Social Entrepreneurship & Impact Investing in India Press Conference with Sir Ronald Cohen

1. Social Entrepreneurship & Impact Investing in India Press Conference with Sir Ronald Cohen Amit Bhatia, CEO- IIC 21 March 2016 | Royal Bombay Yacht Club, Mumbai

2. India needs Social Entrepreneurship and Impact Investing for truly inclusive growth To put 500 million new job seekers, between 2007-2022 to work By 2020, 635 of India’s population will be of working age and will grow by 69 million between 2012 and 2022 According to Niti Aayog, India needs 115 million additional non-farm jobs in the next decade In India, the SME sector employs only 40% of the country’s workforce (and is plagued with low productivity) compared to 80% in Germany, 90% in Korea and 60% in EU To solve its most pressing social problems: Water, Hygiene, Housing, Electricity 594 million people or over 50% of India’ s population defecates in the open 21% of India’ s communicable diseases are water related 77 million households use kerosene for lighting, while 44% of households in rural India lack access to electricity Only 19% of the rural population lives in pucca houses For truly Inclusive Economic Growth India’s Gini Co-efficient is 33.6 in 2012 (was 33.9 in 2009) showing minimal improvement in Inequality- Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality India ranks 130 (0.609) on Human Development Index in 2015 (131 in 2014 or 0.604), amongst Medium HDI nations (behind Very High and High but ahead of Low HDI nations). This was 0.467 in 2008; 0.519 in 2010; and, 0.554 in 2012 showing some absolute but poor relative progress

3. IIC defines Impact Investing as investments in for-profit social enterprises seeking both financial and social returns OUR CURRENT FOCUS For-profit Social Impact Enterprise funded by Social Impact Investors Setup as a grants-based charitable organization Setup as a sustainableventure with revenue streams but a non-profit

4. India’s pioneering Social Entrepreneurs and Impact Investors, thanks to Media, are widely known today Vijay Mahajan(b1950) is Founder of BASIX, a MicroFinance institution- now has multiple social enterprises supporting livelihoods, clean energy, etc. and 3.5 mn beneficiaries. Dr. V (1918-2006) or G Venkataswamy founded Aravind Eye Care with a 11-bed facility. Aravind has treated 32 mn patients and completed 4 mn surgeries and continues to provide free treatments. Verghese Kurien (1921-2012), Founder of Amul, was an early Indian Social Entrepreneur, and called “Father of the White Revolution”. A US$3.4 bn brand, Amul employs 750 people and connects 3.6 mn milk producers. Dr. Devi Shetty(b1953) founded Narayana Health for affordable healthcare with a 225-bed facility which has grown into a 57-facility, 5442-bed chain which just had an IPO. John Bissell (1932-1998) founded FabIndia, India’s leading Fabrics & Handicrafts chain, with 40,000 artisans and sales through 140 stores (& online) creating revenues of $65 mn annually. Rajiv B Lall (b1957) is Founder of Lok Capital and VC&MD of IDFC. With experience at World Bank, ADB, Warburg Pincus & Morgan Stanley, Rajiv’s Lok Capital has founded in 2002 has $90 million under management. Ela Bhatt (b1933), a Gandhian and social leader founded SEWA, which has over 2 million women members today and >20 enterprises like SEWA Bank & SEWA Housing. Vikram Akula founded SKS MicroFinance, India’s first Micro Finance company to IPO with 10,000 employees, 6.4 mn customers and $7.2 bn assets under management. Bhavarlal Jain (1937-2016) founded Jain Irrigation, a $910 million revenue social enterprise in drip irrigation with 29 plants worldwide and 10,000 staff VineetRai founded Aavishkaar in 2001 and has 2 decades experience in early stage investing, small business incubation, and microfinance with over $155 million in AUM. He is also the co-founder of the Intellecap Group.

5. IIC currently has ~30 Funds as Members, of ~50 operating in India

6. IIC Governance is through democratically elected members in an Executive Council and three Committees EXECUTIVE COUNCIL (ELECTED FOR 1 APRIL 2015-31 MARCH 2017) • Sandeep Farias (CHAIR), Elevar Equity • Ajit Mahadevan, Acumen • Anuradha Ramachandran, Omidyar Network • Mona Kachhwaha, Caspian • Royston Braganza, Grameen Capital • Vishal Mehta, Lok Capital • IIC Chief Executive Officer SECRETARIAT • Amit Bhatia, Chief Executive Officer (amit.bhatia@iiic.in) • Neha Bhatnagar, Manager (neha.bhatnagar@iiic.in) • MEMBERSHIP SUB-COMMITTEE (ELECTED FOR 1 APRIL 2015-31 MARCH 2017) • Royston Braganza (EC Nominee Chair), Grameen Capital • SrikrishnaRamamoorthy, Unitus Seed Fund • SanjibJha, Intellegrow • IIC Chief Executive Officer • ADVOCACY SUB-COMMITTEE (ELECTED FOR 1 APRIL 2015-31 MARCH 2017) • Anuradha Ramachandran (EC Nominee Chair), Omidyar • Kartik Desai, Asha Impact • RituVerma, Ankur Capital • IIC Chief Executive Officer • RESEARCH SUB-COMMITTEE (ELECTED FOR 1 APRIL 2015-31 MARCH 2017) • Mona Kachhwaha (EC Nominee Chair) • GeetaGoel, Michael & Susan Dell Foundation • Jinesh Shah, Omnivore Partners • IIC Chief Executive Officer

