P R Ganapathy | February 19, 2016

My policy recommendations on promoting social enterprise

Someone recently asked me a question: “If you had the ear of the Prime Minister / Finance Minister, what would you ask them for, to stimulate social entrepreneurship?” That set me thinking. What would I really ask for?

First, we need ideas. I think we have a shortage of good entrepreneurial ideas that impact the base of the pyramid. We have too many me-too ideas, and too few truly innovative ones that are based on a good and deep understanding of customers. I also believe that we live in a highly polarized society, where the students who get a good education from say an IIT, NIT or IIM, are very far removed from the problems of people living at the base of the economic pyramid. How can we break this barrier?

Fellowships are a great first step. Prime Minister’s Rural Development Fellows and Teach For India Fellows spend two years deeply immersed in these problems. Encouraging them to become entrepreneurs after they graduate will allow them to translate that experience into impactful and innovative ideas that are grounded in reality. Can we have more such initiatives? I remember a time when every graduating doctor had to spend a few years in a village health center. Why not students enjoying government-subsidized fees at an IIT or NIT? Or offer subsidized fees to students of IIMs if they agree to do the same?

‘Grand challenges’ are a possible second step. A ‘grand challenge’ defines a problem, and offers a significant prize to someone who develops a solution to it. Such grand challenges will stimulate our scientific and engineering institutes and their high quality faculty, to develop solutions to real-world, base of the pyramid problems.

Ideas need nurturing to ensure they translate into products and services that can be commercialized. Incubators play an important part in making that happen. However, I think there’s a shortage of good incubation management talent in the country, and just increasing the numbers of incubators will not solve the pipeline and quality problem. We have to provide incubators money to hire good talent, and the legal freedom to develop business models that can compensate incubator managers well. These include, the ability to earn revenue, manage a social impact fund, and to distribute carry to personnel, for example. Only then will we draw good talent into incubation, such as former entrepreneurs.

More support for incubators would be another thing I would ask for. A system that measures incubator performance, and provides more money and support to the best incubators, is what we need. I would also ask that a defined proportion of the Rs. 10,000 crore Fund of Funds is earmarked for early stage social impact funds (SEBI’s CAT-1 AIF) because that’s where the biggest gap exists.

It is good that the Companies Act allows CSR funding to be channeled through incubators to startups. I would ask that in-kind contributions should also count as CSR spend. Corporates have vital resources that can help startups, such as mentors, experts, labs and fabrication facilities.

The other area in which corporates can help is with respect to purchasing products and services from social businesses. They are currently required to procure a certain amount of their purchases from SMEs. I would ask that social startups are included in that definition. Corporate procurement from the base of the pyramid has proven to have huge, long-term impact on poverty in Africa, and we should leverage them to the maximum in India too.

Lastly, I would ask for some help to encourage people to take the plunge into social entrepreneurship. One suggestion is to give students with heavy student loan burdens a moratorium on student loan payments, or support for their EMIs, if they start, or go to work for, a social business. Social enterprises face severe talent shortages, and such a policy can do something to address that issue.

Overriding all these recommendations is a definition issue – after all, what is a social business? I don’t believe it is that difficult. Any government-approved incubator can confer that status on those incubatees that meet a set of defined impact measures, and track their performance on those measures thereafter.

So that’s my dream list. If these recommendations are implemented, I do believe that we’ll go a long way in stimulating social entrepreneurship in India. Because only if we engage our best, brightest and most innovative minds in solving the problems of our poor, will we create the just and equitable society we deserve.

This article was first published on Social Story