By Anjali Sarker
Does serving the poor and making profit contradict each other? This heated debate has been going on for a long time, raising criticisms and doubts about the ideal position of a development organization along the spectrum where the two opposite ends are donor-dependency and self-financing. While the scholars and experts debated, BRAC walked the talk. Starting from a fully donor dependent relief operations committee with little resources, BRAC evolved into a unique international development organization that meets 73 per cent of its overall financial needs from the surplus of its social enterprises and the dividend from its socially responsible investments.
This combination of development programmes, enterprises and investments has allowed BRAC to diversify financial risk and reduce its dependency on external aid and resources. However, it is a huge challenge when it comes to measuring the impact of such a unique model. With the growing worldwide interest in impact measurement and impact investment, it is important that impact is translated into various quantitative metrics, not just the number of beneficiaries or clients served.
Realizing the growing interest on this topic, the Social Innovation Lab invited Sanchayan Chakraborty, a Partner at India’s oldest and largest social venture capital firm Aavishkaar to speak at the September Innovation Forum on September 11, 2014. In a one hour engaging session titled “Channelling BRAC’s entrepreneurial energy”, he shared insights from India’s impact investment sector and talked about how an “enterprise‐based development approach” can enhance livelihoods and reduce vulnerabilities for low income populations.
Aavishkaar started its journey in 2001 with a simple belief that creating ventures in remote geographies would serve the needs of excluded communities and thus significantly impact society. After more than a decade, it is now one of the prime movers in creating and enhancing rural innovation and entrepreneurship in India. While explaining their enterprise-based development approach, Mr. Chakraborty mentioned that Aavishkaar’s big innovation is the adoption of the venture capital methodology to serve the low-income market segment by grooming scalable, for-profit enterprises. Also, within venture capital investing sector he highlighted their two key innovations:
- It moved the investment risk from technology and product innovation to innovation in execution, which increased their success ratio at the enterprise-level, despite the perceived high-risk of early-stage investing and geographical dispersion.
- It redefined the parameters of huge successes in impact investing. At Aavishkaar, a return of 5 to 10 times of invested capital is considered a big thing, instead of a return of 100 times- expected by the traditional venture capital firms.
Aavishkaar also played a crucial role in developing the Portfolio Risk Impact Sustainability Measurement (PRISM) tool with leading Global Development Finance Institutions such as International Finance Corporation (IFC) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). PRISM provides better insights into the linkages between the fund invested in a region and the impact it makes. For large development organizations like BRAC, this can be a wonderful way to visualize the impact across different sectors and gather key insights from huge datasets. Also Impact Reporting and Investment Standards (IRIS) can be a good place to begin, Mr. Chakraborty said.
Though India’s impact investing sector is very much concentrated in two sectors- Microfinance and Financial Inclusion, other interesting examples also came up during the session. For example, Aavishkaar invested in MeraDoctor – a 24-hour health advisory service where people purchase a monthly or yearly package for a small fee which is taken from the mobile phone balance. In return they receive health consultations from licensed doctors, nutritionists and counsellors whenever they need via phone calls. Another case is Vortex Engineering Private Ltd. which is well known for ground-breaking innovations in the ATM industry and has installed solar powered ATM machines in the most remote, rural places in India.
According to a study by research firm Monitor Institute, the global impact investing industry will have assets of $500 billion by 2019. Using profit-seeking investments to generate social and environmental good is not an unorthodox idea anymore, in fact this trend is gradually moving from a small group of philanthropic investors to the core of mainstream financial institutions. While Aavishkaar is flourishing in India and seeking to expand in other South and Southeast Asian countries- what implication it has for development organizations like BRAC? How can we think about ways to incorporate impact measurement indicators into our work? If you have ideas, please share in the comments box below or reach out to us!
Anjali Sarker is an officer with the BRAC Social Innovation Lab.
