Blog - Menterra

An untapped opportunity in employability

Posted on March 27, 2023April 14, 2023 by Menterra

New jobs created over the next five years will be largely in the informal sector. Therein lies the opportunity to skill the informal workforce, enhance their wages and enable their transition to better jobs and micro-entrepreneurship.

The Ministry of Skill Development and Entrepreneurship has projected a total human resource requirement of 103.4 million people between 2017 and 2022. Interestingly, a subset of industries is going to create a disproportionate number of these new jobs, with more than 85 million coming from the top ten sectors, one-third of these in construction alone.

One of the key engines of this growth will be the informal workforce; with three industries alone employing more than one million informal workers each per year for the next five years (see table below). Besides the obvious areas of growth like construction and retail, sectors like tourism and hospitality, furniture and furnishings, and warehousing and logistics will each add more than 500,000 informal workers every year.

The following table projects the informal workforce requirement through 2022.

With so many people entering the workforce over the next few years, we have an opportunity to either bring them into the formal economy, or enable a large number of them to have choices and leverage to command higher wages; and, if they choose, become micro-entrepreneurs.

One size does NOT fit all: Selecting the right model for the right industry

There have been many models over the years to match the demand for labour at varying skill levels, and the supply of employment opportunities. A recent industry report highlighted four potential business models that could help improve outcomes for workers:

1. Self-employment model: In this model, the skilling company offers training to students who in turn, graduate with the required experience to get a job or possibly start their own business. The company’s revenue comes from fee-paying students, or from a government or a nonprofit client. For example, NSDC has partnered with deAsra Foundation to develop and deliver entrepreneurship skills training.

2. Market linkage model: The market linkage model is one where self-employed workers are matched with open jobs resulting in enhanced wages for some, and new employment for others. In recent years, these marketplaces have become familiar to many of us; examples include Uber, UrbanClap, Betterplace , and so on.

Two important conditions are required for this model to be successful. First, a ‘virtuous cycle’ between supply of workers and demand is needed. In Uber’s case, a high number of drivers leads to more customers joining Uber, which in turn leads to more drivers, and so on. If either side becomes weak for an extended period of time, the other side will start dropping-off.

Second, a basic level of technology comfort is usually required for all users. Else, the marketplace will require infrastructure and resources to assist with the onboarding – for example, Bharat Matrimony and Babajob.

While these two models relate directly to opportunities in the informal sector, there are two more approaches that are increasingly being used to place people in informal jobs. These are the employer- and placement-led models—traditional skilling models that have mainly been used for formal jobs till date.

3. Employer-led model: In this model, training is offered to students for a skill required by a specific employer. These students may be new hires or current employees who are ‘upskilled’.

Maruti Suzuki, India’s largest car-maker is setting up 400 skill training and enhancement facilities, in partnership with its vendors, with vendor-partners investing in the set-up of these facilities. The company itself has not made substantial additions to its own staff in the recent past; however, through its production of 1.5 million cars annually, it estimates that it creates up to a million informal jobs downstream — in driver training, repairs, insurance, and so on. According to R C Bhargava, chairman, Maruti Suzuki, “Economists and policymakers seem to underestimate the contributions of the informal sector in creating employment”.

4. Placement-led model: Here, the skilling company has a number of employer-clients where trainees can be placed. Like the employer-led model, it is well-suited for growing industries with multiple players that all require a specialised skill. Ancillary health services company Virohan has a placement-led model where trainees pay to become X-ray technicians and get placed at hospitals that work with Virohan.

THERE IS A GROWING REALISATION THAT THE LINES BETWEEN FORMAL AND INFORMAL JOBS ARE BECOMING POROUS.

The employer- and placement-led models are increasingly being used in the informal sector as industry leaders are beginning to recognise the role played by the informal sector in driving their own productivity and output. There is a growing realisation that the lines between formal and informal jobs are becoming porous and therefore, a lack of skills in the informal sector—similar to a lack of skills in the formal sector—will have implications on larger, established companies as well.

Deciding which model works best: A framework for social entrepreneurs

For social entrepreneurs, it is critical to match the business model to the industry. In some cases, current industry dynamics may not allow for conversion of informal to formal workers, and entrepreneurs may want to focus their energies on a different sector. Some questions to ask yourself for each of these models include:

What are industries in which the demand, visibility into open jobs, and increased income make self-employment a reasonable return on investment (ROI) for people currently headed for the informal workforce? How would fee financing work in this model?
Do market dynamics on the demand side and profiles of the workers on the supply side make a market-linkage model possible?
Which sectors require high capex and fixed costs for training and do they have sufficient margins to make an employer-led company viable?
Is there a large enough network of accessible businesses for the placement-led model to work?

