How philanthropic collaboratives can help the vulnerable

If “necessity is the mother of invention,” as the saying goes, it is worth nurturing some ideas born from the tragedy of the Covid-19 pandemic. Across India’s social sector, there are clear signs that necessity is spurring funders to work collaboratively and innovate financially to benefit vulnerable populations. The combination holds promise for the future.

Since 2020, the number of India’s philanthropic collaboratives, comprising independent actors who join to pursue a shared vision and strategy to achieve social impact, has more than doubled. These new collaboratives have mobilised an array of funding from foreign and domestic philanthropy, high-net worth individuals, corporate social responsibility funders, bilateral and multilateral donors, private capital, and other sources. Through these varied streams, the amount of collaborative funding for improving people’s lives has increased significantly. Multi-year financing for eight of India’s newest collaboratives range from Rs 2 crore to Rs 600 crore, whereas the annual budgets of the 13 philanthropic collaboratives we studied in 2020 ranged from Rs 50 lakh to Rs 50 crore.

As funding levels have risen, so too have innovative financing approaches to drive social impact, including pay-for-outcomes models such as development impact bonds in education and health, and other blended financing mechanisms. Additionally, some of India’s collaboratives are going beyond providing plain vanilla grants to NGOs.

For example, by combining funding from government, bilateral donors, large philanthropies, and leading corporates, Samridh Healthcare Blended Finance Facility has mobilised a capital pool of Rs 1,875 crore. It provides both grants and debt financing to enterprises and innovators that are expanding the availability of affordable and quality healthcare solutions to the bottom-of-the-pyramid populations. Their funding leverages further debt and equity investments as well as matching grants for health needs. Samridh supported the training of 1,100 healthcare workers in more than 25 cities and built out oxygen delivery systems during the peak of the pandemic.

Or consider ACT Grants, which mobilised close to Rs 100 crore from corporate leaders and private equity/venture capital funds to tackle Covid-19’s challenges. By pooling capital from private sources, ACT Grants funded high-priority health needs such as tele-ICU treatment of high-risk patients in Karnataka, delivery of 45,000 pieces of oxygen equipment to healthcare facilities as the pandemic surged, and expenses of hospitalisation and home-based care of Covid patients, to name a few.

Donor partners are also deploying hybrid financing mechanisms that directly benefit under-served populations. During the pandemic’s first wave, REVIVE Alliance, a collaborative platform hosted by Samhita Social Ventures, used direct cash transfers to cover the basic needs of daily wage workers who had lost their income.

As REVIVE reached out to micropreneurs and workers, it soon realised that these people, who had lifted themselves out of poverty but often had no credit history, did not want charity. What they really wanted was dignity — a helping hand so that they could help themselves — and to be included in the formal economy. That is where an innovative social finance instrument called “returnable grants” comes into play.

REVIVE provides recipients with a returnable grant, which is credit with a difference: It is an interest-free loan, with zero collateral required, ranging from Rs 5,000 to Rs 25,000. But this loan also has the characteristics of a grant, since the small pharmacy owner or street vendor is under no legal obligation to repay it. Their sole obligation is moral: If they fail to repay, they prevent another retailer whose shop has lost business from receiving funds.

When workers and retailers do repay, they actually benefit more than just the next recipient. REVIVE estimates that each repayment generates up to a seven-fold multiplier effect, since recipients are also provided with tools and training to participate in the digital economy. As workers and retailers pay off their loans, they create digital repayment records that establish their credit worthiness with formal financial institutions.

Having raised Rs 152 crore in funding from its corporate partners as well as anchor donors, REVIVE has supported the efforts of 1.62 lakh small business owners and workers as of January 2022. The collaborative aims to reach one crore micropreneurs and workers, across all of India, over the next three years.

Because REVIVE’s mindset of dignity and inclusion begins by assuming that people will voluntarily repay, returnable grants are one of the purest expressions of trust-based philanthropy. Early evidence suggests that such trust is well placed. Repayment rates to date are 100 per cent among small farmers and retailers, 99.5 per cent across street vendors, and 87.7 per cent among women micropreneurs. The promise of returnable grants is that they just might move funders from “either/or” choices — either solve for today’s acute needs or tomorrow’s long-term challenges — and instead do both.

They serve immediate needs by enabling a beauty salon owner to replace products that have expired or a small contractor to restart projects. They also enable people who have never been part of the formal financial ecosystem to enter into it.

By marrying different funders, each with their own risk-reward profiles, collaboration can mobilise private capital of varying risk appetites. Because it can also deploy less familiar models of financing, collaboration gives funders additional flexibility in supporting communities. And by blending public, private, and philanthropic capital, collaboratives can reach segments (like small businesses) as well as populations (such as women entrepreneurs) that otherwise may have been left behind by traditional development funding or purely private capital.

Venkatachalam and Gambhir are partner and the head of market impact, South Asia and case team leader respectively at The Bridgespan Group’s Mumbai office

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