Social entrepreneurship is one area where Swiss investors hope to make a difference in India as well as possible financial returns, albeit over time. Projects help business-savvy locals improve their communities. But the model also has its sceptics.
In a remote village near the Gagas river basin in India, a middle-aged woman sits with her head covered, pounding away at whole dried red chillies. A friend beside her is adding salt to slices of lemon. They are making pickle.
When a batch of pickle is sold, Basanti Devi will get her share of the sales - about 30 rupees a day (CHF 0.45) and then save about Rs10 from it (CHF0.15). On this income alone, she has repaid a loan of Rs 20,000 (CHF295), and manages a home with three young children.
Proud to be self-reliant, Devi then gives the profit to Mahila Umang Samiti, a self-help group initiative started in 2001 by the Pan Himalayan Grassroots Development Foundation with a grant from Zurich-based investor Rianta Capital.
Such ‘umang’ - or independent producer companies - are solely owned by the producers themselves which also means that they distribute the profits among themselves.
Kalyan Paul, executive director of the foundation, explains that the model they helped create involves about 200 self-help groups for women in the area around the town of Raniket.
“Each group consists of about six to eight women, totalling up to 1,300 women who raised share capital to create the umang. The company has four divisions – food processing, knitted products, farm produce and seasonal products – and makes a profit of about Rs 7,000,000 (CHF100,590) a year.”
Each group has its own bank account and teaches members to save. They also have access to low-interest small loans whenever needed. The women manage their own affairs thus freeing them from the shackles of money lenders.
Mahila Umang Samiti is just one of the many social entrepreneurship enterprises being created at a local level in India with the help of foreign investment and grants. These social enterprises aim to alleviate problems of the poor in rural areas by encouraging them to help themselves, and range from energy to local produce.
India at a glance
Figures from 2012
Land area: 3,287,590 km2
Population: 1.24 billion
Life expectancy at birth: 65
Number living at nationally defined poverty line: 21.9%
Gross domestic product (GDP): $1.842bn
GDP growth: 3.2%
(Sources: Swiss Agency for Development and Cooperation, Organisation for Economic Co-operation and Development)
Energy and momentum
Over the years the government of India has encouraged women’s entrepreneurship by offering subsidies for businesses in the power and water sector. But in a country that is grappling with illiteracy and poverty, as well as cultural issues, a caste system, lack of power and water, it is hard for the government to fill every gap urgently.
Young entrepreneurs have not been deterred, however, and are looking for support outside the country.
Audrey Selian is the director of another Rianta Capital-funded project, the Zurich-based Artha Initiative online networking platform which connects investors to social entrepreneurs. The company invests in India because of the “scope of opportunity and level of innovation and creativity”.
“There is so much energy and momentum with sheer brain power,” she tells swissinfo.ch.
Social entrepreneurship aims to use business to solve social problems through innovative solutions. It differs from traditional non-profit development model in that investors may not look for immediate returns to their business but focus more on the benefits and development to society.
That’s the view taken by the Swiss Re Foundation in backing a healthcare project with Ashoka, the world’s leading organisation for the promotion of social entrepreneurs, in supporting social entrepreneurs in India.
Project manager Olivier Kaeser says their involvement is not considered traditional investment. “Our financial support is long-term and we do not expect an immediate impact.”
“The difference is quite important,” he explains. “We don't necessarily compare ourselves to a business which invests and then hopes for a direct financial reward. The government cannot tackle all social issues, therefore social entrepreneurs are important to address issues and challenges of social concerns.”
But not everyone has been completely won over to social entrepreneurship.
Crispino Lobo helps run a Swiss-backed traditional development aid venture monitoring climate change. Thirty-five automated weather stations have been set up to track weather patterns and provide advice to farmers about what steps to take to protect crops during emergency conditions.
The project is supported by the Swiss Agency for Development and Cooperation and is being implemented by the Watershed Organization Trust, set up by Swiss national Hermann Bacher.
Lobo says there have been plenty of results on the ground. Farmers have shifted from flood irrigation practices to drip irrigation, saving up to 70% of water supplies, and leading to a 31% decrease in malnutrition in children and 19% drop in anaemia in women.
“I think both approaches - developmental aid and social enterprise - have their merits and place too and one is not superior to the other,” Lobo notes.
But he cautioned: “The hype about social enterprise [as the antidote to all that plagues traditional development aid] may well turn out to be just that - a lot of bells and whistles.”
World Bank boost
The World Bank describes social entrepreneurs as “the third arm of development; along with the commercial private sector and the state sector”.
In 2013 the World Bank awarded $2 million to social enterprises in three Indian states. The grants were equally shared out among 20 social enterprises, to extend and scale up what were “innovative business models”. Of those chosen, 40% demonstrated business models to support and empower women in low-income states.
Others were included affordable healthcare for families, the environment and technology. The enterprises will also have business mentoring and help with business development.
It’s not easy to gauge the impact of social entrepreneurship on a wide level - especially because there are no clear tried and tested models across the country.
“In India social entrepreneurship is a very fragmented system,” says Selian. “All kinds of people are taking a huge variety of approaches to try to solve problems that they see in their localities or region. And, the more variety in approaches – the better.”
To what extent can the web of social entrepreneurship impact on a population of 1.2 billion, of which over 60% belong to rural and underdeveloped areas, and what can investors expect?
“We are investing and hoping that eventually one or two or more of these solutions will pop and scale big time. But it’s too early to tell,” says Selian.
Sunita Ashok Singh, senior director of the National Entrepreneurship Network in India, agrees that scaling up – that is, expanding output - can happen through both government subsidies and the foreign investors.
Foreign investors “provide the initial fund as grant support with no expectation of returns other than [measurable] impact. These are not traditional investors but people who are well informed and balanced in their expectation of impact. So a smart impact investor and a capable entrepreneur can definitely ensure scale will happen.”
Spring Health Water provides safe drinking water in small rural villages. It teams up with local social entrepreneurs to set up water tanks that remove contamination with the help of the WATA electrochlorinator made by a Swiss partner company, the Antenna Technologies Foundation.
With the help of the electrochlorinator, the tanks supply clean drinking water to about 9,000 families in 106 villages, which the group says has reduced stomach diseases by 40% in those locations.
Jacob Mathew, CEO of Spring Health, expects their business to have a multiplier effect over time. He notes: “If successful, in five years we would have created significant supplementary income for 10,000 entrepreneurs, 20,000 in direct jobs through our delivery men and 2,000 direct employees.”
But scaling up is easier said than done. It requires capacity building and that throws up different problems for different businesses.
For instance, local knowledge may not always be sufficient enough to grow the business beyond a certain level, as is the case with the pickle producer, Mahila Umang Samiti, back at the Gagas river basin. Their solution: to team up with other such umangs and share the costs of packaging or selling together.
But ultimately solutions need to be local. Singh explains: “We don’t have uniformity in the different regions because of social and cultural differences.”
In Bihar, India’s poorest state, rice husks are a staple food and are being used to help generate power. But it’s not necessarily a model that can be copied, as husks are not widely available across the country.