Matching industry to business model

To better understand how to match an industry to an appropriate business model, we’ve described two examples below.

Building, construction and real estate: market linkage and placement-led models

From the NSDC data presented earlier, construction is by far the largest employer of informal workers, with more than four million new jobs added each year. Yet, the overwhelming majority of construction jobs over the next five years will remain low-skill.

The profiles of most workers in the construction industry and relative commoditisation of their skills makes it difficult for a market linkage model without a major established player backing it. Therefore, instead of initially focusing on the large majority of low-skill jobs, we suggest applying the market-linkage model for the approximately 10 percent of construction jobs that are skilled jobs (and not completely commoditised). These may include electricians, plumbers, carpenters, bar-benders, masons, and welders—jobs for which there would be competition when placed on a marketplace.

However, market-linked models take time to get off the ground and require a pre-existing set of qualified workers. A placement-led model that first organises and builds a track record of placement might be a good first stage. Eventually, the graduates of that programme could migrate to an open marketplace.

Auto and auto components: employer- and placement-led models

The auto industry currently employs more than 19 million workers and expects to add another 2.2 million by 2022. With more than half the industry workforce in the informal sector, the auto and auto components industry is an opportunity to formalise over 200,000 employees each year over the next three to five years.

At present, automotive skilling is undertaken by the Automotive Skills Development Council (ASDC). Manufacturing companies also have centres of excellence for their workers, while auto component makers and auto dealers work with original equipment manufacturers (OEMs) to train workers. There are many characteristics that make an employer-led model interesting for entrepreneurs seeking to create an alternate and more efficient system:

There is a higher degree of skilling required than in most other sectors.
This sector represents an aspirational step from other manual sectors like construction.
There is a relative lack of trainers today vis-à-vis the expected growth.
Infrastructure cost is high and technology is changing fast.
Companies want to outsource training to reduce costs and keep up with the latest trends.

In time, a placement-led model may also work. Currently there are challenges owing to lack of standardised curriculum, students’ inability to pay for such trainings, and rapid changes in technology, which make the capital investment tricky. However, student-financing options are becoming available from new companies, and we have seen the placement-led model work in other sectors with similar characteristics such as healthcare.

As the train-and-place model gets proven via employer-led programmes, and the industry views this as a critical channel for scale, we can expect viable placement-led models to emerge.

WE ARE ENTERING A TIME WHEN EFFECTIVE ENTREPRENEURIAL VENTURES CAN UPSKILL MILLIONS OF PEOPLE IN THE INFORMAL SECTOR.

We are entering a time when effective entrepreneurial ventures can upskill millions of people in the informal sector. By identifying pockets of opportunity in growing industries and marrying them to the right business models, the earning power of millions of workers in the informal sector can change significantly.

The net result will hopefully create a new segment of people that have the opportunity to build a career instead of spending their working lives looking for the next job.

We want IDR to be as much yours as it is ours. Tell us what you want to read.writetous@idronline.org

Power Play: Can Energy Access Entrepreneurs Survive the Relentless March of Grid Electricity in India?

Posted on March 27, 2023April 14, 2023 by Menterra

When Prime Minister Narendra Modi declared on April 28 that the grid had finally reached the last unelectrified village in India, he set off a wave of different reactions across the country. There was jubilation, of course, for this represented a major landmark in energy access for people of the country. There was scepticism – everyone knew someone who didn’t have power in their home or village. And lastly, there was confusion. Social entrepreneurs in the field of decentralized renewable energy, who built impactful businesses by bringing energy access to unelectrified communities, were left wondering what kind of future lay ahead of them.

FULL ENERGY ACCESS ACHIEVED?

No doubt there were loopholes in the government’s “100 percent electrification” claim. Thanks to an archaic definition, a majority of homes in a village could be off the grid and yet the village could be could be counted as electrified. S.N. Srinivas, CEO of CLEAN, an organization that represents energy access practitioners across India, points out that small hamlets that are omitted from the official census – and there are thousands of them – could be totally without electricity and yet not feature in the statistics. “We are still a long way from having 100 percent electrification at a household level,” he says.

But does this point to opportunities for renewable energy entrepreneurs in these off-grid pockets? The general consensus among practitioners seems to be: not really. The remaining unelectrified hamlets and homes are either extremely remote, or in some cases, lacking valid documentation to be viable from a business point of view. Moreover, under the government’s Saubhagya scheme, the focus has shifted to household-level electrification, with a target to have every house in India supplied with 24×7 electricity by March 31, 2019. There is talk of passing a Right to Electricity Act in Parliament, which would allow a household without grid access to sue the government.

