Tokunboh Ishmael of Alitheia Capital, gives us her summary on the SOCAP / Europe panel: Micro-Keynotes.

Panel Description: Each of the speakers addressed a specific theme highlighting trends, developments, opportunities and challenges of social capital investments.

Moderator & Panelists: Moderator: Frank van Beuningen

Jayant Sinha, Omidyar Network - Jayant Sinha is the Managing Director of Omidyar Network India, where he leads overall investment strategy and operations and develops the India-based portfolio across Omidyar Network’s investment initiatives. Jayant brings more than 20 years of experience in investing and strategy consulting to his role as Managing Director, as well as a deep understanding of managing investments and advising businesses in India.



Niki Armacost, Arc Finance - Niki Armacost is a Managing Director and Co-founder of Arc Finance. Niki brings over 15 years experience in microfinance throughout Africa, Asia, Latin America and Eastern Europe. From 1993 to 2008, she worked at Women’s World Banking (WWB), a global microfinance organization. In her last position at WWB, Niki was the Director of Linkages and Learning and served as part of the senior management team. She was responsible for overseeing the network’s learning and knowledge agenda, for promoting the leadership role of members, and for building and leveraging strategic alliances. Prior to thisposition, Niki held a number of leadership roles at WWB in the areas of knowledge management, market development, policy, and communications. She was an early advocate of linking energy and microfinance services and was an advisor to the Citi/USAID/SEEP Energy and Microfinance Research Initiative from 2004 to 2007.



Vineet Rai, Aavishkaar - Vineet Rai is a founder and the CEO of Aavishkaar. Mr. Rai is responsible for overall management of the fund. Prior to Aavishkaar, Mr. Rai was a founder and the CEO of GIAN, an incubator for rural innovations and ventures based in Ahmedabad, Gujarat. At GIAN, Mr. Rai was responsible for identifying, evaluating, nurturing and launching grassroots innovations based micro level enterprises for poverty alleviation. Mr. Rai has been a guest faculty at the Indian Institute of Management, Lucknow on Technology Incubation and Social Venture Funding. Mr. Rai has co-authored several papers with Professor Anil Gupta on issues concerning rural and micro innovations.



James Kimisoi, Head of Justice and Peace for the Catholic Diocese of Eldoret in Kenya -

As the head of the Justice & Peace for the Catholic Diocese of Eldoret, James coordinates 60 civil society organizations in the Rift Valley reaching a rural population of 5 million. James works with rural community leaders and local government agents, driving community mobilization, family program support and monitoring. While administering services to those affected by the post-election violence, James learned firsthand how energy can improve lives and community.

Design, Methodology, Approach: Reports and expert opinions from panelists.

Main Panel Discussion Points:

Sinha put forward the idea of inclusive innovation (providing an environment for entrepreneurs to flair, and improve the lives of many) towards addressing BOP (bottom of the pyramid)-related issues. The thrust of his discussion was that both public and private funds/participation is required to enable the BOP market to develop to its full potential. To understand the BOP market in India, Omidyar commissioned Mckinsey to research the BOP opportunity. From the results of the research, Jayant purports that the India BOP market (tagged aspirers and destitutes) consists of over 835m people with $360bn of disposable income. Armed with this information, Omidyar has purposed to accelerate development of the market in a bottom-up fashion with particular emphasis on entrepreneurs in the medical and clean technology sectors. Omidyar’s entrepreneurs include D-light, the provider of solar lanterns, which have helped increase child study by an hour a day in rural locations that lack off-grid access; Agni, a producer of coal from rice straw; Forus, provider of ophthalmic screening devices that tests (at a cost of 20rupees) for 5 common diseases that cause blindness; and Embrace, a producer of low cost baby warmers that help keep premature babies warm in the absence of incubators.

Rai expressed investing as a continuum with each type of capital playing a role, emphasizing that charitable donations are needed at one end of the spectrum. He believes that semantics are taking over the real content, and focus should not shift from the need to find and invest in entrepreneurs. Posing and answering the question whether social impact is indeed a separate class, he highlights that all investments at some level whether purposefully or not have some impact. The key thing is that BOP markets desire and inspire change, and we need to source the entrepreneurs that can do just that. In this regard, and in a bid to back the change-makers, Aaavishkar defines itself as a high-risk venture fund that does not guarantee any returns. Vineet explains further that his investors realize it is difficult to make returns when backing/catalyzing such change-makers. Vineet sounded a few notes of caution regarding the current euphoria around impact investing viz. intellectual capital is required ahead of venture capital; the challenge and complications of the concept of greed must be heeded to avoid the same challenges that we have seen in the traditional markets/sectors.

