Social Stock Exchange – a primer for Indian SPOs

Social Stock Exchange – a primer for Indian SPOs

– by Arpitha Rao

Background
In her budget speech in July 2019, the Indian Finance Minister Nirmala Sitharaman proposed a Social Stock Exchange (SSE) for social enterprises and voluntary organisations working for social welfare to help them raise capital through debt, equity and mutual funds. The proposed exchange will be under the regulation of Securities and Board Exchange of India (SEBI), will allow the listing of social enterprises and voluntary organisations and will function as an electronic fundraising platform. In September 2019, the SEBI constituted a working group to hone this further under chairman Ishaat Hussain, Director, SBI Foundation.

This news is indicative of a larger shift towards increased mobilisation of domestic capital for social purposes, and reducing India’s dependence on foreign aid. At Sattva, we studied the concept and implications of the SSE, especially in the context of flow of capital for Social Purpose Organisations (SPOs include for-profit social enterprises and non-profit organisations).

We are sharing our early learnings here as an SSE primer and we will follow up with additional insights as the topic evolves.

Current state of India’s social sector
Although India’s social economy is one of the most active in Asia, Indian SPOs continue to suffer from a low volume of deals and small viable pipelines for social enterprises, as well as consistent, long-term fundraising for non-profits. Indian SPOs face obstacles in raising capital to deliver social solutions due to a variety of factors including monitoring and evaluation challenges, lack of standardised methodologies for evaluating organisations, nascent impact investing environment, restricted / reduced funds for organisational growth and so on.

The SSE could improve this situation for Indian SPOs
Some potential scenarios where such an exchange can be leveraged to benefit SPOs include:

  • – Functioning as a search directory listing credible and vetted Social Purpose Organisations
  • – Enabling equity investments for Social Enterprises (institutional/ retail) across all stages of the capital value chain (SMEs to larger organisations)
  • – Enabling issuance of financial instruments like bonds and notes for SPOs
  • – Potential to create a common language around impact assessment and measurement and popularise this with donor ecosystem – both institutional and retail
  • – Potential to increase unrestricted funds for Indian non-profit organisations.

 

Key considerations for the India SSE model:

As the idea is still nascent, with limited clarity on the overall structure of SSE, it is difficult to understand the impact of such a stock exchange on SPOs at this point. However, an SSE model with clarity in the following areas will greatly benefit the players in the ecosystem:

  • – Clear, consistent definition of the terms ‘social enterprise’ and ‘voluntary organisation’: Given the ambiguity around the terms, a critical task for SSE would be to provide standard definitions to determine whether the model will predominantly provide space for non-profits or for-profit organisations. e.g. The inclusion of Section 8 companies in the SSE’s definition of ‘social enterprise’ could lead to well-funded entities also benefiting from this new initiative.
  • – Measurement models that balance financial and social performance to assess SSE listed members: Ms Sitharaman has reiterated that the new SSE will use a rating mechanism which acknowledges the diversity of players in the social space. The rating tool will need to balance multiple indicators to measure and evaluate the performance of SPOs on this new platform. For instance, the appropriate financial performance measures (revenues for Social Enterprises, Operating budgets for NGOs) in the rating process would need to be balanced with social outcomes attributable to the organisations, to assess them on a level scale.
  • – Clarity on how this initiative will interact with the Companies Act: Among other things, Section 135 of the Indian Companies Act mandates companies with revenue of more than INR 50 million to spend 2% of their profits on Corporate Social Responsibility (CSR) each year. It will be important to have clear guidelines on how CSR funds can be deployed via SSE.
  • – Incentives for participants to drive engagement: Fostering widespread engagement among investors will be vital if NGOs are to raise adequate capital to fund their projects and expand their operations. Some incentives will be important for both market participants willing to invest and SPOs willing to get listed. For example, Investors may need some risk protection mechanisms (through policy and regulatory reforms)

 

What can SPOs do to prepare for SSE
At this early stage of its evolution, it will be important for SPOs to closely follow the developments related to SSE. Some research and thinking on the following areas would be beneficial:

  • – Understand the global frameworks used to assess the impact of organisations; this may give insight into how SEBI could structure the valuation mechanism for the new platform. It is important to understand the mechanisms used by global SSEs such as the Impact Reporting and Investment Standards (IRIS), the Global Impact Investing Rating System (GIIRS) and The B Impact Assessment (BIA).
  • – Explore the feasibility and design of a baseline measurement model to highlight social return on investments, based on a set of quantitative and qualitative indicators. Thinking along these lines for their own organisation’s work, irrespective of the final measurement framework used by the SSE, will be a helpful strategy exercise for SPOs.

