Impact Investments
Impact investing as an asset class in India is providing capital and support to social enterprises and becoming the next way of investing for those who want financial return and achieving measurable impact. Impact investors focus on investing in social enterprises that do not just mitigate negative impacts but also generate net positive impact. Positive impacts may come from creating jobs and employability to serving low-income consumers through housing, education, accessible healthcare, or inclusive finance. What further distinguishes impact investing from traditional philanthropy has been the investments and return motive of impact investors where scalability, entrepreneur characteristics and experience weigh in.
Impact Investing is mainly done via venture in India, and is normally split into seven categories. Those are:
- Financial Access
- Agriculture
- Healthcare
- Education
- Technology for development
- Climate-tech (new 2021)
- Other
The split of total investment in impact investing venture for 2019 and 2020 is shown in the figure. Financial Access have been the focus for a few years, but as the market develops, so does the investment opportunities in other sectors
The sectors access different parts of the Indian market, and here you find a short presentation of some of its special features:
Financial access
Financial access, undoubtedly the biggest success story of impact investing in India so far, saw cumulative investments of $5.5 billion over the last decade across 156 enterprises. The sector impacted ~100 million low-income citizens, through microfinance companies providing last-mile access to small ticket lending and various specialized NBFCs providing SME finance, secured (vehicle and housing) or unsecured personal lending.
Agriculture
Agriculture, which employs close to 70% of the country’s rural households, of which 80% are small and marginal farmers, is the second sector where impact investment has driven innovation and entry of commercial capital. It is creating sustainable business models working with marginal farmers to reduce their input costs, improve yields and increase realizations through better market linkages.
Healthcare
India’s acute challenge in inadequate public healthcare access, significantly amplified by Covid’s impact, is the third major area where impact investment has played a role in driving inclusive innovation across the healthcare value chain. These businesses focus on delivery in Tier II/III cities and rural India of both primary and secondary healthcare, as well as diagnostics, medical devices, pharma and health insurance.
Education
India has the world’s largest population of young people, with more than 65% below 35 years, including 260 million children enrolled in 1.5 million public and private schools. While access to schooling has been achieved at scale, learning outcomes have been low, and the employability gap high, providing the reason for ~90 education and skilling enterprises to cumulatively raise ~$1 billion in the last decade.
Technology for development (TFD)
With ~650 million Indians accessing the internet and rapid increase in penetration (currently 40-50%), a range of dynamic ‘Technology for Development’ (T4D) startups have deployed solutions targeting those who are accessing digital and communication technologies for the first time10. TFD is distinct as a category from technology enablement in core social sector. It focuses on cross-cutting use cases of technology for social impact by providing:
- Access to new markets and new products
- Access to new sources of income (Future of Work)
- Access to connectivity (e.g. SME Tech)
- Access to content (Media/ Vernacular).
Source: The Impact Investors Council – “https://iiic.in/”
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