Besides India's $2.6 billion impact investments are more opportunities for private sector to participate

• Funds diverted towards mental health as part of SDG for healthcare
• Increase support to women-led startups
• Invest in local social entrepreneurships

The effects of COVID-19 pandemic have been persistent but it has not stopped the marketplace from investing in what matters. According to the India Impact Investors Council (IIIC) report, education, healthcare, and agricultural sectors in India received $2.6 billion worth of impact investments in 2020. However, there are investment opportunities in other areas that also need attention. India is in great flux and its people are trying to keep up to meet new demands, challenges and needs daily.

Funds diverted towards mental health as part of SDG for healthcare

Despite the fact that 15% of India’s population suffer from mental health issues, the country struggles with widespread taboos and misconceptions. Spending less than 1% of its total healthcare budget on mental health in 2017, the government must reconsider the way it allocates finances to priority needs such as mental healthcare that should be part of a sustainable development goal (SDG). “There is a mismatch between mental health needs in India and the funding available,” said Leena Dandekar, founder of Raintree Foundation, a philanthropic foundation that focuses on mental health and disability in India. But we are seeing a worldwide upsurge in interest towards mental health. According to a research by October Ventures, global investments in mental health technology have increased by $750 million in early 2020.                    

One of the biggest barriers to private investors to support mental health is the lack of measurable outcomes. Reporting requirements are typically quantitative but impact indicators for issues like mental health are not so easy to track and require an extended period of time to demonstrate improved outcomes.

Philanthropic capital can break down this barrier by taking on an ecosystem-building role. By investing in services and solutions that have lower than market returns, philanthropy cannot only prove that test-bed solutions to under-supported issues are working but also create a market for scale. An example of this is the eyecare model in Rwanda that is supported by philanthropist James Chen. It has provided more than 1.6 million screening services, with 350,000 receiving eyeglasses and 325,000 referred for specialist treatment.

Increase support to women-owned startups

Surely, we are past the time when we need to build the case for women and girls’ empowerment. While women-owned businesses can drive global growth by boosting income per capital by 12% by 2030, there is still a gender credit gap. According to the Innoven Capital study, there was a drop in the number of funded startups with at least one female co-founder from 17% in 2018 to 12% in 2019. Startup India, an Indian government initiative, has offered budding entrepreneurs access to financial resources. It claimed there is a need to support female-led businesses and break the gender gap in economic opportunities.

Invest in local social entrepreneurships

With international travel restrictions imposed, local ecosystems have the opportunity to thrive. The pandemic has stripped away the glamour of businesses that had always survived on quick-wins and only those that are able to adapt remain. According to the British Council report, there are at least two million social enterprises in India today, with more than 50% engaged in skills development and another 30% in education. Investors are also betting on early stage enterprises especially in agriculture and healthcare with a 16% rise in seed stage investments in 2020. Local entrepreneurs are therefore rising to the challenge by adapting to the new normal. In addition, the reduced availability of imported products has resulted in the rising popularity of local goods.

Funders must step up by moving away from one-off project funding models and work towards more time-intensive projects like capacity building. The Rockefeller Foundation has implemented market-based solutions that bring electricity to rural villages in India and support local enterprises. Under a $75 million ‘Smart Power’ for rural development initiative, small businesses saw a 13% average increase in revenue. The initiative has supplied power to more than 100 villages and 40,000 people. Indeed, more often than not, funders have the power to set the tone of resilience building.

Investors must collaborate with philanthropists and the Indian government

In emerging markets like India, impact investments are not only the right thing to do but also the smart thing to do as a sustainable portfolio will be more resilient to future crises. It will also provide the nascent market an opportunity to establish new customer bases and formalise entrepreneurial operations. In addition, no investment can effectively create change on its own so investors must collaborate with philanthropists and the Indian government that can provide first-loss capital and access to large markets, respectively.