Low-income customers need to be treated with dignity: Ajit Mahadevan

Interview with Country director, Acumen

Acumen provides patient early stage capital to companies that are in agriculture, education, energy and healthcare. It came to India in 2006 and in ten years it has invested about $30 million in 25 companies. The India country director Ajit Mahadevan spoke to Anjuli Bhargava on the social sector and how it is evolving. Excerpts :

Having been in the corporate space, what difference do you find in the social impact investing space? How do you see it evolving in India?

I see this sector as a fundamental change from the way things have been done. Typically, we have always looked at customers from the higher end of the pyramid - someone who had the money power.

But, I could also see that there was a need to look at the customer from the point of view of dignity. In a charitable model, this dignity is not always there to be found. But, the moment one offers a choice, there is. The fundamental fact that I get to choose attaches a certain dignity.

The low-income customer in India has never been treated that way. But, it is the way to create a sustainable model.

For most of my working life, I had looked at things from the top end of the pyramid and this was the other extreme - where one looked at everything from the bottom of the pyramid. In my first 20 years, I worked with the top 200 million. But now, one gets a better understanding of the needs of the bottom 600 million, who continuously surprise me with the choices that they make.

Of course, a large bulk of the investment in this sector is in microfinance. Of the $1 billion that may have come in, $800 million is microfinance (the model followed by Grameen). We at Acumen have consciously decided to stay away from microfinance. We invest in four sectors - education, agriculture, energy, and healthcare.

Why are you staying strictly away from microfinance?

Everybody is in that space already. It was the one sector where money was already coming in, so we really did not need to be there. Money is needed more in other sectors where it is not coming in as easily as in microfinance. Funds have been flowing into microfinance because exits have been easier, quicker and more lucrative.

A second tenet of our investment is that we have a strong poverty focus - in rural and urban areas. We look at our stakeholders and customers and a large proportion of them have a monthly income of Rs 15,000 a month and below. The idea is to help those at the bottom of the pyramid.

The third tenet is that we measure impact. For instance, one of our early investments was a company called d.light. It made and sold solar lanterns. One way of measuring the impact would be to say d.light sold 150 million lanterns. But, we go a step further. How much has the dependence on kerosene reduced in places where the lamps have been bought? Or to what extent has the sale of lamps helped students study at times when electricity is erratic? It is not always easy, but we try and measure impact in some depth.

These three tenets make our model tougher than models focused only on returns. It is designed to be much more focused on genuine impact. For instance, we put in money into a company called Ziqitza Health Care which provides emergency health care and ambulance service to those who can't afford to pay. It now helps 3.2 million patients a year in 13 states. They are financially sustainable, growing with 6,000 employees now -and it is targeting the poorest.

Why is this model better than the NGO model?

I'm not at all suggesting that one can't have successful NGOs. There have been many and there will be many in the future. The for-profit model is designed for sustainability. You have to be sustainable yourself before you can proffer to make some else sustainable. Second, it immediately puts your customer - not your funder - in the centre. Sometimes, the NGO can be led more by what the funder wants rather than what the customer needs. In the NGO model, customer is often a confused word. You may ensure accessibility or affordability of a good or service, but how do you ensure quality? The for-profit model forces efficiencies that push all three. I won't exist if I don't provide what the customer needs and deliver the quality he desires.