PART 3: How the social impact ecosystem can join forces and make a difference - COVID19

How the social impact ecosystem - social businesses, impact investors, philanthropists - can join forces to fill the gaps and make a difference on the frontline.

Ajaitah Shah - CEO Frontier Markets

In previous articles (parts 1 and 2), we talked to Ajaita Shah, CEO of Frontier Markets, to understand the interconnectedness of issues that stand out in a pandemic context in rural India.

Frontier Market is a social business that unleashes rural women's economic and social potential. Rural women have ties and trust in their villages and are the most effective agents for serving last-mile households. In partnership with local NGOs and government, Frontier Markets recruit women through Self Help Groups (SHGs), equip them with an e-commerce platform, and train them to market, sell, and service life-improving assets—from clean energy to digital finance—in their villages. They solve real problems for their communities and become drivers of their local economies. To date, 10,000 rural women in four states have earned $15MM by selling 1MM assets to 850,000 households. They have impacted 5.9 million people, 70% of which are women. 

When the COVID19 lockdown happened in India, the gains secured around women’s economic empowerment and autonomy are fragilized. Ajaita explained how her company activated her partnerships with suppliers, partners, NGOs and the government to provide a rapid, innovative and relevant response to the pandemic.

In this piece, we explore the position of the company today and the gaps that still need to be addressed, which are also shared by other social enterprises in many countries around the world. We look at the role that Philanthropists could play alongside impact investors to generate a collective, systematic and efficient support response.

Facts about Frontier Markets Impact

OGUNTE: What is your position today at Frontier Markets?

AJAITA SHAH: Today, we are very clear that this delivery of priority goods is not going to be profitable enough to cover our overall company costs – we have 123 staff who are all surviving from 12 out of 20 branch operations, selling services at a low value and low margins. But this will help us sustain our operational costs. And importantly, it's allowing us to create assets: our data, and better systems in terms of tech integration, better products and services, and significant learnings. We’ve also tightened up the value proposition. We are the only ones able to do doorstep in a way that some of the biggest players aren't being able to.

We have taken additional measures to manage our company’s health – to control our corporate-level costs, the leadership team unanimously volunteered to take a 50% salary cut for the rest of the year. The middle management volunteered a 25% cut for the year. Overall, that was a big help towards our aim of reducing our overall costs by 50%. This was amazing; as a leader, it’s a proud moment to see our teams step in for the sake of the company’s future, and mission to drive impact. We also looked at other small level costs that we could reinvest.

OGUNTE: Where else are you saving money?

AJAITA SHAH: We looked at where we were creating more productivity and efficiencies. At the same time, you do need to thrive, so we continued investing in technology. Adding the FinTech integration costs a lot, such as adding a B2C e-catalogue app. But data is going to be the most important element. So, we are now investing in data analytics, AI and machine learning, to develop predictability through patterns and completing research which we will present to potential investors. Imagine rural households driving our decision making on product, delivery, new services based on their direct feedback in millions.

OGUNTE: This is an amazing way forward. But amid these changes, there must be new challenges, learnings and actions? What do you need as a leader?

AJAITA SHAH: I think no matter how much we try to adapt and create new visions or predict the future, there's always going to be a level of uncertainty and risk in everything that we do. This is the time more than ever, where risky capital allows us to cushion and protect the organization to be able to stand the uncertainties and hold stronger. To continue operating, our existing investors agree to a bridge infusion and we'll close a $750,000 round. This is fantastic because it allows us to continue our efforts. However, that money doesn't account for some of the deep, impact-driven challenges that we're seeing on the ground, for example, especially for women.

We recognize that our efforts help some women access new income opportunities, but the reality is, due to the lack of movement, high level of household responsibilities, they will be earning less – less hours to operate, less customers to serve, less options to sell, less access to income. The Saheli is now delivering first necessity goods, with low margins, for a short term, as opposed to the consumer durables, and solar goods she normally distributes with higher margins So let’s give her the dab money. This has direct adverse impacts on their position in the family; we have been hearing about increased occurrences of domestic violence due to family frustrations.

Therefore, we have been trying to convince more donors to recognize that at least in this period, it was the time to support us by letting us give a stipend to women for them to have some income coming in, that strengthens or retains their power.

They need to retain this position in their family, we can’t let the advancement go backwards. If she brings in an additional $10 or $20 to support essential goods purchasing, it's a game-changer in terms of her retaining her status in the house. As she can't travel, this is the best option for us now, and that can't be done through equity capital, because equity money is supposed to be there to support our staff and our infrastructure. Outside of this, we need to figure out and convince corporate leadership, donors or philanthropists to help, effectively.

OGUNTE: What do philanthropists need to focus on?