Despite a quickly-shifting environment, energy access enterprises have found new ways to stay relevant. A closer look at Kolkata-based Onergy, an emerging player in India’s energy access landscape, throws light on how existing players have adapted to the changing scenario. Piyush and Vinay Jaju started Onergy in 2010, when official statistics showed that 34 percent of India’s villages were unelectrified. At the time, Onergy’s game plan was to sell solar home lighting systems at affordable prices (backed with financing options) to off-grid communities in eastern India. In 2014, 70 percent of Onergy’s sales came from home lighting systems. Cut to 2018, with zero unelectrified villages on official record – obviously this sales strategy has undergone a drastic shift.

“It’s not that the change came overnight,” says Piyush Jaju, “the trend has been quite clear for the past few years.”

Indeed, ever since Narendra Modi was voted into power in 2014, rural electrification shifted gears as it became a major developmental priority, as well as political plank, for the new government. With the number of off-grid villages shrinking by the year, companies like Onergy have had to overhaul their sales strategy on an annual basis.

“Today our product mix looks quite different. We remain committed to making a difference to the lives of the rural poor, but the impact happens in areas other than home lighting,” Jaju said.

Nearly 40 percent of Onergy’s sales in 2018 are expected to be in the form of solar water pumps, which allow even small farmers to access ground water and increase the productivity of their lands. To keep their business viable, Onergy has also made a major foray into rooftop solar systems in both urban and rural areas.

OBSTACLES TO OPPORTUNITY

The good news is that any change brings opportunity. Grid entry into villages can be a powerful catalyst – it spurs aspirations, creates new demand and paves the way for innovative services. Entrenched players – as well as start-ups that are willing to pivot their business – could actually benefit from the spread of the grid.

When the electricity grid triggers the growth of micro-enterprises in rural areas, but falls short of meeting the entire demand, it opens up a gap that renewable energy can very easily fill. SELCO, one of India’s oldest and most respected decentralized renewable energy players, has started looking at this opportunity very carefully.

“We expect that over the next five years, at least 50 percent of our sales will come from the rural livelihood segment,” says Sudipta Ghosh, assistant general manger at SELCO India. This is a big shift for a company that for the first 20-odd years of its existence earned most of its revenues from off-grid solar home lighting systems. The company has already sold several hundred solar-powered sewing machines and is seeing strong demand for solar backup from internet kiosks in rural areas. It is also doing pilot sales of refrigeration systems, furnace blowers, milking machines, roti rolling machines and rice huskers – in all cases, working with customized end-appliances that are highly energy efficient.

At Villgro, India’s oldest and largest incubator for social enterprises, we run a program to support rural renewable energy access companies working in low-income states of India (funded by GIZ, the German development agency). All the members of our latest cohort were born in the era of widespread grid access, and they see the grid as a collaborator rather than a competitor. Take the case of CoolCrop, a startup that provides farm-level cold storages in rural areas. Niraj Marathe, one of the co-founders, feels renewable energy is an integral part of their offering.

“Even with 100 percent grid penetration, rural power supply is always going to be erratic,” he says. “And without power the entire stock that is kept in our cold storage can get spoiled.” Solar panels supplied with their units supplement grid power and provide backup during outages, adding a whole new dimension of reliability to their product line.

DIVERSIFYING PRODUCTS

Similarly, Garv Toilets, which makes smart, eco-friendly public toilets, uses solar energy to run the pumps, fans, lights and remote monitoring systems in their units. This allows them to maintain the quality of user experience, no matter what the grid power situation is at the site.

Other members of Villgro’s cohort have started selling “derivatives” – not energy itself, but products or services that are enabled by it. Oorja, a Delhi-headquartered social enterprise, started off piloting residential mini-grids in unelectrified villages. But managers found this market fading very fast, so they shifted their focus to agriculture and allied activities in nearby farms.

Says co-founder Amit Saraogi: “We found a lot of smallholding farmers did not have their own water sources and were paying a lot for their irrigation needs from diesel pumps. We decided to install and operate community solar water pumps that work on a pay-per-use basis.” With this scheme, Oorja still remains a renewable energy player, but the product that they sell to the end-user is water, by the cubic meter.

In another sector, Bombay Bijlee, a Mumbai-based startup, also taps into the aspirations of rural India. They sell solar powered “infotainment” packages – where monthly instalments pay not just for a TV and satellite receiver, but also the solar panels that power them.

