28 Feb Funding for Livelihoods in India: Importance of Innovation and Entrepreneurship

In 2018, Ennovent conducted a funding landscape study of the sustainable livelihoods sector in India. Sustainable livelihoods efforts in India comprise a vast set of interventions, cutting across diverse communities, objectives and impact strategies. The sector encompasses agricultural and related activities, handicrafts, tourism, skill development, entrepreneurship and innovation, among others. Developed in partnership with the Asia Venture Philanthropy Network, the report is targeted towards enabling more impactful support by providing recommendations on how impact investors can help overcome sector-specific challenges. The study maps the existing state of funding for livelihood projects and programs across India by looking at organisations such as NGOs and social enterprises, working to provide livelihood opportunities to people.

A significant proportion of organizations included in the study was found to have turned to market-based models to attract funds for their activities. Such models were found across sectors, in agriculture and allied activities, handicrafts, skill development, as well as in organizations working with the differently-abled and other minorities.

Within the market-based system, a majority of the interviewed organizations followed a hybrid model, wherein they were partly funded by self-generated revenue and partly by grant and philanthropic funders. The external funding here took the form of debt, equity and grants from impact investors. There were also those who completely subsisted on their own business models. These revenue streams consisted of fee-based support services, product sales and consultancy projects.

The main reason provided for the adoption of market-based models was simple – grants are unreliable. Many were averse to being completely dependent on grant-based funding since they did not want to have to stop engaging with their target communities if and when the grant funds ran out. A market-based model, they felt, had a much higher scope for not just financial viability but also, scalability. Since the focus of this study was on sustainable livelihood providers, there was an added layer of reasoning for organizations to opt for market-based models – an income generation model should itself display sustainability by generating its own income.

However, in spite of the high level of demand from NGOs and mixed-funding organizations for support of entrepreneurial and innovative models of functioning, it appears that donors are unwilling to support what they consider ‘risky’ models. Though there has been an increasing buzz around innovation in the past decade, especially with the launching of projects such as the Niti Aayog’s Women Entrepreneurship Platform and the Mudra scheme for micro-entrepreneurship, funds are still channelled into well-established organizations, with large budgets and existing funding streams, that can bring scale to a project.

This gap in support for entrepreneurship and innovation was felt by organizations working across target groups, and in both rural and urban areas. As a result of the paucity of funds for new project ideas or business plans, a lot of organizations resorted to self-financing or accessing funds through their own personal connections. For many trying out new models, funds for pilots were not forthcoming. In such a scenario, NGO leaders and entrepreneurs either utilised their own funds, or reached out to those in their existing networks, who knew them and trusted their work.

With innovation so heavily reliant on personal wealth and connections, organizations with impactful ideas may be overlooked due to donor reluctance. In such a scenario, funders must become cognisant of the fact that a market-based approach leads to long-term sustainability. Filling this gap requires substantial investment in entrepreneurship training and creation of institutions, particularly those providing access to finance and technology.

You can read the full report here. A parallel supply-side funding study was also conducted as part of the same project, which can be accessed here.

To learn more about our work on livelihoods and explore opportunities for collaboration contact us at abhishri.aggarwal@ennovent.com