Armacost reminisced about Arc Finance’s journey to becoming Arc Angels. Along this journey, Arc has encountered numerous social entrepreneurs with the same basic challenges – the first funding is the most difficult to raise, investors require prototypes/proof of concept, and want other investors at the table. The collective view is that the most difficult financing to raise is the first $1-2m (and within that the first $50-100k required from friends and families) that will enable testing, prototyping, and market research. The response at this level is usually “Fabulous idea, I need proof of concept”, or “love your vision but bring another investor.” Everyone loves the idea but no one will give them money to make the idea a reality, investors want to see someone else take the plunge first. Nicki states that all this results in frustrated change-makers who keep hitting a brick wall, and require divine intervention to help them out of their catch-22. This is where the Arc Angels come in to provide small amounts of money to help jumpstart their ideas, and attract other investors once they have proven their concept. Nicki concluded jokingly that one way of measuring SOCAP’s impact is counting the number of people that become Arc Angels as a result of SOCAP.

Kimisoi rendered a heart-warming case study and emphasized the need for a focus on capacity building. Through their programs, Justice and Peace (J&P) directly impacts or influences the lives of approximately 6m people. James presented a case study of how the distribution of solar lamps to a village in West Kenya helped to reconcile communities, and empower villagers to improve their livelihood post the recent conflict in Kenya. J&P distributed nearly 2000 solar panels to encourage the displaced to return to their villages – in his words, “Going back with something that they did not previously have.” With the lanterns, people were able to cut down on their energy costs, reduce the time and effort wasted on seeking a power source – “people often walked up to 40km to buy energy.” The advent of the panels empowered female entrepreneurs who are now earning enough money to send their children back to school – simply, “Lives were changed. Investment in solar definitely provides impact.” James went on to say that handouts do not help but investments change lives, especially those that reach the villages where the impact is most visible.

Outcomes & Analysis: The micro-keynotes highlighted the different avenues through which various stakeholders are pursuing and having impact. Furthermore, the similarities with traditional investing are considerable, and should not be ignored. It is not new that angel (aka Arc) investors play a pivotal role in the developmental stages of a new venture, and the industry will do well to learn from the constructs used in traditional investor as it develops.

The notion that investing trumps aid is also not new but stories such as the use of solar lanterns to rebuild communities, and empower people should be more broadly publicized for its triple bottom line impact potential – particularly in villages. Although, the labeling may still be in the making, social innovation as a sector is here to stay. Omidyar’s entrepreneur-centric focus highlights the driving force behind the ventures, and aligns with Rai’s assessment that finding the right entrepreneur to back is still the key task, and should not be lost in the euphoria of the moment.

Sandeep Ahuja of Operation ASHA gives us his summary on the SOCAP / Europe panel: Lessons from the World of Microfinance for Social Investment

Panel Description: Venturesome – an impact investor, researcher, and thought leader, recently came out with a report on the history of the microfinance industry, and the lessons from that history for the social investment market. Join a discussion on how the social investment market will evolve over the next 20 years, and how our respective institutions might evolve too.

Moderator & Panelists: Paul Cheng, Venturesome (Moderator), Investment Manager of the CAF Initiative Venturesome; Vivian Kotun, Senior Investment Officer at responsAbility (Panelist); Antony Ross, Executive Director at Bridges Community Ventures (Panelist); Harry Hummels, Managing Director at SNS Asset Management (Panelist).

Design, Methodology, Approach: Panelists discussed aspects of the topic from their own experiences.

Main Panel Discussion Points: Paul Cheng of Venturesome described the first microfinance fund that was floated by Venturesome. He explained that the growth experienced by Venturesome has been tremendous. It was agreed that while microfinance can deliver massive impact, it may not generate market rates of return. Investors need to understand that up-front. One benefit of microfinance is that it has a long track record, whereas other areas of social investing do not. Some panelists expressed the opinion that returns in other areas of social investment will be riskier than microfinance. Panelists described three categories of investors:

(1) Those who want near-market return (social venture fund)

(2) Grants

(3) Investors who want their money back (these investors want a significant social impact but do not care about returns)

Outcomes & Analysis: This session demonstrates that impact investment can benefit

microfinance groups and mainstream investors by achieving social impact and monetary returns. Thus, the social investment market has the potential to expand considerably in future years, especially in the US and Asia

Panel Description / Moderator: Nicola Armacost, Co-founder/Managing Director of Arc Finance ; Ajaita Shah, Founder/ CEO of Frontier Markets ; Stewart Craine, Director of Barefoot Power; Jeroen Blüm, Deputy Director of Shell Foundation; Konrad App, President and CEO of Stima Systems; April Allderdice, Chief Executive Officer of MicroEnergy Creditsprofitable, Shell aims to create the opportunities for others to exploit
them.

