At the Narayana Hrudalaya, up to 25 heart surgeries are performed in a single day. The hospital allows Dr. Devi Shetty to offer heart surgeries at a low cost of $1300 compared to $30,000 elsewhere. 70% of the surgeries are performed at no cost at all. This has been facilitated by an innovative business strategy that restricts the work of a surgeon to only performing surgeries. This hospital is an example of a successful social business.
There is a crisis in civil society. The 1.2 million plus NGOs attempting to fill in this gap in are now coming under fire for their inability to achieve the results they were aiming at. Donor funded organisations are not able to innovate and remain flexible because they have to stick to the donor’s wishes. Increasingly, donors are moving away from India because the government has projected it as a growing and flourishing economy. The reasons might be manifold but it is quite clear that the ‘Golden Age of NGOs’ is fast coming to a close.
In this context, the concept of a ‘social business’ has emerged as the only viable alternative to address social issues that are still relevant. Driven by the desire to bring about change, these businesses use market based business models to stay sustainable. The purpose of the investment is to achieve the social goals and not profit maximization.
Arvind Eye Hospital set up by Dr. Goindappa Venkataswamy has revolutionised eye care in the country. Their facility in Madurai is currently handling 286,000 surgeries per year and this is expected to be scale up to a million by 2015. These surgeries, performed at low or no cost, contribute immensely to the development of the country. A social strategy that aimed at having 400 free patients for every 135 paying patients in 1988 has allowed this facility to provide standardised quality services at the lowest cost.
The process of revaluating how to achieve social goals more effectively makes India a perfect incubation space for social businesses. India has serious development issues, a lack of public infrastructure and many bright young entrepreneurs. Regulations here are also less strict than they are in the US or in Europe and entrepreneurs are free to test ideas.
The creation of this new business space has drawn several investors to this sector. There is a revived corporate interest in the social development space from an investment perspective rather than simply a donor/CSR angle.
However, the social business space in India is wildly unregulated and enterprises find it very difficult to scale, communicate and share their ideas. They still lack support from the county’s leading businesses.
A major problem with the social business sector is the fact that people are not quite sure what it means. A simple internet search will reveal that this phrase has been defined by some as businesses which utilise ‘social’ marketing means and differently by the Yunus Centre as “Social business is a cause-driven business.”
“In a social business, the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point. Purpose of the investment is purely to achieve one or more social objectives through the operation of the company; the investors desire no personal gain.
The company must cover all costs and make profit, at the same time achieve the social objective, such as, healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water, introducing renewable energy, etc. in a business way.”
The work of social entrepreneurs in India over the last ten years has been exemplary and this is witness to the effectiveness of a business-led development model. However, that is not enough and social enterprises are often localized and multiple factors constrain their scale. These include lack of funding, lack of business knowledge, scare talent and a severe lack of enabling policies.
One of the first names that come to mind in the social enterprise sector is Amul, which has effectively delivered sustainable livelihoods to countless number of people. The question is; “Cannot similar and more impact be delivered by engaging and unleashing the entrepreneurial energies of millions by providing the right leadership, vision, management, partnerships and capital?”
According to Manju Mary George, in an article written in the Stanford Social Innovation Review, the magnitude of India’s challenges makes it imperative that big businesses get involved and that it integrates development and sustainability concerns into its core strategy.
Water Health International (WHI), financed by the Acumen fund in India is an example of holistic sanitation solutions being provided at low cost. The ultra violet water work treatment is three times more powerful than the technology available in the market today. WHI now has over 300 community water plants in four regions of the country. They are providing safe and pure water to people at an affordable cost through innovative use of technology.
Development requires greater thought, smarter solutions and more investment that corporate social responsibility grants can offer. There have to be more big businesses that count the poor rural populace within their customer base in order for any real progress to be made.
A key example of this thought process is Britannia who tailor made its Tiger biscuits for consumers who live on less than US$25 a day. Such activity today, however, is very nascent and this creates the perfect space for social entrepreneurs to design business models for the poor. Usually their ground-up models and innovative solutions sync with client needs and opportunities do exist to combine varied strengths of the two.
The Khemka Forum, hosted in Hyderabad in November 2011, saw a large gathering of social entrepreneurs and their stakeholders in India. The aim of this conference was to create an ecosystem that nurtures social enterprises. A major hurdle in this sphere is the fact that enterprises functioning in the same space were not sharing. This desire to remain secretive and exclusive could be the downfall of a sector that is otherwise poised to be able to provide effective solutions to social issues.
SELCO, which provides base-of-the-pyramid solar energy services in India, is one of the few social businesses that are trying to keep the technology open- source. Its model where poor customers pay small increments for access to their products will be made available to young entrepreneurs in the energy field. This saves time and maximizes productivity and impact.
