When Geeta Goel joined Michael & Susan Dell Foundation in 2007, she was all set to break new ground, that of impact investing. The US-based foundation decided to take a small step at first, putting money into Ujjivan Financial Services, a five-month-old microfinance institution (MFI). At the time, the general perception was that equity investments into social enterprises would mean a push towards profitability and that could hurt the value those companies were creating. But Goel did not think so. "If a social enterprise gets the right support from early-stage risk capital and proves to be a sustainable business, it then creates a new sector with many more players and follow-on capital, growing the market and also multiplying the impact," she says.
What happened subsequently proves her point. Ten years ago, urban microfinance was less than 5 per cent of the total market, but it has now reached 54 per cent. With Ujjivan on a roll, new MFIs came up fast, and investments grew as well. "We believe in paving the way by investing in a cluster of companies that can catalyse the market to create a significant impact," Goel explains.
By 2009, she had led eight early-stage investments into MFIs and then focussed on the financial inclusion space. To date, the foundation has spent around Rs 1,100 crore through grants, debt and equity funding, helped 40 social enterprises working on education, financial inclusion and livelihoods, and impacted around 11 million households. The big bet was on education though, which helped 3.7 million children. In 2014, India Educational Investment Fund was set up for early-stage investing, incubation and mentoring.
The foundation has come up with a unique mix of non-profit (grants) and for-profit (equity investments for returns) components, but the latter has grown significantly - from 10 per cent of the total India allocations in 2006/07 to 65 per cent in 2016/17. Goel, however, says it is the global trend, and the model has also been adopted by the foundation in the US and South Africa where she has done similar work since 2013.