When SevaYatra was started a fundamental decision was made to let it function in a for profit environment but with very clear social objectives. The basic idea was that we create a model whereby our existence was based on a self sustaining revenue stream that came from services we provided in the social responsibility solutions segment. This would help us expand our reach through the profits we would eventually make and not create an ongoing dependency on donations and grants. A simple approach based on sound business practices that still had the do-good potential.

Common Definition: A social business is a cause driven business and is more commonly defined as a non-loss, non-dividend company. In a social business, the investors/owners can gradually recoup the money invested, but should not take any dividend beyond that point. Purpose of the investment is purely to achieve one or more social objectives through the operation of the company; no personal gain is desired by the investors.

The idea of social businesses while not entirely new was first put forward in a well defined, more accepted way, by Nobel Laureate Muhammad Yunus in his second book "Creating a World Without Poverty." In this book, he establishes the specific ingredients of a social business by laying out what he considers a social business to be or not to be. He offers a comparative analysis with various social entrepreneurial ventures in different countries and thus lays out the legal and financial frameworks required for a social business to thrive.

In his more recent book, Building Social Business, he emphasizes the importance of the impact of business on people and the environment, and not the amount of profit generated.

Is there really a softer side to capitalism?

While there are institutional investors that are making social investments – be it the Acumen Fund or Aavishkar, if one thinks about this from an individual investor’s perspective the following questions come to bear:

-Does an angel investor commonly understand the difference between making a simple one time donation to a nonprofit (and reaping immediately the benefits of a tax deduction), versus making a social investment in a company where you forego the tax deduction for a longer term investment relationship? In the same way as they have buckets for high risk or moderate risk investments and also separately for charitable donations – will social investments eventually find a new bucket for themselves and will conscious investing become part of an individual investors normal framework of investing?

I grappled over the idea of convincing a group of individuals/professionals with a desire to be involved in the social and development sector be motivated to:

-Provide a $15,000-50,000 loan/investment to a social business

-Potentially expect a return “of” and not “on” investment over a defined period of time

-Consider a social investment which allows them to actively track their investment over a period of time likely 4-5 years versus making a one time or annual donation in a non profit

-Collectively define a strategy for reinvestment of profits into the social business for growth and expansion of mission, but also in the creation of new social business ideas to be funded or supported through profits generated beyond those needed for reinvestment

SevaYatra has thus far managed to be a self funded organization in the early stages of its journey. As we prepare for growth the debate around investment vehicles raises some interesting questions. Can a kiva type model work for example to help fund a social business? A model wherein the individual investments are clearly higher than a typical kiva investment but we offer a level of transparency and purpose that can commit an investor for a 4-5 year period at the minimum, to the business in general. Can we in the process create a host of savvy social investors?

Another common debate which is currently ongoing in the microfinance industry is around whether one should allow entrepreneurs and investors to make some return to reward their efforts and risk. As this segment evolves…clearly new definitions and more creative models will emerge.

But if you had $$ to invest or donate today, what path would you more likely chose? Are you really ready to do something different with your own money? 

Sejal Desai