Boiling the social enterprise ocean

[Editor’s Note: Alternate title for this post: What this blog is about (Version 2.0).]

Two months into my new gig, my view into the world of social enterprises is getting a little crisper. While it’s still a vast ocean, my method to navigate the waters has become more deterministic. There’s no danger of boiling the ocean anytime soon but initial trends of focus have emerged and I’d like to describe them in this post.

The Great Migration: There are anywhere between 300 to 400 million Indians who will be migrating from villages to cities in 25-40 years. And let’s not forget that there are already 100 million Indians today who are in a partial state of migration – partial because they work 90% of the year in urban India as cooks, drivers, construction workers, etc. to support their impoverished families in rural India, whom they visit a few times a year. In spite of contributing to India’s economic growth in a non-trivial way (excess of $500 million of remittances by Bihari and Oriya migrants alone in 2006-07), migrants are sadly the missing link in India’s Development. Notwithstanding innovative rurbanization initiatives from states like Gujarat (see Rurbanization in Gujarat – early signs of success), much of the globalization trends point to increased urbanization world-wide, not just in India, whether current city-dwellers like it or not.

A fresh look at the migration narrative takes a closer look at this trend. While nearly everyone still keeps repeating “70% of India lives in its villages“, few have bothered to look at the latest numbers. Tamil Nadu, Maharashtra, and Gujarat (states with the highest urbanization percentages) are already at 46%, 45%, and 43% respectively.

Rural Development: Even after accounting for the most aggressive migration forecasts, a very sizable percentage of India will continue living in its villages. The largest economically disadvantaged group is the impoverished small-scale Indian farmer. Improving the livelihood metrics of this group is the only sure way of bucking the migration trend. A key learning from this Duke University poverty alleviation study is that income diversification is the top correlating variable for households escaping poverty. The leading reasons for households descending into poverty are related to critical health expenses and high-interest private debt.

Much as the ruling Congress government would have us believe that the MNREGA scheme is a rousing success, the reality is far from that. There’s even growing evidence that far from improving the economic condition of India’s villagers, the scheme is contributing to inflation. This is not to say that all government schemes are missing the mark. The Ministry of Labour & Employment’s RSBY (Rashtriya Swasthya Bima Yojana) program, rolled out in April 2008, provides a free health insurance card (including hospitalization costs upto Rs. 30,000) for Below Poverty Line (BPL) families. 23 million families are already benefiting from this program and the best part is that it has created a demand for healthcare services in areas traditionally considered unprofitable. This demand is creating an environment for a slew of private hospitals to compete with public hospitals in providing healthcare services to BPL families.

Walmart India currently works with a network of 800 farmers (half of them in Malerkotla, Punjab) to supply 140 stores in North India. They have an aggressive target of expanding the farmer network to 35,000 by the end of 2015 with an important related goal of achieving a 20% increase in farmers’ income within 5 years. Walmart’s agronomists are working alongside Malerkotla’s farmers to improve yields with basic techniques like soil testing and germinating seedlings in trays. Walmart set up village collection centers to shorten travel time, uses digital scales to ensure fair weights and replaced burlap bags with plastic crates to minimize waste and damage in transit — all these initiatives serve to increase their profitability which, Walmart hopes, will lead to farmers selling to Walmart first.

Nimble young social enterprises like Patna-based Samriddhi are pursuing a strategy similar to Walmart’s – train farmers in their network to improve productivity, pay them a premium for higher quality vegetables, grade the produce into A/B/C etc., and sell the different grades to different segments (high quality grade-A produce to picky housewives via ice-cooled carts, grade-B produce to bulk buyers, and lower grade produce to low-end restaurants). Samriddhi’s goal (to increase farmers’ income by 50% in five years) is more aggressive than Walmart’s 20%. Odisha-based Milk Mantra is gearing up for the launch of a healthy set of milk products by building a direct last mile linkage to a network of 10,000 farmers, a network of vet care professionals, access to quality cattle feed, and partnership with MFIs to extend credit to poor farmers.

Then there are a bevy of Rural BPOs like Rural Shores, Next Shores, and DesiCrew who are convinced that outsourcing from cities to villages is no longer a question of if, but a question of when. Foundation for Life’s Sunil Savara spent the last few years piloting an innovative 8-month long training program preparing villagers, who’ve never been to any school, for a career in BPO or Information Technology (IT). Their goal is to train and prepare two million such villagers in 10 years to have a BPO or IT job without leaving their villages.

Off-Grid Energy in Rural India: In an earlier post, Why India needs to give more love to off-grid power, I reviewed the state of village electrification with a bold assertion by the central Power Minister in 2009: “The country would become self-sufficient in electricity production and electric equipment by mid-2012.” In the best case scenario, let’s assume that the remaining 100,000 villages will be electrified on target. But how many units of electricity would they get? 400,000 villages today get less than six hours of electricity per day. When blackouts occur, majority of the affected households invariably are in rural areas.

Fortunately a host of off-grid power companies are stepping in to fill the gaping power gap in rural India. Husk Power Systems, with 60 installed mini-power plants and powering approximately 25,000 households in more than 250 villages, has clearly proved its model. Selco Solar’s LED solar lanterns appeal to rural households with school-going kids – as this article in Hindu highlights. D.Light Design’s solar lamps can completely eliminate the need for kerosene lamps – the cost savings for customers can be significant as families spend between 5 to 30 percent of their monthly income on kerosene oil. D.Light’s lamps are priced such that they will pay for themselves in as little as six months.

Financial Inclusion: So far I’ve just scratched the surface of this vast and critical sector. A Primer on Micro Financing Institutions was my starting point, followed by a two-part analysis of Eko Financial Services (Eko – Part 1 and Eko – Part 2). This will be a core focus area for Techsangam going forward.

If you are curious about Version 1.0 of this post, you can check out The broad canvas for this blog (written in March 2011).