A report from the Business Standard revealed that Indian impact investors and social entrepreneurs have now turned their eyes to the urban poor market. This indicates a shift from impact investment funds catering mostly to the rural poor through financing microfinance organizations.
While social ventures that focus on the urban poor are still trying to carve out a sustainable business model, the report said such investments have been gaining investor traction in terms of seed and early stage funding. One example is that of Hum, a group-buying venture, which received Rs 2 crore as seed money from impact investor Vipul Prakash last January. Group buying firms offer goods at low prices for as long as a minimum number of buyers purchase the items. Hum offers the low-income communities living in resettlement colonies, bulk discounts on items that they use on a daily basis like soap and spices. It currently serves around 500 families in East Delhi but Prakash says the business model will only get to be sustainable if it is able to provide its service to 25,000 families.
Tree House Education, a public-listed impact investor, also has a preschool project focused on the slums called Global Champs. The venture has already started preschools in Malad and Kandivli in Mumbai. Soon, it will also be opening a preschool in Dharavi, one of the biggest slums in Asia. Parents who send their children to Global Champs have to pay anywhere from Rs 10,000 to Rs 12,000 each year per child. Former investment banker Rajesh Bhatia is the founder of Tree House Education. He told the Business Standard, "There is huge demand for quality value-for-money education at that level." Tree House Education is backed by global impact investor Omidyar Network.
According to the report, social entrepreneurs and impact investors are lured to urban poor-oriented enterprises because they are easily scalable. On a per capita basis, the expenses involved with addressing a large population such as those found urban poor communities are lower, facilitating better execution of the distribution model.
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