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Tuesday, December 04, 2012

What's the Matter with India?: A Powerhouse of Social Innovation Struggles to Take the Next Step

By Aarthi Rao

Participants in the Samridhi Regional Summit. (Photos courtesty of the Sankalp Forum)

Editor's Note: This week we're launching NextBillion Health Care, a new blog focused on deliverying medical services and products to low-income patients and consumers.

When it comes to social innovation, there’s no place like India.

With its vast underserved communities and the sheer number of groups serving them, India is the site of countless cutting-edge programs focused on the base of the pyramid.

In health care alone, the Center for Health Market Innovation (CHMI) profiles more than 240 innovative programs in India - including 46 social enterprises. New businesses are testing novel ideas to meet the needs of the poor, while existing programs focus on scaling up. In the meantime, public and private initiatives are strengthening the ecosystem for social entrepreneurs, connecting different stakeholders, unlocking new investment sources and identifying trends in the field.

So what’s the problem?

In a nutshell: social entrepreneurs have largely stuck to the big cities such as Mumbai and Bangalore, where the ecosystem is most amenable to testing new models. This has left out much of the country - especially the poorest eight states that carry over a quarter of India’s population. With poor infrastructure, human resource gaps, historically weak governance and a lack of outside investment, these eight states present unique challenges to private sector entrepreneurs – and health care companies are no exception.

I recently attended the Sankalp Forum’s Samridhi Social Enterprise Recognition and Regional Summit in Patna, the capital of Bihar, on behalf of CHMI. The summit brought together funders, policymakers, and entrepreneurs to identify ways to facilitate more social innovation in India’s interior. Although the enterprises that attended the forum expressed a desire to expand their businesses in India’s underserved states, they cited several issues - from weak infrastructure to high levels of red tape – that stood in their way.

But for health care companies in particular, one of the main challenges in serving these communities is the need to redefine cost parameters. Public and private health spending per capita in Bihar is 513 INR, less than half of what it is in Kerala or Tamil Nadu, two states known for their strides in public health. In the absence of adequate public spending on health or effective risk pooling mechanisms, cost will determine whether poor patients can access high quality private services.

Vineet Rai in conversation at the Sankalp Forum's Samridhi Regional Summit, 2012Within limited budgets, health care enterprises must find ways to either develop human resources locally or attract staff from other states. Yet the Public Health Foundation of India estimates that Bihar alone requires 27 new medical colleges and 102 new nursing schools to meet the staffing needs for scaling up basic health coverage. These complexities challenge an enterprise’s ability to rely on modest investments and quickly gain market share.

(Left: Vineet Rai of Aavishkaar, in discussion at the Samridhi Regional Summit.)

Further complicating things, many underserved Indian communities aren’t fully conscious of the ways that health care products and services can benefit them. So in spite of the great need for more and higher-quality health services in India’s poorest states, simply making them available is not enough. Instead, health care companies’ growth often depends on their ability to change the health behaviors and awareness of potential customers.

For example, in many Indian communities, patients typically do not visit formal providers, and may not fully realize that many diseases can be prevented or treated. If businesses hope to reach these customers, they must create strategies that inform patients about the ways different health care products or services can meet their needs, and incentives that encourage them to access these services.

Now for the good news.

Though entrepreneurs at the forum acknowledged the operational difficulties in working in India’s poorest states, they affirmed plans to continue expanding their reach in these areas. Other participants at the summit also made commitments to support the development of social enterprise. Funders like the UK’s Department for International Development and Germany’s GIZ explained that they planned to increase investments in social enterprises and provide technical assistance wherever needed. And the Federation of Indian Chambers of Commerce and Industry (FICCI) presented a new funding window through the Millennium Alliance, a partnership between FICCI, USAID, and the Technology Development Board, to identify, incubate and scale up path-breaking concepts that serve the base of the pyramid.

In another promising sign, the forum participants who were most eager to advance social enterprise in the poorest states were impact investors. Investors explained that if a social business could successfully operate in a place as difficult as Uttar Pradesh or Bihar, it was an indication that the model could be scaled up in other states. So empowering entrepreneurs struggling in India’s most difficult operating environments could ultimately have countrywide impact.

When the forum concluded, most participants felt that it was the first step of many to grow the social enterprise movement in India to reach the poorest of the poor. Although challenges lie ahead, Vineet Rai, managing director of Aavishkaar Venture Management Services, noted that the development of entrepreneurialism in India’s poorest states may mirror the process that transformed cities like Bangalore and Mumbai into vibrant centers of innovation.

It took a number of years for India as a whole to implement business-friendly policies, develop its infrastructure and attract fresh investment. If the lagging states adopt complementary policies and programs that lay the groundwork for improved governance and a willingness to collaborate with new partners, then the social enterprise community can help expand this wave of growth and social development to all corners of India.

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