New engines of social change A new batch of entrepreneurs is merging profits with societal benefits and catching the

eye of venture capitalists, says Anirvan Ghosh There were capitalists, for whom profit was the only touchstone of business. Then there were socialists, for whom money-making was sin and working for societys good was paramount. The twain were destined not to meet. After the economic liberalisation however a battery of young entrepreneurs has proved otherwise, welding the two ideologies into a credible revenue model. Call it social entrepreneurship or by any other name, such businesses are catching the eye of the investor, and transforming the social paradigm. Sample this. Barefoot College, started by Bunker Roy in 1972, has turned women school dropouts in villages into barefoot solar engineers. Located at Tilonia village, Rajasthan, it serves over 125,000 people and has been a stunning example of social change while being a profitable venture. These women now have an income, installing and maintaining solar systems. They are a common sight in villages near the Barefoot campus, replacing dirty, more expensive lanterns. We told the villagers to pay as much as they do today for kerosene, wood, batteries, torches and candles. It comes to around Rs 225 a month. And they were willing to pay, says Roy. There are many more, like Suresh Martin Chauhan in Haryana, who runs a farm like a corporation. Here the labourers working on the farm are shareholders. From being bonded labourers to shareholders is a cataclysmic change for them, says Chauhan. He uses the principles of modern business-diversification, constant innovation and ploughing back profits into R&D. Social entrepreneurs seek higher profits, yet are willing to accept lower margins and operate in more difficult market environments as long as they are able to offer social benefits. The very nature of their field activities may reflect a pursuit of what Abraham George, CEO of George Foundation, says is a mission-related impact, as opposed to normal businesses that are more concerned about competition and product differentiation. Another company with a direct social impact was launched by GS Gul Muhammad in 1996 in the Backwaters of Kerala. Today the backwaters connecting four villages along a 23-km stretchValiyaparamba, Thrikkarippur, Cheruvathur and Padanna-account for 70% of Indias backwater mussel production. Gul Muhammads zeal has changed the economy of a village in Kerala, and the fortunes of 3,500 villagers. Gul has empowered the village folk remarkably. People like him give us hope, said local legislator K Kunhiraman, pointing to brick-built houses with proper roofs to show how mussel farming had improved the lot of the local community. The best part has been the clear social impact. When that happens, people are fine with you making a profit as you do not appear like a greedy capitalist, rather a concerned citizen, says Prof K Kumar at IIM Bangalore. There are also others that have had less visible impact. Companies like the Bangalore-based hanaX, an online-offline person-to-person lending platform that allows Indians to lend and borrow money from each other. Much of the loans are distributed to needy communities for

operating small businesses. So far, the firm has partnered with NGOs to acquire loans of over Rs 30 lakh. The profitability and the goodwill one can earn in a social business, have also got some seasoned professionals interested. Richa Pandey, a marketing manager, chucked her job to start eJeevika, which trains the youth from rural and semi-rural areas for employment in high growth sectors such as telecom, BPOs, banks and insurance. I could have headed a marketing department at a large company, but this is what gives me a sense of achievement and fulfillment, she says. There are many VC firms active in the social space. The biggest buzz has been around Omidyar Networks, started by a eBay founder Pierre Omidyar, which has set aside Rs 350 crore for such social businesses globally. There are others, like Acumen Fund which has committed around Rs 100 crore for investments in social enterprises in India. While there are a number of entrepreneurs who are looking at setting up social enterprises, there are some challenges ahead, particularly in India, in the way of making it fully acceptable and workable. Some veterans caution that some social businesses are not interacting enough with the local population and just assuming that the problems have a solution which would be acceptable to them. In some cases, it might not be so, points out Rathin Roy, chairman, Rural Innovations Network, a Chennai-based firm that helps social entrepreneurs incubate innovations and take them to the market to benefit the rural poor. This is something that the investors need to understand as well, before they put up the money. Several years ago, Roy recalls, he was asked to find out why rural people were not using the newly-invented smokeless chullha, a brick stove which normally emits smoke when used. As it turned out, people were not using the new type of chullha because it didnt emit smoke. The smoke helped to keep down insect infestation in the thatched roofs of their huts, and the villagers were unhappy that there was no smoke. It is very important for these entrepreneurs to focus on user experience. When someone comes up with an idea, he needs to put the user experience on top visually and then see whether what he is proposing helps the user, says Roy. The social entrepreneur often works in complex and uncertain situations which are impossible to control even though we may try to plan things to the last dot. When it doesnt work, play with the system to make sure that some of those opportunities that are there in complexity can be utilised, he says. In that way, the social entrepreneurs can effectively reach the bottom of the pyramid, and improve lives. But that has also been a challenge in itself-to define who exactly is at the bottom of the pyramid. We needed to first find out who they are. This will be possible once the UID system kicks into place, says Kaushik Basu, the chief economic adviser to the government of India. And so, when social entrepreneurs engage with them, there are chances that the poorest of the poor are not as well represented as the entrepreneurs hoped for. The way out here, according to Abraham George, is to define the poverty line yourself. Agrees, Amit Agarwaal, founder of Star AgriWarehousing in Rajasthan which sells insurance products to farmers and also provides loan support. This has shunted out the moneylender.

So while VC and PE funds crowd the sector, and while more professionals choose to lend their expertise as social entrepreneurs, this wave of innovations needs to benefit the poorest lot, and there are around 600 million of them in India, while counting their profits. They are already doing a great job, but when they target the poorest alone, then they would have truly arrived, George adds.