April 5, 2013 marked 1000 days to the end of 2015. At the end of 2015, India and all the other signatory countries will reach the deadline for achieving theMillennium Development Goals (MDGs). Discussions around the development agenda beyond 2015 are already underway, with calls for continuing the efforts and perhaps adding some new elements to the MDG framework such as security, equality and good governance. For a small, but very agile and lively group of social entrepreneurs in India and around the world, 2012 was business as usual and a particularly eventful period – some enterprises scaled out of their original geographies, others built the blueprint to do so. Many of them found smart answers to resolve their operational challenges, while others refined and introduced innovative solutions to market needs. Looking forward toward 2015 and future years, these social enterprises will continue their efforts toward helping to achieve the MDGs and thus improve the lives and livelihoods of around the nearly 2 billion people around the world living at the base of the economic pyramid (BoP). Intellecap is pleased to participate in the development of social enterprises in India and around the world. Through our Research efforts, we seek to contribute towards documenting the growth of the social enterprise industry and building the repository of knowledge about social enterprises. This report is their second installment in landscaping the social enterprise space, and focuses on building sector specific research in five critical needs sectors – Agribusiness,

Clean Energy, Education, Healthcare and Water & Sanitation. It forms the backdrop for more detailed reports we plan to release during the course of 2013.
Each of the social enterprise sectors we showcase in this report is poised for growth. Each has its share of challenges, but each also presents an exciting array of solutions that can contribute to the improvement of lives and livelihoods for people at the BoP. And many of these solutions are highly innovative, home-grown, and community led. Some common threads we observe in this report include:

Large Markets, but Significant Challenges to Scale: India presents large un-penetrated markets in each of the five sectors covered in this report. Rates of penetration are particularly low in the Low Income States (LIS) 1  and the North East Region (NER). 2  Each of these sectors therefore presents a huge opportunity for social enterprises to grow and scale. At the same time, however, the social enterprises currently working in these sectors are young and relatively inexperi-enced, and thus are significantly challenged to meet unmet demand. Achieving scale and sustainability therefore contin-ues to be the biggest single challenge for the social enter-prises covered in this report.

Limited Access to Financial and Human Capital Continues to be a Significant Constraint: Across the five sectors, social enterprises continue to be constrained by lack of access to finance and human resources. Without adequate funding and people with the experience and expertise to manage and grow these unique businesses, the challenges of growth and scale required to meet market demand are not likely to be addressed. For instance, in the Healthcare sector, lack of availability of medi-cal doctors in Tier 2 and Tier 3 locations is a major constraint for several social enterprises seeking to establish new delivery system. In our 2012 report “Understanding Human Resource Challenges in the Indian Social Enterprise Sector”, we spoke about how social enterprises are bridging the talent gap through smart hiring (interns, consultants, part-time high quality staff) and training local communities. Enterprises across sectors – be it Energy, Education or Water & Sanitation – find that they need to repeat the training process in every location. This is time consuming, expensive and does not always deliver the best results. And across all sectors, access to financial capital is frequently constrained because young and emerging social enterprises are not yet “investor ready” in terms of their business models and plans to scale.

Innovative Business Models Still in Early Stages: Many of the social enterprises covered in this report are developing new and innovative business models. This is the case across each of the sectors that we considered. In several of the sectors, however, such as Water & Sanitation 1  The Low Income States (LIS) in India include Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttar Pradesh and West Bengal. 2  The North East Region (NER) of India comprises Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim.and Clean Energy, there are “free”or subsidized alternatives for the products and services that social enterprises provide to the BoP. For communities with access to these “free” products or services and used to ‘making do’, paying for a better alternative does not come easy – especially when there are competing demands for the same budget. Enterprises across sectors have devised interesting and innovative ways to make products affordable, modular and bite-sized. We see evidence of this in the way affordable private schools and vocational training enterprises charge their fees; how enterprises price water and clean toilets and the way Energy companies retail electricity and solar and biomass products. These business models, though, are at very early stages, and need further development to demonstrate scale and deliver on their promises.

New Collaborative Approaches have Significant Potential:One way social enterprises across sectors are seeking to address the challenges of scale and developing new business models is through building networks and other collaborative approaches to their businesses. In the Clean Energy sector, for example, we see a network of village level entrepreneurs and local trained technicians. In Water & Sanitation, we see networks of waste workers as well as entrepreneurs. Further, the Healthcare and Education sectors are exploring a variety of innovative Public-Private Partnerships while the Healthcare sector has established an elaborate health worker system. These new collaborative approaches are distinctive among the social enterprises in the sectors that we covered, and we expect to see more of these approaches as the enterprises evolve their business models and seek to scale.

Technology Adaptation Presents New Opportunities: Social enterprises are generally quick to pick new and updated technologies and adapt them to cater to their markets. Across the sectors covered in this report, enter-prises are leveraging mobile telephony and other communications devices to deliver services and build the last mile connect with customers. In Healthcare, tele-medicine is an emerging format, while Agribusiness enterprises use mobile phones to inform farmers of weather forecasting, farming techniques, best prices and more. Enterprises are also building smaller decentralized solutions that are not only affordable, but also more efficient and supportive of rapid scale. n Energy, enterprises provide electricity through mini and micro grids, while in Water & Sanitation, examples of water purification and decentralized at-source waste management technologies abound. Thus, many social enterprises in each of the sectors covered in this report are attempting to bring current technology at affordable prices to the BoP, and the opportunities for further development and use of existing and new technologies is significant in each sector.

Investment in Stakeholder Education and Awareness is Required: Every social enterprise we spoke with shared expe-riences of how they needed to first create a market in terms of building awareness for the need and then for their product or service. Interestingly, they not only needed to educate their customers but also different stakeholder groups who financed them or supported them up and down the sector value chain. For most enterprises, therefore, investment in education and awareness building became a part of their business and operational plans as they evolved. In the every sector, we saw examples of enterprises creating outreach programs, road shows, mobile demonstration units, and information kiosks.

Social Enterprise Space Remains Attractive for Investment: Social enterprises across the sectors we studied will remain attractive for investment for many years to come. The enter-prises are generally young but growing quickly, and they will require and benefit from investment capital and in some circumstances loans, grants, and other forms of financial support as they seek to scale their businesses and prove their business models. Further, interviews with impact investors and several business incubators indicate that much capac-ity building remains to be done for social entrepreneurs in each of the sectors that we looked at. From an investment perspective, it seemed to us that impact investors will see the best investment opportunities in the Clean Energy and Healthcare sectors, where there is greater proliferation of social enterprises as well as business models that can scale. Other sectors that seem to have significant investment potential are in the post-harvest segments in Agribusiness and the delivery and medical equipment segments of the Health Care sector. “Venture philanthropists” and Devel-opment Finance Institutions may find particularly fruitful opportunities to engage with social entrepreneurs in the pre-harvest segment of the Agribusiness sector, as well as in the Education and Watsan sectors, where there are important initiatives from an impact perspective that may require grants or subsidies in their early stages of development but that could present significant sustainable business opportunities over time.

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