Design, Methodology, Approach: Reports and expert opinions from panelists.

Main Panel Discussion Points: The context is that the energy poor need power – the panelists were asked to present their work on how this is being achieved.

Craine described his business as an energy company serving the lighting needs of 300m households spending $1/week or less, which represents enough cash to build a grid of solar powered households based on $25-50 LED models. These create ownership aspiration, for a product that speaks for itself regarding quality. Vendors sell and repair the units, and make money many times over each year.

Shah described the way in which she works with government and local links but uses her own staff, emphasizing the need to find the right local partner on the ground. By blending microfinance and product distribution, they remain focused on the products and their female customers and how to service them.

App’s Stima Systems serves those at the bottom of the pyramid (BOP) – the $1-3/day income segment. Although these people spend a large percentage of their income on energy they do not have the money to buy a solar charger. It’s expensive selling in rural areas because of the distance; the selling cycle is long as people think carefully before making a purchase; and there is little money to buy assets. So the chargers are given away, and people come and collect them. The selling agent has a key to turn a group’s chargers on, based on weekly payments by the group. All have to pay to keep the group’s chargers switched on. Group force means that there is 100% payment. Village elders are used to find the people to be the agents.

Blüm described the Shell Foundation’s enterprise-based solutions with stoves and rural lighting. The Foundation has an endowment fund, so it is independent. It aims to catalyze existing business acumen to tackle market barriers affecting energy efficiency products at the BOP. They aim to be ‘angel philanthropists’, looking for new partners and new markets from scratch to become viable and scalable. They are always looking for ways to leverage their actions with others, and to have an exit mindset so that others can come in and take over their role. Although such investments can be profitable, Shell aims to create the opportunities for others to exploit them.

Outcomes & Analysis: The subsequent discussion considered the merits of linking microfinance and access to small energy products. Shah spoke about her experiences, where MFIs are better suited to handle larger items. Her organisation provides the servicing of her lights, leaving the regionally-based MFIs to just deal with the loans. App uses two models – one in which they handle the product financing themselves, and the other using an MFI. In the latter case they have to convince the MFIs to lend to someone else to earn an income, and to coordinate their financing with the product vendors. The initial loans usually result in losses, with profits coming in subsequent loans. With very small products that are supplied free, the activities start small and grow fast. They prefer to finance this themselves.

Craine’s experience of dealing with MFIs has been mixed, as his small products are mostly sold for cash. He described his successful supply of lamps and the back trade of cocoa from rural communities, and also the financing of containers of products in Haiti using MFIs. Blüm emphasized the need to present a value proposition to your customer – something that is at the right price and improves their livelihoods meeting his essential 4As of affordability, awareness, availability and accreditation (meaning product quality). The Shell Foundation is keen to measure the scale of its impact using a wide range of performance indicators.

Questions rose at the end of the session summed up the future growth of the sector and dealt with those who cannot afford the appliances. You need to demonstrate its usefulness; allow people to test it for themselves; and make sure your product fits your consumer’s needs. Are the products really aimed at the BOP? For those who pay cash this is probably not the real base, but it’s still a place in the market with real needs. Should products be distributed on a cash or credit basis? Use group-based systems; use trusted agents who live in the community; use serviced provision rather than outright ownership, or use renting or leasing. If you bring energy to people, how do you educate them in its use? All agreed that this is essential, especially for social investors who want to see improved energy access; there are good and bad energy solutions and choices need to be informed about what is appropriate.

Allderdice briefly described her work at MicroEnergy Credits and its astonishing success in reaching 200m households, and growing fast using MFIs and their viral spread into other products such as water. Willem Nolens also described SolarNow’s rapid growth to 200 dealers in Africa, with credit from themselves now being offered via these dealers.

There is a need for a breakthrough on rural electrification – and the time is now. This was the meeting’s consensus.