Impact Investment in India has come a long way over the past decade with a significant contribution to the country's development sector. The sector has "impacted more than 490 million in India with a cumulative investment of $11 billion spread across 600 impact enterprises."
The inflow of equity capital in impact investment sector has been at a CAGR of 26 per cent.
MSME Minister Nitin Gadkari on Tuesday urged MSMEs to adopt a collaborative route to create a positive impact in the lives of underserved communities. Addressing a summit on impact investment organised by India Impact Council, Gadkari said, “These (economic downturn and Covid) times demand more empathy from businesses and investors – not only in empowering those who have been adversely impacted economically; but at the same time opt for a collaborative route to sustain these initiatives by involving smaller businesses, MSMEs, research and academic institutions through technology and knowledge.” He added that the need of the hour is to focus on profitability through socio-economic impact creation.
Impact Investment in India has come a long way over the past decade with a significant contribution to the country’s development sector. The sector has “impacted more than 490 million in India with a cumulative investment of $11 billion spread across 600 impact enterprises,” said a report by ICC and Asha Impact in July this year. The inflow of equity capital has been at a compound annual growth rate of 26 per cent. While the impact investment space has been existing since around the early 2000s but it gained pace only after 2005 on the success of financial inclusion. “The impact investing industry faced a test with the microfinance crisis in 2010, but since then funding has grown 8x in terms of annual deployment,” the report had noted.
“Over $4 billion has been invested into impact investment sector in the country since 2018, partly into newer sectors such as education, health, energy, etc. The ecosystem has strengthened in terms of allowing exits in more than two dozen investments into impact investing based ventures,” said Siddharth Nautiyal, Partner, Omidyar Network India & Chairman, IIC. Impact investment in India, according to the report, was traditionally linked to microfinance before it diversified into core social sectors including agriculture, healthcare, and education. Back in 2010, financial services accounted for 76 per cent of investments but declined to 43 per cent in 2019, and only 30 per cent of total deal volume over the 10 years. On the other hand, impact funding in healthcare, education, agriculture, energy and technology went up in the same period.
Nautiyal added that the focus of the summit — Prabhav 2020 emanates from three key ideas. First, India has a large base of both – low-income customers and an experienced base of entrepreneurs: access to technology and investments would accelerate the delivery of affordable solutions across sectors. Second, the sector needs sustained large scale capital and the right platforms to connect aspirants to investors. And third, there is a strong combination of both needs and opportunities awaiting the impact investment constituents in a post COVID world.