How philanthropic collaborations can help vulnerable people
If “necessity is the mother of invention”, as the saying goes, it’s worth nurturing a few ideas born out of the tragedy of the Covid-19 pandemic. Across India’s social sector, there are clear signs that necessity is driving donors to work collaboratively and innovate financially to benefit vulnerable populations. The combination is promising for the future.
Since 2020, the number of Indian philanthropic collaborations, made up of independent actors who join in pursuit of a shared vision and strategy to achieve social impact, has more than doubled. These new collaborations have mobilized a range of funding from foreign and domestic philanthropy, high net worth individuals, corporate social responsibility funders, bilateral and multilateral donors, private capital and other sources. Through these various streams, the amount of collaborative funding to improve people’s lives has increased significantly. The multi-year funding of eight of the most recent Indian collaborations ranges from Rs 2 crore to Rs 600 crore, while the annual budgets of the 13 philanthropic collaborations we studied in 2020 ranged from Rs 50 lakh to Rs 50 crore.
As funding levels have increased, so have innovative financing approaches to generating social impact, including pay-for-results models such as development impact bonds in education and health. , and other blended finance mechanisms. Moreover, some of the Indian collaborations go beyond ordinary grant making to NGOs.
For example, by combining funding from government, bilateral donors, major philanthropic organizations and leading companies, Samridh Healthcare Blended Finance Facility has mobilized a capital pool of Rs 1,875 crore. It provides both grants and debt financing to companies and innovators that expand the availability of affordable, quality healthcare solutions to bottom-of-the-pyramid populations. Their financing leverages other debt and equity investments as well as matching grants for health needs. Samridh supported the training of 1,100 healthcare workers in more than 25 cities and built oxygen delivery systems during the height of the pandemic.
Or consider ACT Grants, which has mobilized almost Rs 100 crore from business leaders and private equity/venture capital funds to address the challenges of Covid-19. By pooling capital from private sources, ACT grants have funded high-priority health needs such as tele-ICU treatment of high-risk patients in Karnataka, delivery of 45,000 pieces of oxygen equipment to health facilities health as the pandemic increased, and hospitalization and home expenses. based care of Covid patients, to name a few.
Donor partners are also deploying hybrid funding mechanisms that directly benefit underserved populations. During the first wave of the pandemic, REVIVE Alliance, a collaborative platform hosted by Samhita Social Ventures, used direct cash transfers to cover the basic needs of daily workers who had lost their income.
When REVIVE reached out to microentrepreneurs and workers, it soon realized that these people, who had lifted themselves out of poverty but often had no credit history, did not want charity. What they really wanted was dignity – a helping hand so they could help themselves – and inclusion in the formal economy. This is where an innovative social finance instrument called “reimbursable grants” comes into play.
REVIVE offers beneficiaries a reimbursable grant, which is a credit with a difference: it is an interest-free loan, with no collateral required, ranging from Rs 5,000 to Rs 25,000. But this loan also has the characteristics of a subsidy, since the owner of the small pharmacy or the street vendor has no legal obligation to reimburse it. Their only obligation is moral: if they don’t repay, they prevent another merchant whose store has lost business from receiving funds.
When workers and retailers repay, they actually benefit more than the next beneficiary. REVIVE estimates that each reimbursement generates a multiplier effect of up to seven times, since beneficiaries also receive tools and training to participate in the digital economy. When workers and retailers repay their loans, they create digital repayment records that establish their creditworthiness with formal financial institutions.
After raising Rs 152 crore in funding from its business partners as well as major donors, REVIVE has supported the efforts of 1.62 lakh small business owners and workers in January 2022. The collaboration aims to reach one crore of micropreneurs and workers, all over India, over the next three years.
Because REVIVE’s dignity and inclusion mindset begins with assuming that people will repay voluntarily, repayable grants are one of the purest expressions of trust-based philanthropy. Early evidence suggests that such trust is well placed. To date, repayment rates are 100% among small farmers and retailers, 99.5% among street vendors and 87.7% among women micropreneurs. The promise of reimbursable grants is that they could simply steer funders away from “either/or” choices – either solving the acute needs of today or the long-term challenges of tomorrow – and do both instead. .
They meet immediate needs by allowing a beauty salon owner to replace expired products or a small entrepreneur to relaunch projects. They also allow people who have never been part of the formal financial ecosystem to enter.
By bringing together different funders, each with their own risk-reward profile, the collaboration can leverage private capital with varying risk appetites. Because it can also deploy less familiar funding models, the collaboration gives funders additional flexibility to support communities. And by blending public, private and philanthropic capital, collaborations can reach segments (like small businesses) as well as populations (like women entrepreneurs) that would otherwise have been left behind by traditional development finance or development. purely private capital.
Venkatachalam and Gambhir are respectively Partners and Heads of Market Impact, South Asia and the Case Team in Bridgespan Group’s Mumbai office