 

Next steps
At Sattva, we will be closely following all news related to the SSE, given its enormous potential to impact the Indian social sector. Today, most of the focus in all conversations around SSE and similar exchanges in other countries seem more focussed towards social enterprises. We also see a need to engage with non-profits on this topic to understand their perspective and needs. We hope this article and our other forums of engagement will drive a rich, ongoing dialogue with all ecosystem actors on this critical topic.

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Arpitha Rao is part of our Transformation Advisory team and is based in our Bangalore office. Her current work focuses on large-scale transformations in public education. Before Sattva, Arpitha has worked with Teach for India, the India Literacy Project, and Greatest Common Factor. She followed up her Engineering degree with a Masters from TISS and an MBA from ISB.

Sattva has been working with various non-profits and social organisations as well as corporate clients to help them define their social impact goals. Our focus is to solve critical problems and find scalable solutions. We assist organisations in formulating their long-term social impact strategy by strategically aligning with business to provide meaningful solutions to social issues.

● We’d love to hear your thoughts and feedback on this topic. Do write to us: impact@sattva.co.in

EdTech – One Size Does Not Fit All

The Sattva View – One Size Does Not Fit All

In this column, Sulagna Datta lists how ed-tech in under-resourced communities differs from typical market-based products, and argues for thoughtful design and customisation of those products.

5 things to keep in mind while implementing ed-tech projects in the impact sector

Education Technology or Ed-tech is a buzz word in the Indian impact space today. There has been a flux of funding into this sector, with behemoths like Byju’s emerging as unicorns, crossing $1bn in estimated worth. The supply side is inundated with products that can be categorised in a multitude of ways: Subjects, target age group, in school/out of school, etc. As per Tracxn research, which is India’s leading data aggregation and analytics platform – there are ~4574 Ed-tech products in India today, and ~17,000 products globally.

Schools and colleges across the country are using these products for a multitude of reasons ranging from improving scores in specific subjects and preparing for competitive exams to practising for job interviews. However, if you work with implementation of Education technology programmes for the bottom of the pyramid, the question to ask is ‘What are the things that no one told you about Edtech projects for this context?’

1/ The number of Ed-tech products in the market that are actually built keeping the bottom of the pyramid in mind is shockingly low.
From a Sattva research, out of 566 school products catering to Hindi and Mathematics, only 19% had either already partnered with or shown interest in working with government schools. Which means a staggering 81% of products were meant for the private school context.

When products are built keeping private schools in mind, their data and infrastructure requirements are higher, and more often than not, their content is at levels not graspable by students in government schools. Implementation teams have the onerous task of spending time to customise these products for the BoP context.

2/ Even products that are meant for the BoP context cannot be utilised to their full potential Implementers need to be prepared that basic infrastructure varies drastically across government schools even in peri-urban areas in Bangalore and Delhi.
The biggest advantage of education technology over traditional pedagogical methods is the creation of personalised learning paths for students. Students can learn at their own pace with a curriculum adapted to their needs. For this, the ideal device to student ratio is 1:1, and almost all products are built keeping this ratio in mind. However, this fails in an Indian government school set-up. Even in schools that have labs, the device ratio is seldom 1:1, hampering engagement and consequently learning outcomes.

Most products are designed keeping in mind a certain number of modules to be completed at home as practice. However, most children in government schools come from households with an annual income of <1,00,000 Rs. They don’t own devices at home, and hence are not able to complete most of the self-learning that is meant to happen on the product. Additionally, another constraint in the government school context is access to internet. Since the maintenance budget of all government schools in India is ~8,000-10,000 rupees annually [often going into maintenance of buildings, etc.]- covering bills like the internet becomes cumbersome and is ignored. This leads to further interruption of technology-based learning. 3/ From ages 17-23, ~90% of BoP college youth have smart phones. However, they are extremely data conscious and tend to delete any application/product that takes more than 20 MB of space. While choosing products for the vocational context, practitioners have to be very conscious of the product they recommend.
From a pilot to learn English for interviews through applications through 5 top applications in India, 2 applications stood out in performance owing to the following reasons:

i. They functioned fully offline. After the initial download, they didn’t require any data to run
ii. They were between 15-20 MB in size
iii. They were available across all playstores: Android, Jio, etc.
The other three failed on at least one of the above parameters

4/ From qualitative interviews with about ~2000 college students across India, there is a clear set of features that makes an application more successful than another
i. Leaderboards were a clear favourite amongst students. Students were motivated to use applications when they could see their peers use it. They liked to see where they stood in their comparable cohort
ii. Applications that had short modules and progress bars/gamification were favoured. Students used it like a game to finish the stipulated target defined by the product for the day
iii. For a pan India context, the application that was most successful had an 18 language interface. Students preferred to learn in their vernacular language.

