20 Jun 2016
Having an Impact on Development and Poverty Issues
Asha Impact is making investments that will grow small businesses focused on the bottom of the pyramid.Re: Ratan Tata (AMP 71)by Constantine von HoffmanTopics:
Photography by Susan Young
Even though government spending and philanthropic capital are powerful tools for helping people improve their lives and rise out of poverty, there are still problems with them. Regular infusions of outside capital are required to keep the organizations going, and there is limited ability to scale up and have broad-based impact. Vikram Gandhi (MBA 1989) is working to change that by creating investments that can be self-sustaining.
“India has 400 million people within the poverty line,” says Gandhi. “While the government and private charities have a lot of important programs, there is no way that is going to solve the problem. So I think bringing business principles to address issues is a very interesting and exciting thing to do.”
Toward that end, Gandhi has founded two companies. One is Asha Impact, an investing platform set up to address the critical development challenges facing India and other emerging economies, through impact investing in areas such as affordable housing, financial inclusion, and access to energy. The other is VSG Capital Advisors, an investment bank that is bringing long-term institutional and developmental capital to India across the public and private sectors.
Before founding these firms, Gandhi was head of the institutional strategy area for Morgan Stanley and then vice chairman of investment banking and global head of the financial institutions business for Credit Suisse. These experiences helped him to realize that businesses concentrating on the bottom of the pyramid, such as microfinance, could profit from using the same tools and approaches as any other financial institution.
“I hired a team that is a classic private-equity, venture-capital team,” he says. “They source deals, they do the due diligence and financial valuation just like one would as a venture capitalist, but there’s an overlay of impact. And what I define as impact is that the companies we invest in are focused on providing products and services to underserved populations in a profitable and scalable manner.”
In other words, Gandhi’s team doesn’t just assess an investment on the basis of whether it will have impact, but also on whether it can generate a return that will make it possible to be self-sustaining.
In addition to increasing the likelihood of success of the investments, this approach has other benefits. For one thing, Gandhi says, it will create a new asset class for socially minded investors, providing them with a reliable ROI that will advance the investing effort. He also believes that changing from a charity-based model of giving has a huge impact on the people who are seeking capital.
“Even with the best charities, the ‘I-am-helping-you’ element is always somewhere in the transaction,” he says. “You, the recipient, are being given something and that affects the nature of the relationship. Now, with our approach, you are an important part of the economy—a customer—and this institution wants to sell you a product. You know that if you’re not happy, you can take your business somewhere else. You have status. You matter.”
Asha Impact invests in a variety of businesses that have impact. Examples include Janaadhar, an affordable housing developer; Greenway, a manufacturer of biomass burners; Varthana, a lender to schools that caters to low-income families; and Vasthu, a mortgage provider for the purchase of affordable homes.
A native of Mumbai and graduate of University of Mumbai, Gandhi started his career with an unparalleled introduction to business, working as executive assistant to Ratan Tata (AMP 71, 1975), chairman of Tata Group, one of India’s largest conglomerates. With Tata’s support, Gandhi started the Indian chapter of AIESEC, a nonprofit organization that helps young people learn leadership skills through global internships and volunteer exchange experiences. It was through his experiences with the Tata Group and AIESEC that Gandhi became interested in attending HBS.
When he arrived in 1987, HBS was very different than it is today. “There were four people in my entire class of 900 who were actually from India,” he recalls. In the end, his biggest challenge wasn’t the culture, but rather the weather. Even today, Gandhi shivers a little when he talks about “crossing that darn bridge in the middle of winter.”
Just as bracing to him, however, was the HBS attitude of being able to do anything you set your mind to. Although Gandhi drew on his finance background when conceiving Asha and VSG, he says it was his experience at HBS that gave him the foundation he needed to do that.
“At HBS, they talked about different models for development and how we come to use business principles to make things happen,” says Gandhi, who is developing and will teach a course on impact investing to MBA and Executive Education students this fall. “I think there were some seeds sewn in that regard. I have come full circle now.”
Class of MBA 1989, Section H