Indonesia has all the elements of an impact investing market poised for growth: An active small and medium-sized business market. Tech-driven innovation. Significant unmet social needs. And Southeast Asia’s largest economy.
That made it a natural fit for the Sankalp Southeast Asia Summit in Jakarta this week. The third annual event is produced by Intellecap, the India-based business advisor with an increasingly global presence.
Intellecap is in the impact market-building business. Earlier this year, Intellecap won a GSG Honor for Market Builder of the Year from the Global Impact Investing Steering Group for its impact ecosystem building efforts in South and Southeast Asia and sub-Saharan Africa.
ImpactAlpha sat down with Intellecap’s CEO, Nisha Dutt at the beginning of the Jakarta confab of impact investors, entrepreneurs and other stakeholders plotting to scale impact activity across Southeast Asia. Dutt, who has led the social venture advisory firm since 2015, thinks scaling impact in Indonesia might easier than in India.
Intellecap: Building businesses for the next three billion middle-class consumers
At the summit, Indonesian peer-to-peer microlender Amartha took first place in the Sankalp Awards, receiving $20,000 USD, networking, capacity building and mentorship opportunities. Runners up included EnerGaia, a Thai startup that harvests spirulina growers in underutilized urban areas and MyCash, a Malaysian enterprise that delivers simple online banking and payment systems for migrant workers.
ImpactAlpha will have more on these and other startup entrepreneurs at Sankalp. But first, some excerpts of my interview with Nisha Dutt.
Q. You’ve been holding the Sankalp Forum for three years now. What kinds of changes are you seeing in the connections between entrepreneurs, investors and other stakeholders?
Dutt: We are working in India and Africa. For us, Indonesia was a logical progression. If you have something, have the makings of a system, we can come and make an ecosystem. If you don’t have anything like that it can be very difficult for us.
In Indonesia we saw there were things that were already present and we just had to bring it together. I had thought there was almost an absence of the whole impact discourse from the lexicon of Indonesia, completely. They would talk about SMEs but not necessarily about social entrepreneurship or impact entrepreneurship. I think today these are words that are recognized. It is recognized that there are business opportunities and if it is something you can do, and do well, and you can do good. We are seeing a lot more people that are a lot more excited about building a business that can do good. It’s more intentional, I would say.
The other thing we are seeing is more capital, actually. We are seeing a lot more investment in the enterprises. It almost took us 18 months to find the first one, but now we find them a lot more. There’s some momentum that has gotten built. We have three investments already to a total of about $8 million, and we are looking to deploy more capital and we are finding that capital deployment is becoming easier.
Q. What are the streams of some of those investments? Are some of them also coming out of Indonesia itself?
Dutt: It is coming out of Indonesia. The ones that we have made have been in fisheries and agriculture areas. Those are the areas that we have found investments. If I just want to look at some of the finalists we had this year and we have health care, we have financial services, climate change, even tourism.
Q. What kinds of difficulties are there investing in these companies in Indonesia, which has some restrictions on capital within some industries?
Dutt: Some sectors we can’t invest in, but the ones that we are interested in we haven’t had trouble. The only difficulty in some of the geographies might be where will the exit come from later? We believe that unless we can ramp up some of this interest and get a lot more private equity coming in, we might not be able to get an exit. I think that probably is one of the concerns and challenges.
Q. Here we are in Indonesia, can you talk about some of the interesting things you are seeing develop here?
Dutt: What is very different, certainly from India, we are seeing that it is a lot more tech-driven. In India you still see a lot of businesses that are more traditional, very brick-and-mortar, very traditional business models. What we are seeing in Indonesia is a lot more technology. We are seeing how people are using technology for fisheries, using technology for ag. Every enterprise we talk to is using a lot more technology, which I think is hugely different for us, and in some ways it is actually better because scale becomes a little bit easier. Other things are quite similar, the challenges are similar, these shared challenges of emerging economies.
Q. How have you been tracking the impact over these three years?
Dutt: I can’t say that we’ve been able to, in terms of numbers, all I can say is how many people we’ve convened. For instance we’ve been able to convene 1,500 people. We’ve been able to catalyze investments. We’ve been able to work with about 250 entrepreneurs. I can say those are some things that we’ve been able to do. Impact itself takes much longer. I can’t say that we have any impact numbers yet.
Q. It is a long process.
Dutt: It is a long process and right now I can only say, ‘We’ve done all this’ … It is evident that there is certainly more capital, there is certainly more investment, but what is that investment doing and the impact on that enterprise, it is too early to say.
Q. Are you working elsewhere in Southeast Asia?
Dutt: Just in Indonesia, but if you look at our finalists we have finalists from Myanmar, Malaysia, so we have quite a few countries covered. But our work is very centered here. We are serving the region from here.
Q. What are some of the needs that those entrepreneurs, what are their main needs at the moment to get to the next level?
Dutt: I think entrepreneurs need three things. You need knowledge: a problem you want to solve, what are the best solutions you can latch onto. The second is capital enablement is very critical, because without capital you can have the best idea but you have nowhere to go. The third thing for us is network, which is what Sankalp is really about. You may have the best idea and you may have the capital, but what if people don’t know what you are doing. You can’t discover partnerships and really see who you are. I think all three are needed. Knowledge. Capital. Networks.
Q. With the UN Sustainable Development Goals meetings going on in New York right now, how do those discussions translate to the region, as far as you can see, in the use of them as metrics of ways for moving things forward?
Dutt: They are very much goalposts to aim towards. I think the SDGs have huge momentum. In all of our emerging markets we have seen people have latched onto those 17 goals and breaking them down into several metrics. Governments are keen on it, private sector is working very actively. We have been in conversations with corporates in Indonesia that are asking us ‘How can my work contribute to that SDG?’ … so I have seen people working on the water aspect, working on poverty, climate change. The momentum is quite unprecedented. I have not seen this momentum before. We are seeing it in private sector conversations and in government conversations.
For instance in India, the momentum is huge around water, huge momentum around waste management. In Indonesia there is more momentum around agriculture. So you are seeing that not everything is getting addressed evenly.
Q. One last question. We are increasingly at a technological crossroads, where artificial intelligence and these other technologies are becoming so powerful and transforming, but there are also dangers that they will displace people, where people will lose jobs. Driverless cars, automation and these things. How are you looking at these issues when you approach some of your investments?
Dutt: Very actively. One of the biggest conversations we are having internally is the future of work. What is the future of work going to look like and what industries are going to get displaced first? I think at least our effort is to have a two- or three-pronged conversation. One definitely looking at what skills are needed. How do you up-skill a whole generation of people who are going to be redundant.? We know manufacturing will go. We know there are some jobs that may become redundant rather quickly. What skills are needed in the next century? That’s one thing that is very pressing on all of our minds.
In investments we obviously want to see if the investment is in an area that is under threat of being wiped out by this. Obviously it is discouraging from an investment perspective. We are also debating about, there’s been a lot of noise about UBI, universal basic income. Is that such a great idea? Is it a good idea for emerging markets? Or should we just stay away from it? People are coming down on both sides of the issue. Certainly an area that is worth debating for emerging markets. There is going to be social unrest that will come with some of these problems, so how should policy address it? I think all these things need debate and discussion. They are definitely weighing on our investment decisions.
Intellecap: Building businesses for the next three billion middle-class consumers