5/ The optimum learning time on an edtech product is about 20 minutes a day
A critical element to keep in mind while designing an edtech initiative is to set a target for content consumption a day. Applications that stipulated more than half an hour a day, saw declining engagement and drop-outs. A 15-20 minute engagement/day was seen in about 80% students who completed the entire course.

While private enterprise products are pushed to the BoP context without considering its nuances, the learning experience is less than optimum, and that typically discourages the learner, further jeopardizing the quality of education. It’s important to address this demographic thoughtfully, with an eye on specific needs and access.

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This article was originally published in Impact Magazine.

Sattva has been working with various nonprofits and social organisations as well as corporate clients to help them define their social impact goals. Our focus is to solve critical problems and find scalable solutions. We assist organisations in formulating their long-term social impact strategy by strategically aligning with business to provide meaningful solutions to social issues.

● Talk to us: impact@sattva.co.in

CSR Amendments – a step forward for CSR-Nonprofit relationships

CSR Amendments – A step forward for CSR-Nonprofit relationships

– by Nishkarsh Swarnkar

The Indian parliament recently passed a slew of changes with the Companies (Amendment) Act 2019, including its section 135 which is typically known as the “CSR law”. There has been a lot written about the direct implication of these changes on CSR. For a quick reference, you may want to read my colleague Mohana Rajan’s article. In this piece, we will talk about something that has not been discussed as much – the implications of these changes on nonprofits. And the news is not just good, it’s great! The changes to CSR law bring about a number of unique opportunities for nonprofits that have not been possible earlier.

We see three important trends that CSRs are likely to exhibit post the change:

1. Optimise spends – The law has now made CSR spending mandatory for all qualifying companies. This means not only will there be a greater pool of CSR money flowing into the ecosystem, but also that there will be a greater sense of urgency in utilising the funds. Any funds that remain unspent and are not related to an ongoing CSR programme will essentially be lost from a strategic investment perspective. CSRs, thus, will be looking for full utilisation in avenues that fulfill their key social objectives or align with their broader strategic interests. Nonprofit leaders can capitalise on this in the following ways:

○ Create sound projections and spending schedules, minimising underutilisation
○ Understand and align with core focus areas of the corporate’s social interests and investments
○ Keep alternate spending options ready in case underutilisation of funds becomes a challenge, especially towards the end of the financial year

2. Leverage longer-term partnerships – The typical relationship between a nonprofit and a CSR has often been short-term and transactional. However, with the introduction of the 3-year spending horizon in the law, this is now set to change. The CSR funds can now be used to finance long-term projects that aim to achieve large-scale outcomes. The longer spending horizon allows corporates to formally plan and use provisions for multi-year engagements with nonprofits, thus working towards interventions on engendering systemic change. At their end, nonprofits can take the following measures:

○ Establish shared value proposition with corporates by aligning with their social and environmental sustainability goals
○ Shift perspective from ‘donor management’ to ‘strategic relationship management’, and build a team that is equally adept at discussing financials and social impact
○ Think about flagship programmes aiming for highest impact, and create a multi-year plan and robust M&E
○ Include an ongoing dialogue on impact created on the ground, including walking CSRs through the outcomes of the social change

3. Focus on research and innovation – The government has now broadened the scope of CSR activities to include grants to incubators, thus supporting start-ups and initiatives working towards the SDGs. This is a new opportunity for nonprofits that are looking to conduct scientific research, innovate on solutions or test product prototypes. Nonprofits can now set-up their own R&D labs or product development units under government-sponsored incubators, or tie-up with universities, research institutes and existing start-ups. To the incubatees, the ability of nonprofits to bring their topical knowledge, field experience and on-ground insights to the table can prove a great value-add. This tie-up opportunity across varied actors is in itself a rare phenomenon, and has the potential of bringing a multiplier effect to the outcomes of the ecosystem – proliferating platforms akin to ‘Tech for Impact’ across diverse sectors.

To conclude, the changes to the CSR law open several new opportunities for nonprofits to engage in long-term, strategic partnerships with corporates built on shared value. An increase in the pool of available resources will favour nonprofits who fully utilise their grants and track outcomes. And last but not the least, the grounds are most fertile for nonprofits aiming for large-scale, systemic impact through long-term projects, research and innovation.

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Nishkarsh Swarnkar is part of our Transformation Advisory team and based in our Bangalore office. His current work focuses on large-scale transformations in public education. Before Sattva, Nishkarsh has worked with ZS Associates as a management consultant in the healthcare industry. He is a graduate of National Institute of Technology Karnataka, Surathkal.

