September 8, 2017 Yes Institute

Global Innovation Magazine: Innovative Financial Models for Development

  1. Innovative Financial Models For Development AuthorMs. Preeti Sinha – Senior President YES BANK, Glocal Convener – YES Global Institute

Q. YES Global Institute has been the pioneering private sector think tank dedicated to the socio economic development of India with a strong focus on Innovation. How do you see your various initiatives building an inclusive ecosystem for Entrepreneurship?

A.

YES Global Institute, the practicing think-tank, has been established as a division of YES BANK to focus on channelizing private sector capital towards India’s development. The Institute houses all the knowledge verticals within YES BANK and it is our belief that India’s equitable economic growth will be derived from adopting a robust partnership amongst the public sector governance along with the private sector innovation and entrepreneurship.  Additionally, through leveraging the strong backbone of the public sector, the private sector investment frameworks and the deployment of National innovative financing instruments, India will be able to achieve an equitable ecosystem that promotes entrepreneurship.

YES Global Institute’s approach on taking these themes forward is to connect capital and resources to growth and developmental projects. This is done via its research, analysis, convenings of Glocal leaders, and finally through launching market-based solutions for engaging private sector capital in India’s evolution.

Currently, the Institute is on-boarding numerous platforms and initiatives to propel entrepreneurs as the next wave of equitable growth for India. We have been developing several innovative financing instruments to enable entrepreneurs to further develop and scale. Moreover, we have recently created a concept note for multiple Impact Bonds, which could aid in the long-term goal of the Government of issuing public sector bonds.

The Institute is also creating a YES Social Entrepreneurs Platform (YSE), where we are connecting Glocal Impact Investors with Social Entrepreneurs in the hopes of developing a sustainable ecosystem. This platform would serve as a global movement for entrepreneurs using business as a force for good.

At the Institute, we believe Innovation holds the key to leapfrogging India into its next stage of development.

Q. What innovations do you feel hold the key towards catalyzing private sector capital towards development?  

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Social Investment Opportunities and Tools!

To enable India’s next wave of development there has to be an upsurge in Social Investments. Social investments aim to achieve social and financial returns. Additionally, if social investments are aligned with the core businesses of a corporation, it can act as an innovation hub.

Through investing in such opportunities a corporation learns about new markets, grows an existing market, fosters innovation and generates sustainable financial returns.

Firstly, the most common approach is the use of funds that combine regular financial performance with stated social impact goals; these are termed as Social Funds. Such Funds can enable small-scale public investments targeted at meeting the needs of poor and vulnerable communities, through contributing social capital and development at the grassroots level, which can then be repeated by the public sector.

Secondly, Social impact bonds (SIBs) are instruments whose pay-off is dependent on the achievement of a specific social outcome. Such instruments can enable governments to fund programmes without incurring the risk of failure. For non-profits, they represent potential funding and finally for investors, they represent an opportunity to generate returns and also achieve CSR goals.

Thirdly, in developing countries, like India, financial services firms support the unbanked and provide MicroFinance. With an emerging middle class in India, such opportunities could drive economic growth and thereby enable economic development.

It is imperative that India ideate tools to permit social investment opportunities and thereby enable innovation and development!

Q. Impact Investing has emerged as the new buzzword globally to catalyze investments in Social Entrepreneurship. According to you, what are the key steps that need to be taken to build and scale the Impact Investing Market in India? What role do you feel YES Global Institute can play in this?

A.

In recent years, Impact Investing has become a prominent financial tool at the global stage to channelize private capital and measurable positive social and environmental benefits in addition to financial returns. There are certain policy changes required to make impact investing a success in India, and we can learn from the successful global initiatives to accentuate its development. This current trust deficit that is lingering throughout the Indian markets creates a roadblock for investments into social enterprises due to a lacking transparency. At the Institute we are trying to highlight Impact Investing and how not only can you generate social returns, but financial returns as well. We have conducted several convening’s surrounding Impact Investing and are currently developing our platform that will enable Impact Investors to invest in Social Enterprises.

To scale Impact Investing in India you really have to on-board the high net-worth family offices, as once you have the leading players out there investing for social and financial returns, thereby creating a ripple effect for the rest of the market. Currently, YES Global Institute is in the process of conceptualizing a three city tour, where we would bring together these high net-worth families and highlight their pivotal role in shaping the landscape of Impact Investing.

Globally, market-based approaches to social and developmental challenges are on the rise and private sector solutions to shortcomings in the provision of basic services such as education, health, energy, water and sanitation are in focus. While in most countries regulators have not yet come up with a clear definition for the term ‘social enterprise’ or ‘social entrepreneurship’, different stakeholders are dealing with this new niche segment of enterprises.

While Impact Investing is the need of the hour, leveraging the role of technology as an enabler for growth should not be ignored. ‘Crowdfunding’ allows people to pledge capital to almost anything from business ventures and new advances in tech to real estate and even charity. At the end of the day, both streams share similar outcomes of social good, and we at the Institute believe it is imperative we use any methodology to promote India’s social development.

