This article was written by Anumeha Karnatak of NLS Bangalore while she was interning with iPleaders.
Realising the importance of innovation for economic prosperity of any nation in the 21st century, the then President declared 2010 as the ‘Decade of Innovation’. To carry forward the agenda, the Prime Minister approved the formation of the National Innovation Council under the chairmanship of Sam Pitroda who is also the adviser to the PM on Public Information Infrastructure and Innovations.
For the last couple of years, Indian government has focused on ‘inclusive economic growth’ that seeks to ensure that the fruits of higher growth are shared by every section of people on the economic ladder. Such a growth tends to couple itself with development. The main rationale behind setting up of the NIC is to facilitate co-operation and collaboration among different stakeholders such as businessmen, NGOs, professionals, government etc. engaged in innovative activities. Recently, the NIC in collaboration with the Ministry of Micro, Small and Medium Enterprises (MSME) announced the establishment of India Inclusive Innovation Fund which seeks to finance innovations which will directly address the concerns of the economically backward and challenged sections of the society.
The fund is to be registered under the SEBI’s Alternative Investment Fund Category I guidelines with an initial outlay of Rs. 500 crores. 20% of this amount will be funded by the Ministry of MSME while the balance amount will come from banks, insurance companies and financial institutions. The ultimate aim of the fund is to increase fund corpus to Rs. 5000 crores in 2 years. The fund seeks to invest not just in enterprises focused on inclusive innovation (Bottom of the Pyramid focused companies) but also in other funds that provide financial support to these enterprises. Therefore the investee base is going to be very wide.
Following are some of the objectives that the fund seeks to achieve:
To focus on the disadvantaged sections of the society: The fund seeks to provide support to enterprises engaged in developing innovative solutions for customers belonging to the lower strata of society.
To combine social and commercial returns: The fund will not compromise with the profitability of the enterprises. They will still be able to earn modest returns. However, the social impact of their investments will also be significant.
To promote generation of employment: The fund also promises to provide support to enterprises that employ the poor citizens of the country.
To help establish a model for Winder Inclusive Innovation Funding: By providing monetory support to the Bottom of the Pyramid (BOP) focused enterprises, the fund will set an example for other enterprises also to engage in innovative and socially meaningful projects.
The fund will cater to the needs of Indian entities only. Any individual, firm or institution can apply for the fund. The criteria used in selection of applicants include:
- Technical potential to commercialise the idea, process, product, patent etc and take it to the market.
- Ability to bring together skill, professional and organisational potential in the enterprise.
- Fund is open to entities at the Bottom of the Pyramid (BOP). Although ‘BOP’ is not defined anywhere, it is by implication likely to include micro enterprises.
All applications will be examined by a committee comprising representatives from various Ministries of finance, science and technology, civil society groups etc. The entire process will be supervised and mediated by the NIC.
To widen its base, the fund will seek potential investees from the following 4 sources:
- Open broadcast. Because of sensational publicity and outreach activities, the fund will attract many targeted enterprises.
- Angel and venture capital networks with established investments in various SMEs and other institutionalised social-venture interested communities.
- Community organisations such as NGOs and NPOs.
- Other funds.
In order to de-risk investee enterprises, the fund will set up a network of mentors who will provide the necessary guidance to innovators and entrepreneurs so that the correct balance between profits and social acheivements is struck. The fund also seeks to launch an incubation programme to train entrepreneurs in various domains such as finance, marketing and operations.
- It will be able to make sure that the benefits of growth are able to reach the disadvantaged sections of the society.
- Boost to enterprises indulging in socially beneficial innovative technology.
- It will be able to provide innovative solutions to the problems of the people belonging to lower strata of the society.
- It will ensure that profitability of enterprises is not compromised with.