Sattva has been working with various nonprofits and social organisations as well as corporate clients to help them define their social impact goals. Our focus is to solve critical problems and find scalable solutions. We assist organisations in formulating their long-term social impact strategy by strategically aligning with business to provide meaningful solutions to social issues.

● Talk to us: impact@sattva.co.in

Scaling Social Impact through Organisational Capacity Building

Scaling Social Impact through Organisational Capacity Building

The discourse around social impact organisations, more often than not, includes the need to achieve scale. One side of the coin is the denominator or the scale at which the social problem exists, and the breadth that needs to be covered to solve the problem. The other side of the coin is the organisation’s capability – both in terms of quality and quantity – to achieve the requisite scale. Simply put, scaling up both programmes as well as organisations to achieve the desired impact in the ecosystem go hand-in-hand.

Non-profit leaders will concur that scale means different things to different organisations. It depends, among other things, on the problem they are trying to solve, the geographies where the problem persists, and the beneficiaries they are focusing on based on their theory of change. Accordingly, the pathways to scale differ as well. There can therefore be no cookie-cutter approach to scaling up for impact.

Sattva’s decade-long experience of engaging with non-profits of different sizes and maturity levels has however, helped us identify a key tenet – organisational capacity building – which when customised, can enable an organisation to become ‘scale up ready’. There are multiple components to this exercise, and our experience says that every non-profit that wishes to scale requires one or more of these.

Sattva_Insights_ScalingSocialImpact

  • Re-alignment of Mission and Vision: Before embarking upon the creation of a scale-up strategy, non-profits caught in the throes of growth need to relocate their North Star. This holds true even for large scale mature non-profits who have been in the ecosystem for ages. For instance, Sattva helped a 40-year old organisation working on child welfare to re-create the mission of the organisation in the context of the larger vision, which then enabled them to focus on depth of impact, instead of spreading themselves too thin to achieve breadth alone.

  • Development of Fundraising Strategy: The ability to create impact is contingent upon the non-profit’s ability to stay in business and scale, which in turn is largely dependent on the availability of funding. A robust fundraising strategy is therefore very important for any non-profit. Sattva has worked with diverse organisations across various sectors, and some as old as 20 years, to develop a deep understanding of what makes fundraising strategies work. It often starts with conducting fundraising diagnostics to understand past performance, which feeds into new fundraising strategies that define target funder segments, key value propositions and critical success factors. This is then further reinforced by building fundraising capacity of the organisation across people, processes, messaging and networks.

  • Restructuring of organisations (Systems, Processes, People) and Change Management: As organisations grow to scale their impact, their people and processes need to accommodate the changes that come with scale. Sattva has encountered examples of large organisations which have scaled to 400+ districts in India while holding on to centralised decision-making structures, resulting in bottlenecks across the organisation. The solutions in such instances have included developing a second line of leadership to decentralise decision-making, organisational restructuring to create new departments and restructure existing ones, developing standard operating procedures for old and new processes, developing capacity building plans for people, and creating change management plans to help these changes percolate across roles and ranks within the organisation.

  • Developing Scale-up Blueprints and Products for Programs of organisations: Growing an organisation and its programmes requires various strategies and levers. Sattva has demonstrated that standardising blueprints for scale and developing innovative products can enable organisations to implement their programmes at scale. Designing programmes and processes, building monitoring and evaluation frameworks for measuring effectiveness and efficiency of programmes, and using technology as an enabler to scale programmes have been some of tried and tested ways in which we have enabled organisations to scale their programmes and impact, the most shining testimony of which has been an education non-profit which grew its programme from 4 to 13 states in the country in 3 years.
  • Since the need of each organisation on its pathway to scale is unique, the solutions have to be customised as well. Programme and organisational diagnostics to understand the gaps that need filling, custom-made strategies to address the specific requirements of an organisation, and implementation support on an organisation’s scale-up journey are, therefore, all integral cogs for enabling an organisation to achieve the scale that is necessary to create the intended impact. While externalities like regulatory environment and availability of funding may limit the growth of organisations at times, organisational capacity building can help overcome some of the challenges associated with becoming ‘scale up ready’.

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    Sattva has been working with various non-profits and organisations to help them define their social impact goals and optimise their capacity building efforts. Our focus is to solve critical problems and find scalable solutions.

    ● To read more about our work, check: https://www.sattva.co.in/our-work/
    ● Talk to us: impact@sattva.co.in

    Urmi Patil

    Urmi is a part of our Consulting Services team in Mumbai, supporting the design and implementation of CSR projects.