AJAITA SHAH: We need them to listen to the gender-critical stigma that's being created right now.  Economic empowerment is the key to curtail that stigma and create a base foundation to prevent women from going backwards. It is my battle right now. Because of the workload on the ground, we don't have the in-house talent to package that and present that in a way that truly allows the outside world to understand it.  Converting it into a proposal, doing crowdfunding campaigns, this is something we don't have the bandwidth for at the moment. This is one of the reasons we connected with you, because it's about leveraging partners that can do this with us.  It's where philanthropy can work hand in hand with the more basic, classic investors, or investors can rethink the way they finance social Impact. Our very pragmatic ask to philanthropist right now is a sum for us to organise the stipend for Saral Jeevan Sahelis, our women entrepreneurs, to bridge the shortfall of earnings during this crisis.

OGUNTE: There’s an ecosystem issue, here, isn’t it?

AJAITA SHAH: Yes. Let's just look at this ecosystem. The sector is siloed. Collaboration between philanthropic capital and social venture capital is not happening. While we recognize social enterprises turn to investors first, the challenges are deeper. Many social enterprises today are going through business crises and are fighting the threats of shutting down. They did not start the year with cash reserves, and some of them may be going into liquidation. This is where impact investors are stepping in; they are putting out fires, creating access to bail-out funding and loans. I recognize that impact investors are playing their role. Their role in this ecosystem is to strategically and operationally guide their companies to come through, from HR to compliance, because everything is so vague and uncertain at the moment.  When the [Indian] government says: “Please don't fire anybody, don't reduce any salaries”,  that's very easy to say, when we are not given bailout capital, isn’t it? It is not like in Germany, France or the UK.

Additionally, while we would love to showcase our work, help get the right messages across globally, help people learn about the true and complicated challenges in rural India at stake, there’s another bandwidth challenge. In this time of crisis, I prioritize supporting my teams, making sure we're able to operate within time constraints, connect with government, prepare for new disaster management, keep serving our customers in the best way can, leaving no time not talent to focus on the other, which we recognize is important too.

I wish we had the talent or the money to do both. But at the stage, it's hard to do that.

OGUNTE: And there are even structural issues for these financial packages to rescue the social enterprise sector in Western Europe…

AJAITA SHAH: The challenge is the type of funding available for social enterprises. We assume that we will be able to address deep impact challenges, survive as a company, rebuild our business, and scale without concessionary capital. We can drive real change on the ground, build resilient communities, build financial security, build employment opportunities, and work closely with NGOs to drive that.

OGUNTE: Where has Venture Philanthropy disappeared?

AJAITA SHAH: Before COVID-19, everybody was talking about venture philanthropy, how necessary it was to talk about sustainability and scalability, shared value partnership solutions happening on the ground. I wonder what happened to that?  Social entrepreneurs who can become leaders in this space are delivering the work right now. But unless you are a foundation or a non-profit, you are not touching grant capital; I find this surprising in the state that we are in right now.

OGUNTE: What would you like to hear from the ecosystem?

AJAITA SHAH:  Many ecosystem organisations are reaching out to collect data about our work, our challenges. This data is being aggregated by many partners, which is wonderful, but ultimately the question is about the purpose; 90% of the time, it has been done for research papers at best, or consulting work for larger donors, DFIs or funds…

I wish these funds were diverted to companies instead; given the amount of time we take out to be a part of these studies, and our challenges of wanting to directly allocate time and resources on action. At most, organizations like ours are likely to be requiring $200K-$500K (depending on their current growth size) to allow us to deliver the way that we know best, to deal with the crisis that we have in front of us. We are very much capable of doing this.

This is what I want to hear:

“No questions asked, we trust you, you know the crisis better than we do… Tell us what you need and let’s work on this immediately.”

OGUNTE: In fact, this ask is the same ask you’ve shared with the Sahelis: “Tell us what you need”

AJAITA SHAH: Exactly, my Sahelis said: “Please close the loop, give me what I need. Don’t just aggregate the data, package it as a survey and say, I may or not come back to you.  What are you going to do with the information I am giving you? If you were to tell me the plan of action with the information, which resources were allocated, and I am certain that my information would give me access to the same, I am happy to spend an hour with you.

Our very pragmatic ask to philanthropists right now is a sum for us to organise the stipend for Saral Jeevan Sahelis, our women entrepreneurs, to bridge the shortfall of earnings during this crisis. A woman can’t move around; she has just so many hours she can do the work due to her increased housework as entire families stay at home. Her unpaid workload increases. The customer requirements are very low cost. The Saheli is now delivering first necessity goods, with low margins, for a short term, as opposed to the solar goods she normally distributes with higher margins So let’s give her the dab money. This is why we need the philanthropic grant money to bridge the gap.

OGUNTE: Thank you so much for your time, Ajaita. Let’s go and close that loop!

Do you have little time? Read the synthesis article, click here. 

Interview produced by Servane Mouazan, CEO of Ogunte. 
Learn from other ImpactWomen interviews here.

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