However, the area remains nascent and there is a dearth of people and institutions that understand the Social Sector in India properly. Thus, there needs to be collaborative effort in achieving the goals as outlined by the UN\u2019s Sustainable Development Goals (SDGs)(1)<\/sup><\/p>\n\n\n\n The Sustainable Development Goals\n(SDGs)(1)<\/sup>, also known as the Global Goals, were adopted by all\nUnited Nations Member States in 2015 as a universal call to action to end poverty,\nprotect the planet and ensure that all people enjoy peace and prosperity by\n2030(1)<\/sup><\/p>\n\n\n\n I believe Nonprofits and NGOs have spent years focussing on creating a positive impact and thus have the required knowledge and expertise of the sector. They know which strategies can achieve maximum impact and how they can be achieved. Private institutions, on the other hand, have focussed primarily on financial returns and thus have an expertise in understanding business models that can generate a return.<\/p>\n\n\n\n By combining the expertise of these\n2 groups, I believe we can collectively create ventures that not only provide a\nfinancial return but also create a positive social impact. An example of the\nsame would be the \u2018The Educate Girls Development Impact Bond\u2019<\/em>, where an investor\n(UBS Optimus Foundation), an NGO (Educate Girls) and a foundation (Children\u2019s\nInvestment Fund Foundation), all came together to achieve not only financial\nreturns of 15% but also a huge social impact (significant learning gains over\nthe 3 year period)<\/p>\n\n\n\n Development Impact Bonds (DIBs) or\nSocial Impact Bonds (SIBs) can help the NGO get the required funds, provide the\nflexibility to achieve high impact, and also provide a financial return based\non pre-defined outcomes. <\/p>\n\n\n\n Currently, most people consider their investments separate from their corpus for donations. This leads to a problem in which people end up setting aside minuscule amounts for donations and keep the larger chunk of the pie for their investments from which they wish to earn a financial return. <\/p>\n\n\n\n NGOs lack the funds necessary for\nthem to achieve scale and generate a greater impact. Given that Impact\ninvestments have the potential to bridge this gap of scarcity of capital, I\nbelieve nonprofits can achieve a greater social impact, as well as generate\nfinancial returns for their investors. <\/p>\n\n\n\n Additionally, private investors are\nbecoming more and more socially responsible and are paying greater attention to\nwhere their money is being invested in and the societal impact their\ninvestments are creating. Investors are now motivated towards achieving high\nsocial impact with their investments, viz-a-viz, not sacrificing a huge return\nin the process. Thus, socially responsible and high impact ventures are likely\nto get more funding than the traditional business models in the future.<\/p>\n\n\n\n We have already started on this\njourney and India is at the forefront of this change. I believe the next\ngeneration is looking not just towards risk and reward, but also towards having\na positive social impact via their investments. As we become more and more\naware of the impact of our investments, and understand its importance, this\nwill lead to an environment where only socially positive businesses would\nthrive and thus we would have been able to create an equitable and harmonious\nenvironment. <\/p>\n\n\n\n The Indian microfinance sector is a good\nexample of how the narrative of impact investments went from purely social\noutcome-based to strong commercial-based models. <\/p>\n\n\n\n Microfinance initially started as a\nnot-for-profit model trying to solve the problems of bringing finance to the\nunserved masses at the bottom of the socio-economic pyramid, where traditional\nfinancial channels were unable to reach. But with the liberalization of the\nIndian economy in 1991, the microfinance sector witnessed strong growth. Private\nsector actors leveraged the self-help group lending model, and created business\nmodels that were commercially viable and scalable. The strong repayment rates\namong these (often women-directed) self-help groups, along with Micro Finance\nInstitutions\u2019 (MFIs\u2019) joint-liability lending model addressed credit-risk\nissues and increased the availability of capital in the form of credit from the\nprivate sector. Meanwhile, equity capital from investors \u2013 among them Caspian,\nAavishkaar and Elevar \u2013 contributed to the growth of this space.<\/p>\n\n\n\n As of March 2017, the total gross loan portfolio of India\u2019s\nmicrofinance sector stood at approximately US $16.4 billion, and it had\nattracted cumulative investments of approximately US $1.5 billion from April\n2011 to that date. This represents almost 30% of the total impact investments\nin the country, and these investments have led to some of the most profitable\nexits by investors. For instance, impact funds Aavishkaar and Caspian (India\nFinancial Inclusion Fund) saw 13x and 4.5x return, respectively, on their exit\nfrom Equitas through an initial public offering in 2016.<\/p>\n\n\n\n Recently, especially with the Covid-19 crisis, there has been a\nshift in the focus areas of NGOs as well as investors. Both players are now\nrealizing the immediate concern of skilling and empowering the underprivileged\nto prevent a potential collapse of the economy. The lockdown has exposed\nseveral harsh realities that the underprivileged face, and organisations are\nrevamping their programmes and strategies to account for these. I believe we can achieve a positive\nsocial impact for the beneficiaries as well as create a lucrative financial\nreturn for the investors by setting up a vocational training school, thereby\nimparting vocational skills to the underprivileged. <\/p>\n\n\n\n This can be achieved in the\nfollowing way:<\/p>\n\n\n\n Step 1:<\/strong> Setting up a \u2018Vocational Training School\u2019 \u2013\nThe investor would provide the funds required for the set up and upkeep of the\nfacility. The money would be invested in procuring land, setting up of\ninfrastructure, purchasing white goods and raw materials, and onboarding\nprofessionals that will carry out the training.<\/p>\n\n\n\n Step 2:<\/strong> We would then partner with NGOs and other\ninstitutions that can help us connect with the beneficiaries interested in\navailing this program. The key features of the program would be that the\nbeneficiary would not pay anything for the training or the material required\nduring the course of training. However, they will need to sign a bond in which\nthey shall be liable to share a fraction of their earnings post the completion\nof their course for a period of 5 years. This will help the underprivileged get\nvocational training at no cost and also aid the investor in earning returns\nafter the completion of the training. Beneficiaries would include children aged\n16 and above as well as young adults who show aptitude for the skill\/opportunities\nin question.<\/p>\n\n\n\n Step 3: <\/strong>Helping the now trained professionals sell\ntheir art\/product by leveraging the vast network of the NGOs and the private\ninvestor. Exhibitions could be planned to showcase the art\/products of these\nyoung talented professionals, thereby not only generating revenue for these\nprofessionals but also help in paying back the investor. The same products\ncould be used as in-house merchandise for the investor, thereby increasing the\ncircle of visibility. <\/p>\n\n\n\n Accomplishment: <\/strong>The investor will not only achieve a\npositive social impact by making several young underprivileged become\nself-reliant but also achieve a financial return in lieu of the paybacks\nreceived from the sale of the goods. After a period of 5 years, the professional\nno longer has to pay anything to the investor and thus can significantly\nincrease their earnings and are no longer dependent on anyone for their\nlivelihood. In addition, the youth gains access to employment opportunities,\nthereby averting a social disaster. The ultimate goal would have been achieved\nvia this project- providing skills to the underprivileged thereby ensuring they\nhave access to income to meet basic needs, and empowering them to escape the\nvicious cycle of poverty. <\/p>\n\n\n\n
\n\n\n\nPreviously successful example: Microfinance in India(2)<\/sup><\/h3>\n\n\n\n
\n\n\n\nGoing Forward: How Can we Achieve Success?<\/h3>\n\n\n\n
Case in Point: Setting up a Vocational Training School<\/h3>\n\n\n\n
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