India’s Impact Capital Vacuum – And What to Do About It

India’s Impact Capital Vacuum – And What to Do About It
Editor’s note: This post is part of the NextBillion series, “A Survival Guide for Raising Capital,” – one of several topics we’ll be covering through special series this year. Click here for more details on our 2018 series.

Impact investing is not a new phenomenon in India. It came into existence in the early 2000s alongside the concept of the for-profit social enterprise. From then on, India witnessed a perceptible shift in the willingness of investors to support impact-oriented business models.

In the early years, these impact investors focused on supporting enterprises across the spectrum. However, today most impact investors are primarily channeling capital towards scalable and financially sustainable business models only. Additionally, the majority of this capital has been invested in the financial services sector, due to the maturity the sector has demonstrated.

Unfortunately, other sectors like agriculture, health care and clean energy have not scaled enough, because of their inherent business characteristics and want of longer gestation. Lack of adequate patient capital leaves these impact industries high and dry.

According to a McKinsey report from 2017 titled “Impact Investing: Purpose-driven finance finds its place in India,” impact investments in India have witnessed ~14 percent compound annual growth rate from 2010 to 2016, and are expected to reach US $8 billion by 2025. However, the on-the-ground reality is not so rosy.

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