What is Social Investing?

Social Investing is a fairly new concept. While there are many definitions to it, we’ve tried to explain it in a more comprehensive way. It’s going to be the next big thing, so it’s vital to understand what it is in the first place.

What is Social Investing?

Social Investing is a investment strategy that aims to generate both social change and financial returns for an investor.

Christy gets 100 bucks as pocket money every month. Over time, she managed to save a substantial amount after whatever she had spent on. Let’s say 500 bucks. This is a surplus amount. Christy doesn’t feel a need to spend it or make a purchase at the moment.

But there’s her friend Harsh. He wants to provide rooftop rain harvesting services in water-scarce regions as a part of his annual project. He needs initial capital of 2000 bucks for making the prototypes and installing the first model.

What’s capital? Basically, anything that increases your ability to generate value.

In this case, the 2000 bucks could earn another 1000 bucks if Harsh’s project grows. Let’s move ahead.

Christy lends Rs 500 to help him set up. There’s a good chance Harsh might succeed but the possibilities of failing aren’t null either. But his project is overseen by his father who guides him well in the aspects of the business. Harsh sees a model of giving assistance/aid to homeowners at the construction stage to develop a more robust rainwater harvesting model. Right now, he only needs funding.

He manages to raise 1000 bucks from his neighbour Garima Aunty. The colony watchman was lent 500 bucks and the remaining 500 bucks came from his school van driver.

This is called investing. But wait, what’s social about it?

Social investing is when you invest to facilitate a social cause. In Harsh’s case, the cause was water scarcity. The investors (Christy, Garima aunty, the Watchmen, the Driver) do not actually seek a hefty monetary return. They are aligned with Harsh’s vision and are eager to join him on his social mission.

That’s what we call Social Investing. Simply put, it is the use of repayable finance to help someone achieve a purpose affiliated with a social mission.

Hope Harsh’s story builds an understanding of what Social investing is.

Let’s take a look at how Social Investing plays out in the real world.

Shanti Bai is a homemaker in Khandwa, Madhya Pradesh. She lives with her family of four. Apart from household chores, she takes up animal husbandry. She rears goats and that’s a lucrative business in rural areas. A goatling can be bought at Rs 1500-2000 and be sold off at Rs 16-20k when it is of age. Shanti Bai wants to upscale her business and wants to buy more goats. But there’s one catch, she needs capital of Rs 30k.

Often in rural households, the savings are meagre which often hinders growth and sustainability. Credit here becomes the crucial player.

Social Investing comes as a handy option. People across India can invest in Shant Bai’s venture and help her grow.

Shanti Bai in her backyard.

But why Social investing?

Would you know about Shanti Bai, if we didn’t tell her about you?

She is living in a remote village and barely has access to means that enables her to voice her needs. There are many like her, to be honest, millions.

Traditional banks have operational costs, high-interest rates, paperwork, and documentation, and above all, they don’t feel lending to Shanti bai is a safe option. Banks only understand the language of collaterals and interest rates. Not human potential and resilience. Something we understand a lot at Rang De.

And the second option is charity or donations. Well, philanthropy is not suited for all social problems. Do we know how Shanti Bai will feel if we give her a handout? Are we undermining her ability to be the driver of her own success? These are the questions that tag along.

Social Investing, on the other hand, empowers her. It promotes the idea of responsible borrowing. Her repaying the money to the investors keeps her accountable for her growth.

Rang De engages with many people like Shanti bai. Farmers seeking loans for high-quality seeds. Retail entrepreneurs seeking loans to start their businesses. Women need loans for tailoring machines. Collectives seeking credit for artisans. We call them ‘Investees’. A term we are proud to coin.

So as a next step, learn more about our work at www.rangde.in to know the people who are seeking your investment. If you’re hesitant to invest, start small, say 100 bucks. And see what unfolds.