TOKYO — India is fast overtaking countries like Japan and South Korea in creating ways for socially minded entrepreneurs to raise funds from impact investors. The aim is to get more capital to companies that bring social benefits, like education and health care, many of which are thriving.

Indian hospital operator Narayana Health is one of them. While BSE Sensex, the country’s benchmark equity index, has dithered with gains of less than 10% since October, Narayana’s stock has soared over 50%.

The company is considered one of the leading social businesses in India, meaning it grows through contributing to society. Devi Shetty, founder and primary physician for the late Noble Peace Prize Laureate Mother Teresa, keeps a plaque in his office that reads: “The world’s biggest problems are also the world’s biggest business opportunities.”


Known for inexpensive treatment, heart transplants at Narayana hospitals cost a fraction of those performed in the U.S. Since debuting on the Indian stock market in 2016, it has used the proceeds from its initial public offering to buy more beds for impoverished patients. Over the past three years, revenue has jumped 78% and profit threefold.

The Indian economy is slowing due to a credit crunch caused by ailing lenders, with investors shifting their money from stocks highly attuned to economic trends in favor of “defensive” stocks that are more resistant to downturns. With patients still streaming to Narayana hospitals, the company is an attractive option for prudent investors.


The government has a plan to funnel even more investors, especially impact investors, to companies like Narayana. In 2019, it proposed a Social Stock Exchange, which would allow investors to buy shares in social enterprises. The aim was to encourage other companies to imitate Narayana’s successful model.

Devi Shetty, the founder of Narayana Health. (Photo by Takuya Imai)

Preparations are now underway to open the exchange. While listing requirements will likely be easier than in existing stock markets, companies may be required to be highly transparent to be listed. Experts could also be called upon to rate companies’ social contributions.

The SSE is expected to be up and running around the end of 2020 at the earliest.

“We believe there is going to be a lot of money that will move in from India and from the world, looking [to make] an impact,” said Vineet Rai, a Mumbai-based impact investor serving as chairman of Aavishkaar Group and a member of the committee tasked with designing the SSE.

The outstanding balance of global impact investment topped $500 billion at the end of 2018, according to one estimate.

Other countries in the region have recognized the need for a financial entity like the SSE, but have yet to act.

In 2013, the South Korean government engaged in “studies to create a financial market for fostering social enterprises.” It concluded that capital market infrastructure was needed after analyzing the trends in social businesses.

But six years later, there is still no SSE in South Korea. “We couldn’t translate social values, such as job creation, into investment information,” said a person involved in the studies. And investors are reluctant to take on risk before understanding a company’s value.

Yusuke Mizuno, CEO of Life is Tech, worries that IPOs can have drawbacks for social businesses.

In Japan there are companies trying to meet demand for a social market, but the lack of broader financial infrastructure worries entrepreneurs.

Life is Tech, an educational venture founded in 2010, is seeking a “social IPO” to raise a large amount of funds by stressing the social value of its work. The Tokyo-based company has raised 2.5 billion yen ($22.84 million) through three new share issues by quantifying and promoting the social value it creates.

The company teaches programming skills to junior and high school students to improve digital literacy. It has educated about 40,000 students, and also cooperates with municipal governments to revitalize local economies by producing IT-savvy young people.

But founder and CEO Yusuke Mizuno worries that social IPOs can backfire. “If you offer shares to the public, you’ll have shareholders who don’t understand your social mission,” he said. “You may see your corporate philosophy diluted under market pressure.”

A considerable number of socially minded entrepreneurs give up on plans to expand their operations through IPOs, according to Mizuno.

An SSE acts as a dedicated place where social entrepreneurs can raise funds from the market.

The Tokyo Stock Exchange will undergo a major reorganization in 2022, but the current plans do not include a social market.

India’s nominal gross domestic product is set to surpass that of Japan in 2029, according to a forecast from the Japan Center for Economic Research, making it the world’s third-largest economy.

When it comes to creating financial vehicles for companies and markets to engage on social issues, India is already set to emerge as Asia’s front-runner.

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