Touching lives first, returns second

Accion, a global not-for-profit organisation which invests in ventures that have a strong microfinance or bottom of the pyramid focus, will continue to look at these areas in India too. It recently led a $25-million (about ₹162 crore) investment in IFMR Holdings, a financial inclusion platform, contributing half the money with two other investors taking up the balance.

“Our agenda continues to be financial inclusion,” says Abhishek Agrawal, Country Director, Accion.

Core areas US-based Accion has been active in India since 2006 and has built up a portfolio of 11 companies ranging from micro-finance, SMB lenders, affordable-housing lending, financial advisory, healthcare to the low-income group and a BPO that predominantly employs differently-abled. Accion’s thrust, says 36-year-old Agrawal, is to work with institutions and focus on lending to individuals to serve their credit needs.

“We work closely with the companies we invest in. We are deep-rooted impact investors and we work with the companies in developing their product, improving their processes, building their capacity so that they can start scaling up,” he adds.

In the nine years it has been in India, Accion would have invested about $30 million, picking up stake ranging from 20 per cent to 40 per cent. It invests through three funds – Venture Lab, Frontier Investment Group and Gateway Fund – with varying ticket sizes. Through the Venture Lab, it will put in about $500,000 and $2-4 million through the Frontier Investment Group, which can go up to $7-10 million over multiple rounds. The average ticket size in the Gateway Fund is $4-5 million and it can go up to $15-20 million over different rounds.

According to Agrawal, Accion is a long-term investor and will stay invested in a company for 7-10 years.

How does the idea of a not-for-profit organisation investing in ventures work, as there will be an expectation on the returns? Agrawal insists that Accion is not driven by the “multiples factor.” Yes, it does pay back its investors, but the profit is ploughed back into Accion, which then re-invests in other ventures.

“What we look at is what is the social impact we have been able to create. How many millions of lives we are able to touch,” he says. “Our exits are generally between seven and 10 years, what is the social impact we have been able to create and nothing is driven by the IRR or numbers,” he adds.

The idea is that Accion would like to have a multiplier effect because of the investments it makes. Accion’s investment in a venture will also bring with it commercial capital, which is good for the business. It has not had any exits in India, but globally it has exited some of its investments.

These exits also prove to other investors that there is an opportunity to invest and make a return on the money put in.

Accion, according to him, does not have a committed fund for India, but can draw upon its global pool as and when required.

There will be an increasing focus on India, given the need for impact investments and the opportunities available.

Those who have contributed funds to Accion include Bill & Melinda Gates Foundation, IFC, Citi, Credit Suisse, Deutsche Bank, FMO, Ford Foundation and IDB.

India focus Agrawal says Accion’s focus in India will be on financial inclusion, but it will work in other areas too, like in the financial technologies space as these ventures in turn will be able to help those that are in the financial inclusion space. “We feel this (financial inclusion) is a core area where we have expertise and the need itself is large enough,” says Agrawal.

He feels there has been a lot of interest in the impact investment space in India in the last three-four years, both from the number of entrepreneurs wanting to start ventures and from investors keen on putting in money. The money floating around tends to push up valuations.

“That makes me a little nervous. But what makes me comfortable is that young entrepreneurs are coming forward, willing to take the risk and getting into businesses that were not heard of in the past,” says Agrawal.

He expects Accion to put greater emphasis on India in the next three to five years.

“We expect in the next three to five years, we would be spending a major chunk of our resources in India,” adds Agrawal.

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