Four interesting takeaways from the GIIN/ Dalberg “Landscape for Impact Investing in South Asia” report

On 18 December 2014, the Global Impact Investing Network (GIIN), in partnership with Dalberg Global Development Advisors, released a report that provides a “state of the market” landscape analysis of the impact investing industry in South Asia. The Landscape for Impact Investing in South Asia looks at the $8.9 billion in deployed impact investment capital in six countries – India, Bangladesh, Pakistan, Myanmar, Nepal, and Sri Lanka – and paints a picture of a “diverse but growing impact investing market across South Asia.”

As the report has circulated amongst the Upaya team, four main points have jumped off the page. Some of them mirror observations we’ve seen through our own experience investing in India, and others shed light on issues we are wrestling with. In no particular order:

Two of the top five areas for impact investment in South Asia – Manufacturing and Agriculture/ Food Processing - are directly contributing to livelihood enhancement. That said, they are still only 17% of the identified market.

Broadly speaking, manufacturing and agri-processing are two broad areas under which our team has focused its livelihood development efforts and we are excited to see them crack the top five areas for impact investment. 

However, the fact that the two segments combined are still a smaller percentage of the impact investment market than each of the top two categories - Financial Services and Energy – shows that we still need to expand the conversation about job creation and its social benefits in the impact investment community.  

“There is also a need to bring less-exposed enterprises into the fold in a number of countries. Even in India, where formal networks of entrepreneurs exist, it is difficult to find enterprises that are not part of these networks.”

This point really hits the heart of one of the biggest challenges in the impact investment space – pipeline. Right now, too many impact funds are only looking at the businesses that self-identify as social enterprises, and are only doing due diligence in that limited pool. The result is a sort of “social venture ghetto” where a subset of entrepreneurs are continually showcased together at business school competitions and conference panels, thus creating the impression that they represent the full scope of social ventures in the space.

Not coincidentally, the investors who have been successful are the ones who have not limited their purview to that ghetto. For Upaya, the majority of entrepreneurs we support do not necessarily self-identify as social enterprises, but simply as businesses operating in poor communities. Friend of Upaya Artha Initiative has taken a similar view of the issue with their Artha Venture Challenge, a competition that has uncovered several great companies outside of the mainstream social enterprise conversation. In both cases, Upaya and Artha have had success in finding the types of investment opportunities that were sitting outside the standard impact investor conversation but are having a positive impact through their work.

“[In India] funds are shifting toward a less opportunistic and more hypothesis-driven approach to selection; in this new approach, these funds start with the identification of a problem in a given sector, then identify a potential solution (hypothesis), and subsequently seek organizations that contribute to this solution.”

Among the team we’ve long been wary of the proliferation of impact investing funds whose portfolio companies are united only by a broad notion of “positive impact” rather than a specific type of change they are working toward.  Our concern is that, without a unifying objective, funds will scatter investments across a variety of issue areas and miss the opportunity to aim significant resources at a specific problem.

Of course, Upaya has developed its own hypothesis – support Small & Growing Businesses that can be large scale employers in ultra poor communities – and are pleased to see that others are starting to bring their own theses into sharp relief. I would certainly point to our friends at Omnivore Partners as a great example of what can happen when a fund pursues clear and measurable outcomes in a specific area (in their case, agricultural supply chains).

In India, “foreign funds are prohibited from investing in debt and, as a result, most of the capital from [foreign] impact funds is deployed through equity instruments. Consequently, small domestic funds are emerging to fulfill the need for early stage debt.”

Accessing affordable working capital debts is a continual challenge for many SGBs in India, including some of Upaya’s partners at various points in their early lifecycle.

For much of the past year, our team has worked with domestic lenders to find creative and effective working capital solutions for our partners. What they are now coming to see that, while smaller domestic lenders are playing a role, these funds still have a big gap to bridge if they are to fulfill the credit needs of SGBs. It is an issue that Sreejith, Tanya, and the team are working hard on, and we are all glad to see this observation in the report.

Upaya Bolsters India Team With Addition of Tanya Jairaj as Director, Strategy & Operations

Upaya Social Ventures is thrilled to welcome Tanya Jairaj as the organization’s Director, Strategy & Operations. Based in Bangalore, Tanya will complement Upaya’s current leadership in India by overseeing the organization’s domestic operations, expanding its social performance capability, leading local outreach and brand-building, and contributing to the success of Upaya’s LiftUP Project partnerships.

“I am excited to be joining an organization with such a unique approach to meeting the basic needs of the very poorest,” said Jairaj. “I’ve spent the majority of my career promoting real change for those facing the injustices produced by extreme poverty, and believe Upaya’s work can have a very positive impact on India’s neediest communities,” she said.

A trained lawyer with experience litigating civil and consumer cases in Indian courts, Tanya has spent the last 10 years working in the development space in areas of good governance, education, women's and children's rights.

“From the first conversation we were impressed with Tanya's passion and desire to make a difference in the lives of the ultra poor,” said Upaya’s Executive Sachi Shenoy. “As we enter the next phase of the organization’s growth, we believe that Tanya’s unique blend of skills and experiences will be a tremendous asset to Upaya, its partners, and all those we are working to serve,” said Shenoy.

Prior to joining Upaya, Tanya was a Rural Business Development Advisor with Sun Edison, one of the world’s largest solar development and management companies. This followed several years with Ashoka: Innovators for the Public where she set up an initiative that gave access to social entrepreneurs to high quality legal services, helped law firms in India systematise pro bono lawyering into their practice, and managed a fellowship program that has since engaged more than 350 Ashoka Fellows. Tanya holds a B.A.LL.B, Law from University Law College.

With this addition, Tanya is taking over the title of Director, Strategy & Operations from Upaya Co-Founder Steve Schwartz, a move that reflects Upaya’s expansion of its India-based team and infrastructure. Steve is transitioning to Director, External Relations where he will lead the organization’s fundraising and outreach efforts, as well as continue providing ongoing strategic marketing support to Upaya's partners. 

Upaya Joins Intellecap Impact Investment Network (I3N)

Upaya has accepted an invitation to join the Intellecap Impact Investment Network (I3N), India’s first angel network dedicated to start-up socially beneficial enterprises. I3N draws on the full spectrum of Intellecap initiatives - including the popular Sankalp Forum - to facilitate investments in early-stage enterprises that pair financial returns with clear social and/or environmental impact.

"We are honored to have been invited to join this distinguished group of angel investors, and see a great opportunity to expand our own due diligence capacity through the Intellecap network,” said Sriram Gutta, Upaya's Director of Business Development. Gutta will serve as Upaya’s representative to the I3N.

While the network supports start-up enterprises across sectors including healthcare, education, clean energy, financial inclusion and agri/rural businesses, Upaya is the first I3N member with an explicit focus on job creation for the ultra poor.

“Business growth and job creation require a full ecosystem of support for entrepreneurs throughout all phases of their development, and it is our hope that Upaya’s membership in I3N will help foster that ecosystem,” Gutta said.

Intellecap launched I3N in September 2011, and currently counts more than 20 high net-worth individuals and institutions among its membership.

For more on I3N, click here.