What are the challenges that you face while investing in businesses catering to low income markets?
Access to finance is the key. For businesses which require franchisees for distribution, for example, there is the problem of a lack of finance. It’s not that a franchisee in a small town is not bankable, it’s just that we don’t have a credit history, so things like these are challenges for these businesses to scale up. Second challenge is that a lot of these business do not have access to collaterals when they want to raise debt. Uncollateralised debt from the market costs them some 18% interest which is a huge challenge for their growth. And being a foreign investor, you cannot bring debt to India easily because of the strict ECB (external commercial borrowings) regulations. So at the firm level, companies require patient capital and patient debt at about 6-8% interest rate. Even though there are funds like Acumen that are willing to provide it, the regulatory environment does not permit us, so that’s a significant challenge. We do come across these challenges but we have a very clea