Only time will tell if the paths chosen by these entrepreneurs will lead to success and scale. But they can surely take inspiration from how the internet evolved. In the early days, internet service providers ruled the roost, but as net access become faster and more widespread, a bewildering array of other, much more profitable businesses sprung up that rode astride the internet’s growth. Perhaps a similar story is waiting to unfold in India’s energy access sector.

Ananth Aravamudan is Lead, Renewable Energy at Villgro.

How an Incubator-Investor platform transformed a dorm startup into a successful company: The Journey of BIOSENSE

Posted on March 27, 2023April 14, 2023 by Menterra

First time entrepreneurs generally lack the experience to build business models that are not only scalable, but also profitable in the long run. From the early startup boom of the silicon valley till today, this has been the pattern almost everywhere in the world. However, in the past decade, incubators and accelerators/investors across the world, have slowly but surely tried to fill this gap. While incubators help early-stage entrepreneurs with mentorship, investors help in accelerating the development through capital.

First time entrepreneurs generally lack the experience to build business models that are not only scalable, but also profitable in the long run. From the early startup boom of the silicon valley till today, this has been the pattern almost everywhere in the world. However, in the past decade, incubators and accelerators/investors across the world, have slowly but surely tried to fill this gap. While incubators help early-stage entrepreneurs with mentorship, investors help in accelerating the development through capital.

But the catch for the entrepreneurs has been to find the perfect incubator-investor combination. Incubators to help them shape their business model and the investors to back their business through funding. This is especially difficult in the social entrepreneurship universe. While Villgro was founded in 2001, Menterra, its partner investment fund was set-up in 2016. Together, this platform provides a strong value to early-stage entrepreneurs. The platform works like a well oiled conveyer belt and enables a business right from its formative stages to growth.

To know exactly how this model works, I caught up with Paul Basil, Founder & CEO, Villgro and Mukesh Sharma, Co-Founder & MD, Menterra Venture Advisors. The duo explains how one of their flagship portfolio companies, Biosense, achieved success, and is now creating impact at scale.

THE BIOSENSE STORY

Biosense is a cutting edge IoT product that is focused on tackling India’s twin challenges — malnutrition and diabetes. The product leverages connected devices to increase accessibility of tests. From the hilly regions of Ladakh to desert districts of Rajasthan to the tribal areas of Gadchiroli in Maharashtra, Biosense has been catering to some of India’s poorest, in diverse geographies.

It can be hard to believe that Biosense was just a dorm room startup!

“When we incubated Biosense, it was a product idea and the founders were still pursuing their degrees at IIT Bombay. It was a typical dorm startup!” recalls Mukesh. “The founding team told us they know the problem and they can create solution. They didn’t know how to build a business around it. They asked us if we would help them to build a business. It was a test of our incubation model. Over the last 7 years, Biosense has launched 7 products and has raised more than USD 4Mn.”

~ All Biosense devices use mobile platform with geo tagging and cloud-connectivity enabling data on disease
prevalence by village and district.
~ Potential Aadhaar integration would enable care to high risk patients.
~ Government and corporate initiatives are now able to use this data to provide targeted intervention resulting in
efficient usage of scarce resources.

INITIAL CAPITAL AND TALENT DEVELOPMENT

Apart from the infrastructure setup costs, hiring the right talent is the first major hurdle for any startup. While speaking about tackling this, Mukesh Sharma says “We helped them build a team and business around their passion and idea. So, the Villgro-Menterra partnership with Biosense can be summarised in one line: transforming a dorm startup into a solid organisation that delivers impact at scale.”

Mukesh elaborates, “We helped them raise first angel and VC round. Once we launched our fund, we provided more than USD 1Mn in equity funding. For working capital, soft debt funding of more than USD 2Mn was arranged through our investor network. Capital was an initial impediment. There was need for very intense hand-holding in multiple areas.”

“We worked on talent development at all levels (CxO, board and the execution team). Building sales DNA and engine has been an area of focus for us. We engaged distributors and mentors from large pharma companies to provide them with very specific commercial, distribution and sales inputs. We formalized the board and initiated robust governance structures. We helped team of doctors and engineers develop a business aptitude with sound financial discipline.”

EXIT FROM VILLGRO AND HANDOVER TO MENTERRA

Villgro initiated the incubation of Biosense back in 2012. Initially, it focused mainly on a strong product and smart customer insights. But later on, after about 4 years – in 2016, we wanted Biosense to become aggressive in the market. That’s when Menterra entered the fray.