    Before Sattva, she worked in southern Gujarat assisting Ph.D. scholars with their primary research and learning different participatory tools of engagement. She has worked in Government Primary Schools in Uttarakhand for two years where she was able to support schools on processes that improved the learning outcomes of children and enhanced participation of the community members. She has also worked with Mahila Mangal Dals, Yuvak Mangal Dals and Self Help Groups for their capacity building through community-based stakeholder mapping.

    Urmi has a Bachelor of Arts, with Economics Honours from Christ University.

    Shrutee Ganguly

    Shrutee is part of the Consulting Services team, Delhi, and leads engagements with corporate and strategic account clients. She manages a team that works with various implementation partners and NGOs to create long term sustainable impact. Her role demands her to manage customer experience, define strategy and create valuable outcomes in the ecosystem.

    Before Sattva she has had 16+ years in diverse corporate domains – banking, product management and consulting. Her key areas of expertise are Operational Excellence; Process Re-engineering, Programme Management, Coaching, Relationship Management & training. She has worked with senior leaders and operations staff to understand cultural dynamics, manage expectations, streamline processes and deliver results. It is her belief that the social sector needs some of these skills to streamline and structure their efforts to create impact and value. At Sattva, Shrutee has worked with the largest education non-profit in India to co-create models to recognise needs of middle management govt officials who are responsible for the policy and implementation at schools. She also worked closely with the client’s programme team to run pilots and gather relevant inputs from teachers and community on teaching practices, child engagement, good practices and challenges.

    Shrutee is a post graduate in computer applications from Madras University and an IBM certified Lean coach.

    Bobbymon George

    Bobbymon heads Assessments in Sattva and is based in our Bangalore office.

    He has delivered evaluation assignments across sectors and with key CSR accounts such as ABG, JPMorgan, ACC, Philips, L&T Infotech, L&T Financial Services, Dell and Fidelity. He comes with over 13 years of experience in the development sector, across programme design, implementation and Monitoring and Evaluation. He has led Programme Delivery, Curriculum Development, setting up Monitoring & Evaluation frame works and tools in non-profits.

    He is also a master facilitator/trainer in Life Skills.

    Garima Goel

    Garima is part of the Transformative Advisory team in Delhi, working with Kaivalya Education Foundation (KEF) on the District Transformation Product for 25 districts.

    Before Sattva she co-founded a sanitation enterprise called “Project Raahat” which is working in the field of urban sanitation in partnership with the government and is currently operational in 3 states. She represented India and Raahat in London and become ‘Enactus World Champion 2017’, chosen among 36 countries. She has also worked with MPs under the MPLAD programme and ran projects in their adopted villages regarding menstrual hygiene and community development. At Sattva she has worked with Central Square Foundation in landscaping the EdTech industry on a programme to drive efficacy and advocacy for country wide implementation by the government. She is committed to inculcating a bottom up method in development solutions to make them community driven.

    Garima did her Bachelors of Management Studies from Shaheed Sukhdev College of Business Studies, with a major in Finance.

    Atul Sukumar

    Atul helps design, build and implement consulting projects as part of the Consulting Services team in Delhi.

    Previously, his experience includes extensive research and analysis on problems of economic policy, education, healthcare, and energy. He has worked as a Data Analyst with the McKinsey Center for Government, a global hub for research, collaboration and innovation in government productivity and performance. He has also worked in consulting organisations, publishing companies, law firms and election campaigns. He is committed to bringing best practices from the private sector to impact public efficiency and effectiveness.

    Atul is a liberal arts graduate of the University of Miami.

    Parnika Madar

    Parnika is a part of the Consulting Services team in Delhi. She has 2 years of experience in the social impact consulting sector- engaging with corporates, foundations and NGOs focusing on research, implementation, programme management, and monitoring and evaluation. She also co-founded her own philanthropic venture which won accolades from an international inter-governmental organisation.

    At Sattva, she has been involved in establishing and managing an entrepreneur-led apparel micro enterprise in rural Uttar Pradesh for an international foundation, and has also worked with a key non-profit client in designing and executing a lean pilot for micro enterprise and entrepreneurship development in UP. Apart from livelihoods, she has also worked in other sectors and functional areas such as CSR portfolio management, Education and EdTech, and Skill Development, for varied clients such as a global beverage-manufacturing company, global tech and healthcare enterprise, non-profit philanthropic foundation, and a leading national financial services and investments firm.

    Parnika has both her Bachelor’s in Social Sciences and Master’s in Development Policy from Tata Institute of Social Sciences, where she had been a part of multiple field studies, spending time in rural Maharashtra with local communities.