How to Address the Yawning Gap in India's Social Impact Sector

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In today’s charged socio-economic climate, corporates, startups, and individuals aren’t just paying lip service to words like poverty and inequality. They don’t want to be on the sidelines of creating a positive social impact for those at the bottom of the pyramid (BoP). They want to be the humane change-makers, heralding a new way of solving age-old societal issues--right from the frontlines. They want to be risk-takers who would go beyond making profits to improve the lives of the underserved, thereby empowering low to middle-income groups to lead dignified lives. 

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Creating social impact for India’s underserved segment

India’s poor and vulnerable social strata—the aspirational class that includes cooks, drivers, waste pickers, and domestic help—represent a key opportunity area for social entrepreneurs to make a real difference in the innovation ecosystem. According to a recent study, 34 percent of these strata are aged between 10 and 25 years and aspires for a better life. It’s about time social changemakers start tapping into India’s aspirational class, who are tomorrow’s neo-middle class. Understanding this under-served stratum is key to unlocking the potential of the Indian economy. 

Thankfully, there is a new breed of impact investors that caters to the aspirations of the lower-middle-class and focuses on pockets of opportunities that would enable the latter access to a better quality of life and improved livelihoods. 

Take for instance the Aavishkaar Group, a key player in India’s impact ecosystem. The organization has been working for two decades to nurture social entrepreneurs committed to building an inclusive and sustainable future for the country’s marginalized communities. Aavishkaar’s impact-focused entrepreneurship model funds social enterprises in the rural, low-income markets in sectors such as sanitation, healthcare, education, water, and livelihoods support. Arohan, which is a part of the Aavishkaar Group, offers microfinance to families and communities in India’s remote rural pockets to nurture innovation in local economies. Arohan’s Sanitation Loan Facility supports rural women to construct toilets in their homes. The initiative not only promotes sanitation and hygiene in India’s villages but also empowers rural women to regain their dignity and protect their privacy.

There are other game-changers that are focused on building an inclusive innovation ecosystem for the disabled community. For example, AssisTech Foundation is a non-profit platform that supports and nurtures assistive technology startups and innovators to enhance the lives and livelihoods of people with disabilities. The organization incubates startups that leverage digital technologies to produce affordable assistive technology products that empower people with disabilities.

Technology as an enabler

India’s strong digital infrastructure has been a gamechanger for those who want to leverage the power of technology to create a social impact on a larger scale. The growing smartphone penetration and high-speed internet connectivity in rural areas have empowered social entrepreneurs and innovators to create new models for change to accelerate social impact.

For example, Unitus Ventures is an early-stage venture capital firm that uses technology to solve long-standing social problems. It focuses on investing in FinTech, healthcare, and JobTech to support startups focused on serving low-income communities. Among its portfolio companies is Utter that is focused on empowering India’s unorganized blue-collar workforce (app-based cab drivers, food delivery workers, e-commerce delivery staff) by offering them workplace skills in a variety of sectors, such as hospitality and transport, among others. Its AI-based multilingual mobile education platform uses a combination of chatbots and live tutors to impart workplace skills and English language training for those who don’t have access to traditional classrooms.

Villgro is a pioneering social enterprise incubator that addresses the yawning gap that exists between startup ventures that attract heavy venture capital funding (eg: Airbnb) and those that struggle to get funded, such as those that work in the area of sewage cleaning and road development.

Impact players like Villgro help bust the myth that the social impact sector doesn’t get sufficient funding for education and healthcare for its poorest as this category lacks a “profitable business model” and talent to grow the BoP (base of the pyramid) segment.

Villgro’s investment strategy focuses on sectors such as education, employability, and agribusiness to drive innovation for the ‘have nots’ who are in dire need of market-based solutions that will help them in job mobility, upskilling and affordable quality healthcare to move up the socio-economic ladder.

Like Villgro, there are other players such as social enterprises and NGOs, research institutions and think tanks, CSRs and foundations, and government-promoted bodies that aim to help broaden access to capital for those who need innovation the most.

In this context, one must also mention the Government of India’s ambitious tech-led solutions, such as the Aadhaar Card and the AarogyaSetu COVID-19 tracking app that showcase the government’s commitment to digitize the economy and create social impact at scale.

Identifying key pockets of opportunity

Social entrepreneurs catering to the BoP segment are attempting to solve challenging problems that are often overlooked by key stakeholders in the innovation ecosystem. For instance, despite education being a fundamental right, around 8.5 crore marginalized Indian children in the age group of 5-6 years still don’t go to school due to a lack of financial resources. It is further estimated that the aspirational neo-middle class consists of 90 million children that EdTech entrepreneurs can target to make education a level playing field. EdTech entrepreneurs who believe in the power of innovation to ensure equity in education sees a tremendous opportunity to transform the education system in low-income communities.

AgriTech, healthcare and microcredit finance are other critical areas where social entrepreneurs and incubators are offering inclusive and sustainable solutions to ensure the upward mobility of the marginalized class.