“From a friendly, caring Villgro there was a shift to a more aggressive Menterra. This taught us a lot at Villgro that we need to be harder and tighter with our entrepreneurs, while providing them the shelter to kickstart their businesses.” Paul says while talking about the transition.

Mukesh also has fond memories of those days. He recounts, “Our journey started 7 years back. The trust was already established at Villgro but there was more tough love at Menterra. They knew that we only have their best interests in mind. So, our relationship evolved but the trust and mutual respect remained. That helped through difficult times that every enterprise invariably goes through.”

WHAT THE FUTURE HOLDS FOR BIOSENSE

The mentoring through the Villgro-Menterra platform has helped change the DNA of Biosense – from being a tech & product-driven to a market-focused organisation, according to Mukesh.

He continues “When Biosense joined Menterra, its revenue was ₹1.5 Crore. Within 3 years it would likely be at 10x in a segment where fewer companies have built serious domestic business. It is also an important Make in India story and is well aligned with the development challenges and priorities of the country as well as the UN Sustainable Development Goals. Our focus is to help them scale. For that, the level of intensity and engagement needs to and continues to remain high.”

THE VILLGRO-MENTERRA PLATFORM

Paul Basil is excited about the future of other similar prospects like Biosense. “We are extremely delighted to see a company that has travelled through our ecosystem in form of the incubator (Villgro) and investment fund (Menterra). To build successful companies, incubator and downstream investors need to partner and work together. This alignment is very weak in our current funding and support ecosystem. Investment Funds wait for good quality companies to emerge. Entrepreneurs and incubators toil hard to build investable businesses. To fill this gap, we need serious collaboration. A closely aligned incubator-investor partnership like Villgro-Menterra can go a long way in building a strong and vibrant startup ecosystem in India.” he concludes.

Learn more about the impactful, innovative and successful enterprises that we are creating at www.villgro.org and www.menterra.com.
If you are an early stage entrepreneur and want to be supported, please connect with us at info@villgro.org.

Source: http://villgro.org/how-an-incubator-investor-platform-transformed-a-dorm-startup-into-a-successful-company-the-journey-of-biosense/

Hardware Innovation is … Hard

Posted on March 27, 2023April 14, 2023 by Menterra

Hardware Innovation is… Hard: How Four Entrepreneurs Overcame the Challenges

So, Walmart recently agreed to buy a majority stake in Flipkart – a popular mobile app-based online retailer in India – for $16 billion. That’s roughly a billion for the founder, who started his app-based innovation with about $1,500. “Good for him!” I thought. Not too many have such luck. And then I immediately thought about an expectant mother in rural Maharashtra, India, whose version of luck was being able to deliver her baby and survive the process, since her anemia was diagnosed fairly early and she has been on iron supplements to counter it.

It is not all luck, actually: Her survival (and that of thousands of other mothers) is possible, in large part, thanks to a non-invasive anemia screening device from Biosense. She might not understand the concept of an app, let alone shopping on Flipkart, but the impact of the hardware-led innovation that led to her survival is all too real to her.

(Note: Biosense and the other companies mentioned have received investment capital from Villgro, where the author serves as chief technology officer and health care practice lead).

HARDWARE-LED INNOVATION IS…HARD!

It was one such rural mother, whose luck had run out in a peripheral health center where undiagnosed anemia took her life, that motivated Biosense co-founders Dr. Abhishek Sen and Dr. Yogesh Patil to embark upon a journey of innovation and entrepreneurship. It was a radically new path for these freshly minted physicians. Fast forward seven years and Biosense is in scaling mode, having grown slowly, painfully and steadily into an entity focussed both on its original mission of serving public health needs – and also on reaching a sizable share of the private health care market in India. But its journey was not as “utopian” as Flipkart’s. For starters, hardware-led innovations are, for lack of a better word, really hard to pull through. The resources and time required to churn out iterations are much larger, even if one has a clear understanding of the problem-solution fit and the design expertise needed. Additionally, the lack of a mature ecosystem to support such hardware-centric enterprises is a stumbling block. The journey of a social entrepreneur is fraught with a minefield of crippling mistakes and cash-robbing redesigns. It is not surprising that many entrepreneurs and investors avoid risking their resources on such ventures.

KNOW WHO WILL PAY FOR IT, WHY AND HOW MUCH

Another complication is the fact that the buyer of this type of innovation is distinctly different from the user, who in turn is entirely different from the beneficiary. Even a simple innovation is bound to become a lot more complex to deploy if all these different stakeholders have to be satisfied. The Bempu bracelet by Ratul Narain is one such example. Designed as a simple intervention to reduce infant mortality due to hypothermia, the bracelet measures the infant’s temperature and raises an alarm when it falls. Worn by the infant and monitored by the caregiver, it is an effective solution – but who will buy it and help deploy it?

