneur of the Year award to deserving candidates in association with Schwab Foundation. I have a post which highlights 2007 selection and the final winner on my blog http://harisays.wordpress.com/2007/12/31/social-entrepreneur-of-year-2007/
I suggest an insightful book – How to Change the World by David Boreinsten. This book gives insight into the working of Ashoka Foundation and has excellent case studies of Social Entrepreneurs in our Country. BTW, India has more than 250 Ashoka Fellows.
It is just not “profitability” or making money which drives entrepreneurs. It is the pace at which your idea comes to light and social status is what counts maximum points. Social Entrepreneurship is a journey, where you might reach your destination or might not. You might enjoy the benefits, but high chances are that, next generation will see the fruits of the seed you have planted. In today’s education system in our country, the term “Entrepreneurship” is not found in any book, it is only the interest of the individual to understand. There are organizations which invite people and organize speech’s and workshops on Social Entrepreneurship, but unfortunately the same organizations do not back up people who are interested.
Before I close, just wanted to share my understanding of Microfinance (MFI). If you notice, MFI is a very profitable business where the returns of investment are on a great scale of 97%. If you carefully examine the interest rates of these organization, they are close to our credit card rates
My startup has been working with Indian schools for last two years. We adopted a variable pricing model where money charged for some services helped us provide educational software and IT services to other schools free of cost.
At the ground level a social entrepreneur like me faces these problems -
1. If we are not that concerned with making money for ourselves, we surely don’t have money to give away in commissions and kickbacks. Number of school principals in Delhi who would award a contract without a cut, is not more than a dozen.
2. Lack of trust and a feeling of general hopelessness among the customers. We Indians don’t trust each other much and certainly not someone who comes to us talking of a greater good.
3. Attractiveness to investors – Lets face it…a social enterprise is not attractive to the VCs or so called angels. They believe they are already doing India a favor by their mere presence.
Winner of the 2009 Sankalp Award for Social Entrepreneurship (For Healthcare Inclusion) and Business in Development Award in 2007, Vaatsalya Healthcare is one of the few organisations focussed on democratising healthcare in semi-urban and rural India.
A venture funded company (Seedfund, Aavishkaar and Oasis Fund), Vaatsalya is building India’s first network of hospitals focussed on semi-urban and rural India.
More at http://www.vaatsalya.com
Another example I can think of is Rangde.org connecting some 350+ investors with 1000+ micro-enterprises investing ~60 lakh across the country. My estimate is that they have generated at least 2500 direct jobs over last one year. I find them market driven and brand conscious and would probably reach a tipping point once GoI allows them to accept foreign investments.
Thank you for this nice post. i was actually searching for the material on Social Entrepreneurship. i got it .thank you once again to the owner of this blog.