Kheyti, a non-profit that offers technology solutions to small farmers is another fine example of how innovation at the grassroots can create a large-scale impact in the long run. The AgriTech startup is on a mission to see one million small farmers move out of the vicious cycle of poverty by 2025.

India’s new technology-led economy has the responsibility to serve the low-income, high-aspiration class by accelerating innovation to ensure social inclusion. Late Prof. C.K. Prahalad’s seminal work Fortune at the Bottom of the Pyramidemphasised that companies should innovate not only to meet the needs of the wealthy but also to cater to the concerns of those at the BoP. One of his underlying principles of BoP innovation suggested that sustainable solutions for the marginalized strata of customers must be affordable and scalable.

Ushering in best practices in social innovation

Speaking from experience, I am convinced that social innovation in the Indian context is not clearly defined by an evidence-based approach. Perhaps therein lies one of its bigger challenges. Social entrepreneurs working to create an impact on the scale have to contend with operational challenges, such as a lack of market access, besides inadequate investor connect and mentoring opportunities. Also, technologically and in terms of scale, it is difficult to solve problems in this sector as the risk factor is high for social entrepreneurs. Besides, the educated class with its worldview isn’t contributing enough to the growth of this sector. Such pain points highlight the need for open innovation to solve India’s most complex social problems. The good news is that the social impact sector is ready for growth and is poised to attract both talent and ecosystem enablers who will strive to improve the quality of life of the under-served strata—and hence those placed at the lowest end of the innovation spectrum.

A rapidly transforming India that is recognized for its digital capabilities across sectors has triggered the need to reimagine social enterprises as for-profit businesses. It’s a fallacy that a for-profit model that works for the social good of disadvantaged members of society takes away from the founders’ noble intentions. Instead, the for-profit business model creates purpose-driven organizations that will funnel the revenues for a good cause. The trend reflects the larger global narrative of how social enterprises are reinventing themselves as smartly-run businesses with their heart in the right place.

The time is opportune for exploring innovative solutions to help homegrown entrepreneurs in this category succeed and scale their businesses. To illustrate this point, India’s streets are dotted with innumerable nondescript ‘chaiwallas’, or tea stall vendors, who have dared disrupt the innovation space—and beverage industry—with their ingenious business skills and entrepreneurial talents. Successful homegrown businesses like this are a reflection of the new face of entrepreneurship in India that have mushroomed as a result of chutzpah and drive—and not any fancy MBA degree.

Maximizing inclusion for India’s marginalized strata

India has come a long way in bridging the gap between the ‘haves’ and ‘have-nots’ by laying out the roadmap for a robust digital ecosystem. As a nation, we have a unique opportunity to create a lot more equity by leveraging technology for social good and increasing digital literacy for the masses.

However, technology is not the silver bullet to solve the problems of India’s poor. It has to be viewed as a means to achieve the larger objective of creating a holistic inclusive social impact ecosystem. A fragmented innovation ecosystem cannot thrive in the absence of a comprehensive social innovation policy.

In this context, Telangana has taken the initiative to prepare the roadmap to fuel innovation in its social impact sector. Stakeholders in the Telangana innovation ecosystem strongly believe that the dignity of the under-served strata of society can be adequately protected only with the backing of a robust government policy. Telangana’s draft Social Innovation Policy emphasizes that as a first step, stakeholders should identify key areas that require innovation for social inclusion and growth. Thereafter, innovation models should be built to leverage Telangana’s strengths and attract funding into these programs. The programs should transform into knowledge-sharing platforms to boost capacity building in the early growth stages. And that is how we will build a future where the lowest common denominator in society will thrive.

Likewise, India’s social innovation roadmap should reflect a similar core philosophy to ensure that the most marginalized are not prevented from fully participating in the country’s Sustainable Development Goals. Only when key stakeholders collaborate to create a robust ecosystem for social entrepreneurs will India’s complex social problems be swiftly addressed and resolved.

Social inclusion through continuous innovation also bodes well for the country’s GDP and economic growth story. However, if the longstanding problems of disadvantaged groups are ignored, it will lead to the loss of wages and widespread discrimination that will make some groups particularly vulnerable to missed economic opportunities, and, therefore, the persistence of poverty.

I believe that social innovators—be it individuals, social incubators, governments, corporates, academia, or startups—who put people first will help create new and exciting markets and facilitate a synergistic innovation ecosystem. But if social transformation occurs in the absence of inclusivity—or empathy—governments would have lost the plot even before the real impact of the innovation narrative can unfold.

Ravi Narayan

Written By

Ravi Narayan is the CEO at T-Hub, a unique public/private partnership between the government of Telangana, 3 of India’s premier academic institutes (IIIT-H, ISB & NALSAR) and key private sector leaders. It stands at the intersection of the start-up, academic, corporate, research and government sectors. T-Hub is India’s fastest growing startup engine catalyzing innovation, scale and deal flow.