That is a seemingly simple question with multiple complex answers. In the Indian context, it is the government that is capable of purchasing this at scale, and is also tasked with reducing infant mortality – especially the state government, which is responsible for public health. But to complicate matters, the state health budget has two components, funded and approved at two different levels: Suddenly, identifying the buyer is not so obvious. In some ways, the biggest thing Narain had to accomplish was NOT designing the bracelet, but figuring out which line item in the budget is the key to a government sale. But he realises that while this path is clearer now, it is certainly not a sprint to the end, but a marathon – 29 states in India means at least that many stakeholders to convince – pilot after pilot after pilot.

RADICAL INNOVATION REQUIRES HEAVY CONCEPT SELLING

Imagine the plight of K.S. Satish, the founder of Flybird Innovations, who discovered this reality the hard way and had to overcome it without running out of cash. Satish was a 13-year veteran of aerospace R&D and product development, but passionate about agriculture. There was an acute water shortage in his hometown of Chitradurga, and yet farmers were not using irrigation technology – mostly because small farmers couldn’t afford it. So he left his job and started creating a product for water management – a controller that automated water delivery to crops. After some hard knocks, he pivoted to an efficient drip irrigation system, enough to satisfy a small farmer’s needs, at an attractive price.

But selling a radically new farming practice required significant behavior change, and hence extensive concept selling. He started doing small demos at farmer fairs and saw some traction, but achieving serious scale required big sales muscle – Flybird was too small to attract such talent. Though Satish’s story has a pleasant ending – he managed to get a co-distribution/co-branding solution with a major agribusiness – many hardware-led enterprises flounder and slowly fail because they underestimate the stamina required to tackle this dissemination step. Unless well-planned and executed, the cost of sales/customer acquisition for these one-product companies quickly becomes prohibitive to enable scale.

All these innovators did get one aspect right – they were able to leverage the support their ecosystem partners offered vis-a-vis mentoring, knowledge, networks, etc., and navigate the challenges a typical hardware-led innovative enterprise faces. But such partners are also few and far between, a gap that Villgro hopes to fill in its mission to create impactful, innovative and successful enterprises. With our investment and outreach programs iPitch and Unconvention, and through partners like ASME iShow, BIRAC and the DFID-funded INVENT program, Villgro strives to support many such innovators – who went well beyond tapping and swiping!

I respect and empathise with the plight of these innovators, and wonder if the ecosystem will mature fast enough to offer them enough support before the hard path of app-less-ness consumes them. Yet I am touched by the fact that this enthusiastic lot is laboring on, fueled by the smiles on the faces of their beneficiaries – although they assure me that they would also gladly take the next billion-dollar exit!

Arun Venkatesan is the chief technology officer and health care practice lead at Villgro.

Social action in India: Past, present, future

Posted on March 27, 2023April 14, 2023 by Menterra

Looking at social action in India from 1947 onwards, and given where we are today, here’s why we need civil society as a balancing force between the state and markets.

Based on Vijay Mahajan’s essay ‘A Retrospective Overview of Social Action in India: 1817-2017’, this three minute video gives you a brief history of social action in India. Watch it here, or scroll down for the slideshow.

Social action is an aggregation of efforts by various individuals to address what they see as the social problems of their times. Thus, before we think about the future of social action in India for the next 30 years, we need to think more fundamentally about our role as individuals in society.

Unfortunately, the overwhelming concerns for survival and securing livelihoods, and the growing influence of market institutions have converted most relationships between individuals into mere transactions. We have reduced ourselves to producers and consumers, sellers and buyers. The interactional aspect of relationships has taken a back seat.

“TODAY, A CITIZEN IS NOTHING MORE THAN THE RELATIONSHIP THEY HOLD WITH THE STATE.”

On the other hand, the rise of the state—including its encroachment on essentially social sectors such as health and education in the name of welfare—has reduced the definition of the word ‘citizen’. Today, a citizen is nothing more than the relationship they hold with the state. In a recent speech, Rajesh Tandon, founder of Participatory Research in Asia (PRIA), argued that we need to broaden the concept of citizenship from being a vertical relationship between the individual and the state, to numerous horizontal relationships among individuals.

The third level at which people relate is one that encompasses the natural world or environment, as well as the spiritual—the need to find meaning and purpose in our daily lives.

Therefore, an individual who is not only engaged in transactions and interactions, but has humane relationships with others, cares for nature, and cultivates their spiritual side is more evolved than the mere producer-consumer archetype.

