MICROFINANCE PAPER WRAP-UP: “Invest. Catalyze. Mainstream. The Indian Impact Investing Story;” by Nisha Dutt, Usha Ganesh, Prashant Chandrasekaran, Payal Agarwal, Samved Patil, Ankit Gupta; Published by Intellecap

“Invest. Catalyze. Mainstream. The Indian Impact Investing Story;” by Nisha Dutt, Usha Ganesh, Prashant Chandrasekaran, Payal Agarwal, Samved Patil and Ankit Gupta; published by Intellecap, April 2014, 70 pages, available at http://intellecap.com/publications/invest-catalyze-mainstream-india-impact-investing-story

India is a major hub for impact investing – an investment approach that pursues financial returns while seeking social and environmental improvements in low-income communities. Impact investments channel capital into initiatives such as health, water, clean energy and agriculture. Since 2000, an estimated USD 1.6 billion in “impact funds” has been invested in 220 Indian enterprises. India-based consulting firm Intellecap compiled this report to summarize and examine the role of impact investing in India.

The information technology boom in the 1990s created capital and infrastructure that facilitated private sector investment in community development. As such, much of impact investing exists in areas of India with the largest information technology presence – the southern and western states. While some of the funding comes from domestic entrepreneurs and the government of India, the vast majority of impact investments come from foreign investors. The authors of this report credit organizations like India-based Aavishkaar and US-based Acumen Fund, both of which began operations in 2001 to invest in sustainable businesses, as pioneers of the field. While every state in India has had enterprises receive “impact funds,” the funding is skewed towards a few specific states in select industries. For example, the report estimates that 54 percent of impact investing has been placed in the microfinance sector in the Indian states of Karnataka, Maharashtra and Tamil Nadu.

The report highlights the following drivers of impact investing in India: (1) roughly one third of India’s population lacking basic goods like food, sanitation and energy sources; (2) insufficient allocation of public funds for social sectors like infrastructure, water and other basic goods; and (3) an active private sector that seeks a “bottom-up” business development approach that creates jobs and increases access to goods. Impact investors can serve as the middle ground between these public and private interests, which seek social and financial returns, respectively. They do this by developing market-driven solutions to basic needs by supporting enterprises through capital infusion, building networks, engaging with government, and consulting on business models and internal governance. The authors identify three key stakeholders in this arrangement: (1) enterprises; (2) investors; and (3) “ecosystem enablers,” such as banks, incubators and business advisories.

By Meraj Husain, Research Associate

About Intellecap

Intellecap is a social-sector advisory firm that aims to provide market-based solutions to enhance the business practices of social enterprises. Its services include microfinance development, technology solutions, investment banking and business consulting. It currently operates in both India and the US. Financial information is unavailable for Intellecap.

Sources and Additional Information

[1] Intellecap: Invest. Catalyze. Mainstream. The Indian Impact Investing Story

MicroCapital, October 8, 2012, Intellecap’s Intellecash Microfinance Network Purchases 56% Stake in Arohan Financial Services in India

MicroCapital, September 15, 2011, Indian Microfinance Institution Bandhan Financial Services Raises $29m in Equity From International Finance Corporation (IFC), Arranged by Intellecap

MicroCapital, April 11, 2011, Intellecap Presents Sankalp 2011: Social Enterprise & Investment Forum in Mumbai, India, May 5 – May 6, 2011

MicroCapital Universe Profile: Intellecap

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