How venture philanthropy is helping Indian NGOs do good better

Children under the care of an orphanage in Howrah, West Bengal, attend a Health Check-up and and Creative Ability Program spearheaded by a Nisana Foundation, a local NGO in India. Photo by: Biswarup Ganguly / CC BY

Scale has long been a challenge for Indian nongovernmental organizations — more than 2 million are registered with the government, but few if any are as large as those in the United States.

But that’s now changing, with a growing number of social venture philanthropists innovating the NGO landscape, using the venture capital model to overcome the growth challenges that have clipped the industry at grass-roots level for decades.

The fact that most NGOs have not been able to scale is “a clear nod toward lack of capacity” at a time when it’s needed more than ever, Aparna Sanjay, general manager of Social Venture Partners Bangalore, told Devex.

Most NGOs in India were started by someone in the community and run on modest budgets, often topping out at 500 million rupees ($8 million) annually, according to Vidya Shah, CEO of Edelgive — a charitable foundation that the Edelweiss Group, one of India’s leading financial services companies, established in Mumbai in 2008. Shah shared with Devex that while these NGOs can build and execute programs, “there’s hardly any knowledge around building an organization.”

That’s where nonprofits like EdelGive, SVP India — the local affiliate of Seattle-based SVP that seeds organizations in major cities in India, including Bangalore — Dasra and Smile Foundation come in.

Using the venture philanthropy method, they usually incubate NGOs for three to five years, providing 500,000 to 10 million rupees in funding annually, often tied to achieving set milestones.

Building capacity

Capacity building is provided in areas where NGOs struggle: business planning, human resources, financial management, communications and fundraising.

“We typically make a commitment of between 75 [and] 100 days of support,” explained Neera Nundy, a former investment banker who co-founded Dasra in Mumbai in 1999.

SVP India and EdelGive use corporate volunteers for capacity building. Having started operating in India two years ago, SVP India is setting up a network of professionals with the necessary skills, while EdelGive draws senior and midlevel staff from the Edelweiss Group and engages Toolbox India, a pro bono consulting facility, to access a wider employee pool.

India’s wealthy philanthropists used to scoff at the idea of opening their wallets for capacity building, but slowly they’re being won over and the discourse has now moved to what kind of capacity building needs to be done, Shah said. She puts this down to India’s growing cohort of successful businesspeople-cum-philanthropists who are tackling giving with, “the same approach as they did business.”

These corporate-savvy funders have seen Dasra’s “giving circles” swell from an initial 3 million rupees to 30 million rupees today.

Sustainability

Indian NGOs face particular challenges when it comes to sustainability, with regulations preventing them taking out loans for projects, running commercial ventures earning more than 1 million rupees or investing in businesses. It’s also difficult to receive foreign funds.

Social venture philanthropists have to think outside the box.

“Key factors, aside from a revenue model, contribute immensely to sustainability,” Shah said, noting government support and community buy-in. EdelGive helps NGOs engage with key influencers, tie up with other NGOs and link to donors.

Smile Foundation teaches grass-roots NGOs to raise funds locally with tailor-made initiatives like “collecting old newspapers and selling them,” communications head Sandip Nayak said.

Restrictions have also pushed nonprofits to innovate — giving rise to a hybrid nonprofit business model consisting of two legal entities, which is increasingly popular.

“We’ve seen these kinds of models being quite impactful,” Nundy said. Dasra often opts to incubate the nonprofit arm of hybrids, like Eco Femme, which sells cloth sanitary napkins and raises awareness about menstrual hygiene.

Scaling

Scale is another buzzword dominating discourse in India, with philanthropists calling for NGOs to spread geographically and reach more people, Shah said. But the diversity in geography, languages and cultures makes it complicated.

Dasra only selects nonprofits with potential to grow significantly “in scale and impact,” Nundy said, often NGOs specializing in a sector or innovative hybrids, which can grow up to 30 times over five years. For example, Educate Girls “started in 50 schools and by the time they were exiting out of the portfolio … they would have reached about 15,000,” Dasra’s co-founder explained.

The extent of scaling SVP India aims for varies case-to-case for the livelihood-focused NGOs it targets.

“Sometimes it’s just a concept when it comes to us and all they need is a little bit of funding to pilot that,” Sanjay said.

Smile Foundation — which started operating in Delhi in 2002 and now reaches 25 states — aims to boost impact by 60 percent and leave NGOs financially sustainable, Nayak said. But this takes “at least five years” and can even exceed 10 for the small, sometimes newly started nonprofits it works with.

India’s social venture philanthropists face many challenges too, not least regulations preventing them from funding social enterprises. This is particularly frustrating as “social enterprise is a very vibrant sector at the moment and a lot of them are doing very interesting work,” the SVP Bangalore official said.

SVP India sidesteps these restrictions by giving capacity building-only grants to social enterprises, while Dasra runs an executive education program for social businesses, with enrolment fees.

Another hurdle is that most Indian nonprofits are not aligned to thinking about becoming sustainable, according to Shah. Social venture philanthropy meanwhile accounts for a tiny fraction of India’s development sector and is “still in the early stages of development” itself.

There’s not yet an ecosystem for collaborating and sharing learning, Sanjay pointed out.

Still, social venture philanthropy is growing in India. SVP India is expanding to “at least” 10 cities and hiring for new branches in Delhi and Chennai, while Smile Foundation aims to support 5,000 NGOs, both in the next three years. And with India’s philanthropists jumping on board and the government’s new corporate social responsibly laws mobilizing corporate donors, the trend is set to continue.

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About the author

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    Alys Francis

    Alys Francis is a freelance journalist covering development and other news in South Asia for international media outlets. Based in India, she travels widely around the region and has covered major events, including national elections in India and Nepal. She is interested in how technology is aiding development and rapidly altering societies.

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