Social Entrepreneurship in India – Changing the Life of the Poor

India has the world's second largest labour force of 516.3 million people and although hourly wage rates in India have more than doubled over the past decade, the latest World Bank report states that approximately 350 million people in India currently live below the poverty line.

Author Rima Hanano:

Translation Rima Hanano, 07.29.13

India has the world’s second largest labour force of 516.3 million people and although hourly wage rates in India have more than doubled over the past decade, the latest World Bank report states that approximately 350 million people in India currently live below the poverty line.

With an estimated population of 1.2 billion people, this means that every third Indian is bereft of even basic necessities like nutrition, education and health care and many are still blighted by unemployment and illiteracy. Social entrepreneurs can help alleviate these issues by putting those less fortunate on a path towards a worthwhile life. Rather than leaving societal needs to the government or business sectors, they can solve the problem by changing the system.

What is a Social Entrepreneur?

The degree to which social entrepreneurs pursue social impact as opposed to profitability vary, but in all cases financial sustainability is fundamental. One approach is to create business models revolving around low-cost products and services to resolve social problems. The objective is to create a social benefit that is not limited by personal gain. Social Entrepreneurship is the process of bringing about social change on a major and more effective scale than a traditional Non-Governmental Organisation (NGO). They differ from NGOs in that they aim to make broad-based, long-term changes, instead of small-scale and time-limited changes. Furthermore, a NGO raises funds through events, activities and sometimes products. However, raising money takes time and energy, which could be spent in direct working and marketing processes. Above all, Social Entrepreneurs consider the affected people as part of the solution and not as passive beneficiaries.

The key role of India in Social Entrepreneurship

Some wellknown Indians became aware of the potential of Social Entrepreneurship quite early. Two of them were the Social Entrepreneurs Dr. Govindappa Venkataswamy and Thulasiraj D Ravilla who established the Aravind Eye Hospital in 1976. Since then, they have treated more than 2.4 million patients, often free of charge. Many others have also contributed to the comparatively high levels of Social Entrepreneurship which have been reached in India.

As the Swiss Klaus Schwab, founder of the World Economic Forum and of the Schwab Foundation, pointed out in an interview with the Hindustan Times: “India has some of the most advanced and innovative social entrepreneurs. We believe and already see that many of the models developed in India, for instance rainwater harvesting for schools pioneered by Barefoot College, are exported around the world.” Thus, India is a key country in developing social entrepreneurs. Several institutions help people to become involved with Social Entrepreneurship, such as UnLtd India and the National Social Entrepreneurship Forum (NSEF).

Furthermore, the Schwab Foundation and its Indian counterpart, the Jubilant Bhartia Foundation, give the Social Entrepreneurship Award to prominent visionary Indian social entrepreneurs. In 2009, the winners of the Social Entrepreneur of the Year Award included Brij Kothari of “Planet Read and Bookbox” who found to combat illiteracy, Padmanabha Rao and Rama Rao of “River” which focused on the primary education of children and Rajendra Joshi of “Saath” who created inclusive societies by empowering India’s urban and rural poor. The next winner will be announced in a ceremony coinciding with the India Economic Summit in November 2010.

Another important organisation that is linked to India is Ashoka, which is the global association of the world’s leading social entrepreneurs. Since 1981, they have elected over 2.000 leading social entrepreneurs as Ashoka Fellows, providing them with living stipends, professional support and access to a global network of peers in more than 60 countries. India is home to Ashoka’s first Fellow and for the past 25 years, India has served as a testing ground for most of Ashoka’s international Fellowship building programs and other key initiatives. Since 2003, Ashoka and the American India Foundation (AIF) have partnered to co-invest in social entrepreneurs in India. This partnership has enabled Ashoka to increase the number of Fellows elected in India to 250.

AIF is a leading international development organisation charged with the mission of accelerating social and economic change in India. Since 2001, it has raised over 30 million US-Dollars and awarded grants to education, livelihood, and public health projects in India with an emphasis on elementary education, women’s empowerment and HIV/AIDS.

Increase in Microfinancing

In particular, the field of microfinance is a growing one. The Bhartiya Samruddhi Investments and Consulting Services (BASIX) founded by Vijay Mahajan was the first microfinance project to lend to the poor. Vikram Akula is another founder of a successful Indian microfinance project. His organisation “SKS Microfinance” offers microloans and insurance to poor women in impoverished areas of India. SKS is currently one of the largest and fastest growing microfinance organisations in the world. Furthermore, the Bangladeshian Grameen Bank shall be mentioned as an outrider in the field of microfinance. As Anna Agarwal of the Massachusetts Institute of Technology pointed out, banking and finance are the biggest beneficiaries of technology-enabled social start-ups.

There are three reasons why microfinancing is so important for the poor: Firstly, they don’t possess money to open a bank account. Secondly, they don’t have collateral or a credit record to secure a loan and thirdly, they are often unable to complete the necessary paperwork because of their poor standard of literacy. This is why they rarely have access to the formal financial sector and microfinancing is an important service in assisting to cope with these issues.

In India, self-help groups form the basic constituent unit of microfinance. These groups usually consist of 5 to 20 poor women who pool their savings, sometimes as low as 10 or 20 cents per month, per member, into a fund from which they can borrow when necessary. The group is linked to a bank, where they maintain a group account. After at least 6 months of ´inter-loan` repayments the group is eligible for the loan. The bank lends to the group as a unit, without collateral, relying on self-monitoring and peer pressure within the group for repayment of these loans. Starting with lower multiples (1:1 to 2:1) the maximum loan amount often is a 4:1 multiple of the total funds in the group account. Many other innovative social entrepreneurs could be named.

The Way Forward

One example of highly motivated young Indians wishing to promote Social Entrepreneurship is Rikin Gandhi. After working for the US space program as an aeronautical engineer he decided to help Indian farmers with his project “Digital Green”. The project is sponsored by the Bill and Melinda Gates Foundation and interacts with different NGOs. It produces and distributes community-centric, locally relevant videos about best agricultural practices. In the future, “Digital Green” plans to develop a technology platform where farmers can share data and videos.

There are some challenges that Social Entrepreneurs must address in India. They often face situations that are unpredictable, constantly changing and hard to control. In 2008 for instance the terror attacks in Mumbai forced Social Entrepreneurs to re-think their general strategies. Furthermore, although there are many opportunities in the Indian welfare sector, most social entrepreneurs still focus on traditional areas such as education and healthcare.

Gabriele Mante/RESET editorial

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