7. Impact investments have grown at 24% CAGR over the last decade and are expected to touch $ 1bn by 2020 Annual Impact Investments in India (US$ mm)(1) India has seen cumulative impact investment of ~US$ 2.5 billion in over 350 social enterprises with over 55 partial & full exits (1) Source: Intellecap Report: Invest, Catalyze, Mainstream- The Indian Impact Investing Story; IIC Analysis

8. Government can help Social Entrepreneurship and Impact Investing by defining them and providing regulatory support I. Define Impact Investing II. The Impact Investors Council (IIC) has further identified following priority areas that to boost impact investing IIC defines impact investing as for-profit investments in social enterprises, which are defined on the basis of: Intentionality – Achievement of measurable social impact as a stated, primary objective of the enterprise Priority/Social Sector Focus – Includes but is not limited to financial inclusion, agriculture, affordable healthcare, affordable education, clean energy, water, sanitation, livelihoods, affordable housing Beneficiary Focus – Over 67% of suppliers, customers, producers and/or employees must be individuals with annual income < US$ 5,000 Public Commitment to Social Impact Measurement, Reporting & Audits 1. Recognition of Impact Investors, Social Enterprises and IIC Notify definitions of Social Entrepreneurship and Impact Investing, based on Intentionality, Focused (priority) Sectors, Beneficiary Focus & (transparent) Impact Reporting to enable and catalyse Private Sector’s formal partnership for inclusive growth 2. Review Social Venture Fund (SVF) Guidelines Reduce minimum SVF size from INR 20 crores to INR 10 crores, using proposed Accredited Investor Guidelines, for parity with Angel Funds 3. Permit CSR & Trusts to make social “impact” investments Allow CSR/Trust/Foundation social “impact” investments, without source profiteering & with appropriate taxation, to unleash creativity 4. Increase Access to ECB for Social Enterprises Expand the Eligible Borrowers under Track III (INR funding) to include Social Enterprises and Eligible End Use to Social Entrepreneurship activities

9. We have two big stories to tell- a sterling Report Card and a bold, new Vision REPORT CARD • $ 2.5 billion cumulative core investments in India currently across >350 social enterprises; projected to grow to $6.5 billion by 2020 • 2015 Investments touch $508 million across 55 investment transactions • $60 bn market globally growing at 16% • Dominant Focus on Financial Inclusion in India: 61% by value and 54% by volume • Extensive Risk Taking: 39% by value and 34% by volume on Pre-Revenue companies  • Impact Investing returns estimated at 13% for a sample of 55 partial and full exits since 2007 with average holding period > 5 years VISION • Sir Ronald Cohen, Chair of GSG, has a bold, unified vision on a broader definition of Impact Investing with Outcomes in the middle, all sources of capital (Philanthropic & CSR included) and all social ventures (For-Profit and Not-for-Profit) • IIC is excited and building all-stakeholder consensus • We aspire to collaborate with Sir Ronald Cohen to unify all sources of Impact Capital and all Social Ventures, to build a $5 trillion global and $ 1 trillion Indian Impact Investing Industry by 2050 ($60 billion currently) • Finally, to make this possible, we need two innovations: • Outcome Funds & Social Impact Bonds • Social Investment Bank(s)

10. Opportunity # 1: Social Impact Bonds & Outcome Funds The SIB can have any time period and fixed or variable returns (based on outcomes). Also called “Pay for Success Bond” or “Social Benefit Bond”or “Development Impact Bond”. Outcome Funds will be not-for-profits and mobilize Philanthropic, CSR or Govt. Capital for specific outcomes- e.g.,reduction is school dropout rate for girls OR reduction in Diabetes OR reduction in Infant Mortality OR increase in GER, etc. The SIB issuer can be for-profit OR an Impact Fund which raises both “Risk Capital” for the entrepreneur and “Outcome Capital” as ongoing “revenue” and still play for “exit bounty” Worldwide, Governments are theprimary Funders of SIBs The OF, SIB Issuer or SV must hire a professional Social Impact Auditor for Outcome Measurement The Social Venture can be a for-profit or a not-for-profit; SIBs therefore unify the sector

11. Opportunity # 2: Social Investment Bank • What’s a Social Investment Bank? An independent financial institution with a social mission, to help grow social investment in a country with (i) investment and (ii) advocacy. • Is there an example? Big Society Capital in UK, co-founded in 2012 formerly chaired by Sir Ronald Cohen is the world’s first wholesale, Social Investment Bank, setup with GBP 600 million investment. As a wholesaler, BSC does not directly invest in frontline organisations, but in Social Investment Finance Intermediaries (SIFIs). BSC receives funding from two sources: • Banks and building societies in the UK pay money from dormant accounts into the Reclaim Fund Limited. • Four of the main UK banks (Barclays, HSBC, Lloyds & RBS) contributed GBP 50 million. • Do India Aspiration Fund or SIDBI perform the same function? No,IAF is a Fund of Funds and an LP into Venture Capital, Private Equity or Social Impact Funds. It is not dedicated to social mission. SIDBI too is focused on MSMEs, not social service. It also focuses in Equity. What about NABARD & IFCI? These are Development Banks with focus on Agriculture and Industry respectively and prominent use of direct investments. What about NSDC (National Skills Development Corporation)? NSDCis a Government SIFI, as it does direct investment into skills development companies and will be able to raise funds from this wholesale bank. • How will it help Government and India?: Different Ministries lacking professional skills to run “Funds” can consider Outcome Funds for current or new social programs, using professional capabilities and structures of this Wholesale Bank, which will improve upon the current process of Ministry Tenders, and both galvanize and create transparency amongst 2.5 million + social ventures in India.