Inclusive Growth is an important tool to counter this economic disparity and achieve long-term economic dividends for all, thus making it time to overcome India’s core societal challenges using innovative frameworks like ‘Impact Investing’ to unleash the true entrepreneurial spirit.

Q. Over the past few years emerging technologies such as Big Data, AI, Blockchain have changed the contours of the business community. What role do you think these technologies and Innovation can play in the Social Development arena?

A.

Technology plays a vital role in terms of effectiveness, efficiency, accountability and most importantly conceptualizing new solutions to the age-old problems. We have seen technology transcend leaps and bounds in shaping the current Indian developmental landscape and it is our belief at YES Global Institute that technology holds one of the key cornerstones for India’s development.

Blockchain is the fundamental ‘Building block’ technology incorporated by crypto currencies such as Bitcoins. Its transmutation from a tracking database for Bitcoin transactions to a turbulent force of change in the financial industry occurred within a decade. Inclusion of block chain technology is a catalytic game changer as it has potential to streamline services by making them faster, cheaper and more transparent, thereby enabling social and equitable development. YES Global Institute has began to explore such solutions with agri-players like M-DAIRY, with the hopes of making all transactions transparent, and making each member of the value chain accountable for their own transactions.

Another technogical breakthrough would have to be the  new age ideology in this field with an acute focus in pursuing social impact is the conceptualization of DevelopmentCoins or ‘DevCoins’,  which is a prominent solution addressing the quandary of rewarding the efforts of social impact players working around the globe. Currently, there are a multitude of investors in the global marketplace increasingly display interest in sustainable investments and openness to new investment strategies. YES Global Institute is finding ways to channel the force of private capital to address these issues isn’t only the right thing to do, it’s the smart thing to do.

Lastly, in this era of new-age disruptive technologies, Artificial Intelligence (AI) is transforming the landscape for the entire human race. AI is redefining the way traditional businesses are run, it is also catalyzing meteoric leaps in productivity, and unfolding as a new ‘factor of production’ to reignite economic growth. In India, YES Global Institute is conducting private-sector convening’s on AI and how it represents an enormous opportunity for policymakers to capitalize on these technological advancements, thereby enabling them to make better informed decisions on some of the toughest socio-economic challenges.

We at the Institute believe that policymakers should further work towards identifying the public sector domains in which AI, Big Data, Blockchain, DevCoins etc. could drive innovation for development. Through integrating these technologies with some of India’s impactful initiatives such as Make in India, Digital India, Startup India and JAM trinity through creating central and state level innovation clusters, which then can go a long way in making India the world’s most powerful ‘Digitalized Economy’ and in realizing the dream of ‘Smart Sustainable India’.

Q. You personify a very Global Mindset having worked at African Development Bank, and World Economic Forum. What do you think India needs to do in order to realize Sustainable Development Goals?

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The Sustainable Development Goals (SDGs) are more ambitious than the Millennium Development Goals, through their coverage of a broad spectrum of interconnected issues, from economic growth to social issues to global public goods. The implementation of SDGs needs every country to judiciously prioritise, and adapt the goals and targets in accordance with local challenges, capacities and resources available.

India has, over the past years, directed its development pathway to meet its priorities of employment, economic growth, food, water and energy security, disaster resilience and poverty alleviation. India has also aimed to restore its natural capital and adopt transparent and robust governance along democratic lines. However, emerging challenges of climate change impacts, increasing inequities, and lagging human development indices are well recognised by both the citizens as well as the government. The post 2015 UN Sustainable Development Agenda framework provides an opportunity to renew and integrate efforts in order to meet, to a significant degree, national and global aspirations in a defined time frame.

India’s asset is its diversity of institutions and expertise available to deal with issues related to achieving all SDG Goals. While the current plans and approaches need an overhaul to effectively deal with achieving all the goals and targets of all SDG’s, it is also important to take the responsibility and ownership of achieving the same to States, local bodies and the civil society including the corporate sector.

NITI Aayog (the government think-tank of India) with this mandate and ability to oversee action to deal with SDGs needs to have a special focus on enhancing synergies and cooperation amongst agencies and institutions as well as ensure that finances that are deployed on issues related to SDGs are relevant, appropriate and impactful. While India can pride itself as a society with historical consciousness to deal with sustainable development, it cannot bask in the past glory when the indications are that the society is fast moving towards unsustainable production and consumption patterns with local people at the receiving end of the vagaries of economic, social and environmental wrong-doings.

To realize this vision, a just-as-ambitious plan for financing and implementation is needed. The magnitude of the SDG financing challenge far exceeds the capacity of any one organization and demands a strong partnership among governments, the private sector, and development organizations.

Global Innovation Magazine Innovative Finance Models by Ms. Preeti Sinha