Money & Banking

Social impact investing needs recognition, separate classification, says industry body chief Amit Bhatia

KR Srivats New Delhi | Updated on January 16, 2018

Amit Bhatia, CEO, Impact Investors Council

Over 150 global social investors to attend conclave in New Delhi next month

Social impact investing should get its due recognition from the government and a separate category must be set up for this sector so that it can be measured and allowed to grow, Amit Bhatia, CEO, Impact Investors Council (IIC), has suggested.

“Anything that does not get measured well does not grow. Providing a separate category for social impact investing sector would help develop the eco-system for social entrepreneurship,” Bhatia told BusinessLine here.

Bhatia highlighted that India still does not know how many social enterprises are operating in the country. Creating a category would help such enterprises attract more capital.

“Today, we have to search for social enterprise. In India, there is no classification as social enterprises,” he said.

IIC is an industry body established in 2014 to build a compelling and comprehensive India impact story and strengthen the significance of impact investing in India.

Impact investment is a for-profit enterprise that serves under-served beneficiaries who are producers, consumers, suppliers, employees or users. Under-served beneficiaries could also be enterprises as defined by the MSME Act 2006.

Industry conclave

To showcase the impact investment opportunities in India, IIC, in association with Ministry of External Affairs, is organising the country’s first ‘Impact Investment Conclave: Prabhav 2016’ in New Delhi from November 15-17.

About 150 global social investors, including big sovereign wealth funds, pension funds and fund-of-funds, are expected to participate in this conclave, Bhatia said.

Currently, there are only 50 impact investors in India with a market size of $7.5 billion. Last year, social impact funds raised $500 million through 55 transactions. “By 2020, our target is to annually raise $1 billion.”

Of the current cumulative fund size of $7.5 billion, as much as $ 2.5 billion has gone into core (direct to beneficiary) and the remaining to non-core (rural infrastructure, climate change).

“The fact that we help capital find its highest purpose and the fact that we solve the problem of the poor, why shouldn’t any government not be embracing it, instead of ignoring it?” Bhatia asked.

Till date, the Centre has not been receptive to IIC’s suggestions on allowing social impact bonds or permitting CSR funds to flow into social impact funds or even permitting philanthropists around the world to invest in social impact activities.

Healthy returns

Bhatia said that the social impact funds have since 2007 delivered average annual return of 13 per cent in dollar terms, which is a good return.

“For most of the 15 years of our existence, we were out proving to the investors that this (social impact investing) works. We are looking to find ways for rich to understand that the world is not just divided into two parts of wealth maximisation and philanthropy.

“There is also something in the middle which is called social impact investing — you can still earn profits and at the same time serve the poor,” he said.

He also said that social impact investing sector does not want any tax incentives for enabling its growth.

“We will compete on level-playing field with regular businesses because poor makes good customers. Social entrepreneurs can be smarter than regular entrepreneurs. We are only saying please recognise that they exist,” Bhatia added.

A simple certification mechanism to recognise social enterprises would be of immense help for the growth of this sector, he added.

Published on October 11, 2016

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