The central challenge of the 21st century then, is to build robust eco-social action-oriented institutions that can nurture such individuals across income, caste, and class levels.

These eco-social instituions (ESIs) are therefore civil society organisations of the future; they focus on changing environmental and social norms—critical for the future of the planet.

The role of eco-social institutions

There are at least six reasons to build robust eco-social institutions.

ESIs promote diversity and pluralism. They are like bio-diversity reserves for preserving a vast variety of ideas and beliefs, necessary for the survival and evolution of humanity.
They serve as incubators for innovative approaches to resolve problems, which neither the state nor the market have been able to crack.
They can act as ‘practice fields’ for democracy, where people form numerous neighbourhood groups and wider social associations to address a number of needs and issues. These collectives provide them the practice for political democracy.
ESIs can act as early warning mechanisms that are able to detect and amplify anxieties on the ground, among the people, and alert society, the state and the market to take corrective action.
They play a balancing role between the state and market institutions and are essential for ‘restoring sanity’ whenever either of these crosses a line. ESIs can influence political change and enable pro-consumer and pro-environment laws to control market players.
Finally, they are focused on enhancing the overall well-being of all people. Market institutions are designed for maximising profits, while state institutions are designed for maximising power, control, or order.

Eco-social institutions therefore have a huge responsibility to work at the normative level, that is, establishing principles of what is widely accepted as desirable for the long term good of individuals in a society. This is partly because governments have ripped the normative fabric of society in the name of social good.

“WE NEED A NORMATIVE VISION THAT WILL ENSURE LIBERTY OF LIFE AND BASIC FREEDOMS.”

We need a normative vision that will ensure liberty of life and basic freedoms—of expression, belief, occupation and association, a safe and clean habitat, with a minimum level of health, education, economic opportunity, political representation, and cultural self-expression for all.

The state as well as market institutions have failed to offer these to us. It is time that ESIs step in and influence both the state and the market. If the 21st century has to avoid the folly of the reassertion of the state in response to the excesses of the market, ESIs need to be strengthened, as a balancing force between the state and market institutions.

Using eco-social institutions to influence the state

In order to provide primacy to ESIs, several constitutional and legal amendments are required. These would:

Make the Directive Principles a conjoint responsibility of the state and eco-social institutions by amending Article 38 (1) to read as follows: “The State shall strive, directly as well as by enabling associations of citizens, to promote the welfare of the people…”.
Establish a permanent national commission on eco-social institutions so that there could be an interface between the state and civil society.
Advocate that the Finance Commission as well as the State Finance Commissions devolve at least a minimum portion of their tax revenues to ESIs.
Broaden the ambit of the Comptroller and Auditor General, the Central Vigilance Commission, and the Central/State Information Commissions to cover social institutions. Doing this would bring social institutions at the same level of accountability and transparency as they expect from state institutions.
Ensure that the Union and the State Public Service Commissions—which are responsible for recruitment of candidates to the various civil services—have at least two members from the social sector to ensure the selection of right people in public service.

Using eco-social institutions to influence the market

Business has acquired enormous power to mould and control our lives; it is necessary that businesses and market institutions are influenced by eco-social thinking. To ensure this,

Companies and regulatory commissions must have at least two board members from the social sector.
Universities and professional schools must have adequate representation from the social sector on their boards; they must also offer courses on social sector issues.
At least 50 percent of CSR funds should be given to independent social institutions to undertake various programmes.
Users and consumers must be organised as a countervailing force against the untrammelled power of large companies.

Building effective institutions for eco-social action

The time has come for individuals to evolve from being passive participants in market institutions—producers and consumers, or passive recipients of state entitlements and welfare services.

To go beyond the control of market and state institutions, individuals imbued with a deep ecological and spiritual consciousness need to come together and form a new generation of eco-social institutions. Inspiration, leadership, legitimacy and resources are crucial for making ESIs more effective. Each of these can be and will have to be developed systematically to make such institutions more responsive, participatory, efficient, accountable and transparent.

The bell curve of altruism

Posted on March 27, 2023April 14, 2023 by Menterra

We need to look beyond our existing definitions and approaches to Funding, Talent, and Partnerships, if we are to address Social problems at Scale.

One often hears the question (and you’ve probably asked this yourself): “What is the role of private enterprise in addressing social problems?” The general belief is that the moment you allow return-seeking capital, you are opening the door for exploitation. After all, how can you profit from the poor?

These may be fair concerns, but for-profit, impact-seeking private enterprise has a role to play in development; and this article is an attempt to articulate why.