Social entrepreneurs are trying to create a socially relevant ‘for-profit’ organization that runs with the same level of discipline and rigour as a market driven capitalist venture. This requires great focus on the goals of the entity that have to be both market facing and social.
In addition to this, any successful social enterprise has to have scale, transparency, integrity, measurement systems and process, and a great team. Leveraging technology to drive scale, partnerships with complimentary organizations and developing a unique value proposition for its offering also remain key to effective impact.
Sanjay Anandaram, entrepreneur-turned-VC, says, “Interestingly enough, investment capital is usually attracted to profit making businesses that demonstrate the above attributes. Making profits is critical because it ensures sustainability of efforts.”
In order for a social business to work, one has to abandon the charity/donor mindset. Asking an investor to donate money for a good cause and asking him to invest in profitable venture draws entirely different people to the table. Detailed business plans explaining the logic of the enterprise just like a for-profit allows social businesses to operate in a different and more effective playing field.
Drishtee, a for-profit social venture started in 2000 aims to solve the problem of lack of easy access to trade, business, wealth and other government services by using an ICT based platform. Through a tiered franchise and partnership model, Drishtee rents out kiosks that allow one to access information to local entrepreneurs. The 1000 plus kiosk owners charge a nominal fee for people to use their services. Each kiosk caters to approximately 1200 households with an aggregate income of less that $2 per day.
The demand for basic needs far exceeds the supply of resources provided by either the government, civil society or the social businesses. However, if they were to combine their services, they can more effectively improve the quality of the lives of their consumers.
Project Shakti, which was launched in 2001 as an initiative of Hindustan Lever Ltd, aims to integrate business interests with national interests. It provides sustainable micro enterprise opportunities to poor rural women and raises living standards through health and hygiene awareness. Creating Self help Groups of rural women in villages all over India, they have proved that micro-credit, when well targeted, can alleviate poverty significantly.
Rural upliftment depends not only on infusion of credit but also in guiding its usage towards better investment opportunities. Social venture funds (SVFs) measure their investment on social, financial and environmental returns. Large SVFs expect to impact the lives of millions of people per 5-year time frame.
In the power sector, a significant contributor to society is Azure Power that was set up in 2009 as India’s first private utilityscale power plant. Azure provides electrical power to Awan and its 32 surrounding villages of over 20,000 people. Financed by the US Overseas Private Investment Corporation, this was the first solar powered plant of its scale.
It is clear that social businesses can work and do work effectively to fill in the gaps in government infrastructure but that is not without facing some major hurdles. First is the lack of entrepreneurial lessons in regular curriculums. This prevents most social enterprises from having competent promoters.
In the absence of enough SVFs willing to invest in their business plans, many promoters are forced to take loans of local moneylenders and use their own savings. They face hostility from banks and government institution who do not want to support them because of the social angle to their plan.
Most people are unable to differentiate between a for-profit business and a social business. This means that they are skeptical of the products being offered by these enterprises. In comparison to a regular business, social entrepreneurs find themselves struggling to make adequate revenue while proving low-cost products to the consumer. It is expected that once they work out how to make money while remaining social, more traditional businesses will enter the ‘social’ domain.
The government in India is rather unhelpful towards the social businesses in India. Neither do they provide any infrastructure, nor do they provide any tax benefits or subsidies towards social businesses. This has proved to be a major hindrance to the growth of social businesses in India.
By their very definition, social enterprises should be creating jobs within their organizations for those from the underprivileged sections of society. Sadly, this is also the section of society that is least educated and essentially unskilled. This puts the entrepreneur in the difficult position of balancing the aspirations of these divergent disadvantaged groups and still has a positive impact.
SKS microfinance in 2010 precipitated a massive microfinance crisis in Andhra Pradesh leading to several suicides and eventual loss of face of the entity as well as the concept. When we try to study what went wrong, it seems that the management was as much to blame as the consumer who borrowed more than they could pay off. The company, in an effort to recover the money that had been lent out, resorted to radical means and also stopped disbursing loans. A warning to all overenthusiastic social entrepreneurs, The SKS story tells us how a perfect plan can go horribly wrong.
A successful social enterprise should network and collaborate with other entities to learn about the market and also effectively lobby the government and regulatory agencies to create a better environment for the social business.
These enterprises should assist the higher education bodies in India in including entrepreneurial lessons in the curriculum.
The analysis of social businesses in India so far has pointed to many regional disparities. This disparity in terms of distribution has to be addressed by existing enterprises. A balanced and well distributed growth of social enterprises in India is key to achieving a permanent solution to India’s social issues.