The United Kingdom’s Department for International Development (DfID) is overhauling its approach to investing in small enterprises in India. The governmental body is looking to organizations such as the Acuman Fund and Aavishkaar Investments as leaders in the field of patient capital that aims to help enterprises reach scale and increase their economic impact. DfID is leveraging the expertise of the Small Industries Development Bank for India to channel GBP65M between 2012 and 2019. The project will be known as Samridhi, prosperity in Hindi, and will focus on investments in microfinance and other financial inclusion sectors. Another initaitive is to co-invest in Milk Mantra, a diary services business that collects millk and manufactures higher value products such as cheese. Finally, the Commonwealth Development Corporation (CDC) is establishing a new private equity fund called “Pragati” to make targeted investments in India’s eight poorest states, aiming to boost investments in healthcare, infrastructure services, oil and gas services, manufacturing and education.
Dfid’s role models for its new private sector approach in India include the US-based Acumen Fund, part of the Aspen Network of Development Entrepreneurs, the US Rockefeller Foundation and Mumbai-based Aavishkaar Investment.
Dfid has chosen the Small Industries Development Bank for India to channel investments to small enterprises, in its first private sector development programme in India.
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The Samridhi, or prosperity, initiative is worth £65m between 2012 and 2019. It will create an Impact Investment Fund targeted at India’s low income states to provide capital for enterprises that benefit poor people.
One of its aims is to widen access to financial services, and particularly microfinance, to the poor so they can boost their livelihoods. Sidbi has already helped develop a network of microfinance businesses across the country reaching 6.6m clients.
Samridhi will extend the reach of financial services in some of the poorest states such as Bihar, Madhya Pradesh, Orissa and Uttar Pradesh.
Milk Mantra is a small dairy business that Dfid has identified for support.
Srikumar Misra set up the company two years ago in the eastern state of Orissa to help small farmers. He buys milk from a network of 3,000 farmers, some of whom have just one cow.
Milk Mantra is backed by investors Aavishkaar and IDBI Bank. The company collects the milk and turns it into cheese and other dairy products. It then packages the produce for sale in urban markets through retail stores and home delivery services under the brand of Milky Moo.
Milk Mantra offers poor dairy farmers an assured market, better prices and helps them to boost productivity. The expansion of Milk Mantra requires more capital and technical assistance.
Pragati venture and incubator fund
The Commonwealth Development Corporation has joined forces with Narayanan Shadogopan, a former investment banker based in New York and London, to set up a new private equity fund called “Pragati” to make targeted investments in India’s eight poorest states.
The CDC has backed the new fund, based in Delhi and Mauritius, with a $50m investment.
Pragati will invest – typically in amounts between $5m and $15m – in areas such as healthcare, infrastructure services, oil and gas services, manufacturing and education.