The Limitations of traditional approaches

The development problems we face are large and complex. Income inequity, poor health outcomes, low rates of educational achievement, low farm productivity—everywhere you turn, you see these issues staring you in the face. Some of these are hundreds of years old, deeply intertwined with other issues, and seemingly intractable.

While government has the potential to scale, it is not designed to experiment with risky solutions.

Traditional ways of addressing these have been through government intervention (such as targeted schemes), or through initiatives of nonprofits. While the government has deep pockets and the potential to scale, it is not designed to innovate, or experiment with risky but potentially game-changing solutions.

While government has the potential to scale, it is not designed to experiment with risky solutions.Nonprofits, on the other hand, struggle with finding the talent and resources required to scale. The donor shift to project-based financing also means that they don’t have the ability to experiment too much with new and innovative, but risky, approaches.

Lastly, solving these complex problems requires collaboration. Parties working on different parts of the problem must work together, contributing what they individually do best, while also collectively making a difference on the whole. However, without the resources–people and money–to engage partners effectively, attempts at collaboration often break down.

THE RETURN VS IMPACT MOTIVATION

To address these problems at scale, what can we do to increase the flow of money, talent and partnership, support to develop, deploy and scale innovative solutions for our most pressing problems?

I like to think of these in terms of the ‘Bell Curve of Altruism.’ If there was an index of altruism, I believe that funders—both individual as well as institutional–would generally be distributed normally along that index.

On the extreme left would be the Amazing Altruists, people who readily give their money and time to causes they believe in. On the other extreme are what I’d like to call Greedy Goblins who don’t think much about the impact of their actions, as long as they continue to make more money doing it.

I think most would fall in the middle, where they’d like to see fair returns, but are conscious about how those returns are earned—fairly and legally.

If we have to increase the flow of capital to social causes, we have to be able to move beyond the Amazing Altruists and draw in the Big-hearted Benevolents, and some of the Conscientious Capitalists.

While Altruists are willing to give their money as pure grants, expecting nothing but social impact in return, Benevolents need a little more—they expect to get at least their capital back, and are willing to be patient about it. The Conscientious Capitalist may be willing to accept a lower-than-market return, but expects the investee to at least cover inflation, and maybe a little more.

At Villgro, a nonprofit, we’re firmly in Altruist territory. However, to expand the pool of capital available to the social entrepreneurs we work with, we launched the Menterra Social Impact Fund, which gives muted returns, with social impact. We were thus able to tap into the Benevolents and Conscientious Capitalists and expand our footprint of financial supporters.

The same logic can be applied to people as well. We need hundreds of social change agents at all levels, within both nonprofits and social businesses, if we have to make a dent in the size of problems we face.

We need social change agents at all levels, within both nonprofits and social businesses, if we have to make a dent in the size of problems we face.

Some of the best entrepreneurs we’ve seen, are those who have gained valuable experience working at a corporate. When they evaluate the decision to take the plunge into solving a social problem, the ‘opportunity loss’ in giving up the security and quantum of the corporate paycheck weighs heavily on their decision.

We need social change agents at all levels, within both nonprofits and social businesses, if we have to make a dent in the size of problems we face.

People sitting just outside the Amazing Altruist territory–2-3 percent of the population–want their basic material needs to be met. They have families to support and student loans to pay.

Founders of social enterprises might be willing to make the sacrifice, knowing that their shareholding will compensate them in the future, when their social enterprise gets acquired. But companies aren’t built on founders alone; one needs senior and middle management to execute and scale.

If we have to increase the flow of smart, capable, talented people addressing social problems to the sector, we have to meet the needs of the people in the upward slope of the bell curve – the human equivalents of the Big-hearted Benevolents and Conscientious Capitalists.

Which means, we must pay them reasonable salaries, be able to share equity, and allow them to have some chance of an ‘exit’ so as to create wealth for founders and employees, something that is possible through the legal structure of a for-profit social enterprise.

Lastly, partnerships are key to execution and scale. Social businesses need partners who will help them use their labs for prototyping equipment, test their medical device in clinics or distribute their product. Here too, the bell curve of altruism will come into play.

While a few partners will enthusiastically support your cause, with little expectation of a return, true scale will only come from partners who will charge for services rendered.

I believe that we need to recognise that not everyone is an Amazing Altruist. If we have to expand the pool of funders, people and partners who can help us in our journey of addressing social problems at scale, we need to leverage structures that give them more than just social impact.

Of course, some checks and balances are required to ensure that we guard against mission drift, but with those protections in place, I do think we can leverage the benefits that are on offer.