Screen Shot 2015-07-04 at 09.02.22I’ve been to a lot of events in India over the past year when incubators and (institutional) impact investors  have reiterated the same complaint: the slow pace of technological innovation for social purposes, and the consequent  lack of investible technology based social enterprises.

Unsurprisingly, we’ve seen a flurry of competitions for new product innovations, particularly in under-served sectors such as maternal and child care (such as that launched by Villgro, one of the delivery partner for BIRAC’s Social Innovation Immersion Program).

These concerns, and the responses to them, lead to some basic but important questions about the functional role of social enterprise in India.

The Asian Development Bank’s report on the social enterprise landscape in India attributes the  necessity of social enterprise in India to:

“non-uniform infrastructure, low quality public good provision by the government (especially in health and education), and resource limitations”

It goes on to claim that “by employing innovative business models, SEs are addressing India’s vast development needs, while maintaining sustainability through viable revenue models”.

Intellecap’s alternative landscape survey openly suggests that social enterprises have emerged because of the “the limitations of government and NGO solutions to India’s development challenges have become clear” and there is now a “critical need for private-sector participation in building and scaling sustainable solutions”.

No-one can disagree that there is huge state failure in public good provision across all sectors, and that a diversified private sector has an essential role in helping to plug that gap. What’s less obvious is where social enterprise should be directed. Is social enterprise activity happening where it is needed most?

If we allow the market to play out, will we see a preponderance of social enterprises in sectors where financial sustainability is high, but social outcomes are less striking. Will we see a crowding of some sectors, like energy and agriculture (some claim that’s already happening) and a lack of entrants in others, like sanitation and education?

Secondly, what should the role of  impact investment be?  If we consider the UK, Big Society Capital has explicitly claimed that its role is to build the social investment market but  it equally has a responsibility to shape it, so that it is patient and suitably diversified across sectors. Could the Indian government, often portrayed as a barrier rather than a partner, position itself to shape impact investment too?

At a global level we’ve come to realise that ventures tackling the most complex, entrenched problems are the most likely to fail – and therefore to spook incubators and investors – but they are also those which, if they succeed, can deliver significant impact.

Thirdly, there is little consideration of how the public sector should work constructively with the private sector. If we are seeing a relative lack of innovation in education and healthcare, two primary human capability domains, how should the Indian government stimulate innovation in these areas? Is there scope for a variant of Social Impact Bonds in the Indian market, given the volume of potential impact investment? Further down the track, how might  it ‘absorb’ social innovations  to replace existing delivery mechanisms, and how would that be financed?

Markets aren’t too keen on circumspection, but it might be time to have a discussion about the position of social enterprise in Indian public good provision and the role of government and impact investors to direct activity where it is needed most, not where the quickest wins are.

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