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New Development Impact Bond in India That Can Lift Women Entrepreneurs Out of Poverty

07 October 2020

By

Neelam Chhiber

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Co-author: Prabu Thiruppathy

3 min read

Solving capital constraints in rural economies through sustainable financing

Women-led producer enterprises in rural India, perhaps more than many other businesses, continue to struggle with access to capital. Their needs are often not being acknowledged or understood by financial institutions from the very beginning, so traditional financial instruments and mainstream finance products are not easily accessible to them, particularly when it comes to growth capital. The current global health crisis further exacerbates this problem.

Industree’s POWER (Producer Owned Women Enterprises) Project seeks to support 6,800 women directly and a total of 54,500 persons in communities, across bamboo value chains over 3 years. It recently partnered with USAID under the Women’s Global Development and Prosperity initiative that seeks to reach 50 million women in the developing world by 2025. To achieve this, however, innovative financing will be required. In this regard, Industree and USAID partnered with KOIS in an event recently to define how to sustainably finance the project.

Collaboration was key in laying the groundwork for this project. The partners brought together the brightest minds from across the board: from impact investors, to donors, to corporations. They exchanged knowledge and collectively shared ideas and actionable plans to solve for the lack of access to finance for rural women entrepreneurs.

One of the key highlights of the discussion was exploring the use-case of a result-based financial instrument, such as development impact bonds (DIBs). Such a mechanism offers outcome transparency, but special attention has to be given to pricing the risk profile correctly and ensuring long term sustainability of the enterprises, even after the project is over.

The collaboration: A USD10 development impact bond for the bamboo value chain

While exploring the potential of results-based instruments, the partners saw great value. The program will have an impact across the areas of livelihood, women empowerment, and environment in the bamboo value chain. Farmers would receive sustainable income from the third year onwards (i.e. the time between planting and harvesting bamboo), and for up to 30 years. Bamboo planting would also help to reduce atmospheric CO2 levels as well as carbon sequestration. Furthermore, bamboo does not need high quality or productive lands and it can be grown on underutilized land as well, thus having no impact on food security.

As such, a USD10 million DIB, with potential to scale to USD25 million, was formed. This DIB (10M USD) would unlock the opportunity for incubating additional producer enterprises to access global markets and capital, thereby reaching an additional 10,000 women directly and another 80,000 women indirectly. Essentially, The DIB at 10M USD would impact 10,000 women and at 25M USD would impact 25,000 women and so on.

Industree’s 6 Cs model for sustainable impact

In this result-based financing mechanism, social investors would provide the upfront capital and receive an outcome-based return. Industree, with over two decades of operational expertise, would manage the end-to-end setup and launch of the bamboo vertical; a third-party evaluator would collect, report, and assess the predefined outcome metrics. If these outcomes are realised, the donors would reimburse the social investors the capital and interest.

Way Forward

Industree & KOIS are currently structuring a financing mechanism covering the implementation roadmap, measures & evaluation framework, financial and governance model for a financial instrument. Donors who are interested in results-based financing and the social goals are welcome to help co-create grassroot impact by reaching out to Industree or KOIS, or staying informed on their social media channels.

References

A. Environmental Stewardship
To protect the environment, we organize programmes like mangrove nursery and Reforestation, Coastal and River Clean-Up, Community Based Environmental Solid Waste Management, Environmental IEC Campaign and Eco-Academy

B. Food Security and Sustainable Livelihood
To ensure a sustainable livelihood for the community, eco-tourism include Buhatan River Cruise Visitor Center Buhatan River Mangrove Boardwalk are run by the community. Others include Organic Vegetable and Root crops Farming, Vegetable and Root crops Chips and by-products Processing and establishing a Zero waste store.

C. Empowered Communities
To empower the community, we provide product and Agri-Enterprise Development Training, Immersion and Learnings Exchange Program, Earth Warrior Training and Community Based Social Entrepreneurship Training

Author

Neelam Chhiber

Neelam Chhiber has for the past three decades been working on regenerative economies, with parts of India's 200 million strong artisanal work force, by providing design, technical, marketing and management solutions to bridge the urban-rural divide. Over the years, Neelam and her team have built a holistic ecosystem that works with the most vulnerable rural and peri urban women in India to equip them with the necessary skills and tools to set up self-owned enterprises close to their homes, having already impacted 60,000 producers. Their work ensures that communities become part of mainstream value chains with customers such as IKEA and H&M Home, giving them greater control over their economic security and resources to significantly improve social gains such as social security, better health care, improved resilience to crisis and overall resilience. Her work is now transforming into building a Platform for Inclusive Entrepreneurship for women, with very strong technology enablers, so that in the years to come, solutions being built out could use the power of networks and scale faster.

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