Samhita’s THRIVE initiative addresses the critical challenge of growth and digital transformation for India’s micro, small and medium-sized enterprises (MSMEs). Through a collaborative network of public, private and financial organisations, THRIVE aims to empower 10 million entrepreneurs and workers by 2030. Its innovative solutions demonstrate how partnerships can tackle complex socioeconomic issues.
MSMEs in India struggle to access finance and other business support services, which has hampered their growth and stalled inclusive development in the world’s most populous country. For example, only 14% of all MSMEs have access to formal credit currently, with 92% of women-owned MSMEs operating informally and unable to access formal financing.
The International Finance Corporation estimates that nearly 60% of credit demand from microenterprises and 70% from small enterprises remains unmet by formal financial institutions. In fact, a large majority of MSMEs form part of the ‘unorganised’ sector of the economy and are new to credit (NTC), which means they are ‘high risk’ to formal financial institutions.
Samhita is an impact consulting firm based in India. In 2023 it collaborated with its nonprofit wing Collective Good Foundation (CGF) to launch the THRIVE initiative. The collaborative venture, involves public, philanthropic, corporate and financial organisations It aims to improve outcomes for 10 million entrepreneurs and workers by 2030.
THRIVE’s key objectives are to:
- Provide a holistic suite of interventions to microentrepreneurs, including access to credit, financial literacy, digital skills, market linkages and entrepreneurship development
- Develop and scale innovative financial instruments such as returnable grants and credit guarantees to serve NTC borrowers
- Create a pre-credit score (PCS) as a public good to enable financial institutions to better underwrite NTC customers
- Build a sustainable, scalable and replicable model that can support not just 10 million entrepreneurs by 2030, but empower the next 100 million individuals in underserved communities who face similar challenges globally.
The genesis of the collaboration
As a precursor to THRIVE, Samhita formed a coalition with REVIVE Alliance (REVIVE) in 2020 at the height of the Covid-19 pandemic. It provided financial and other capacity-building support to low-income households, which were most severely affected by the pandemic disruptions.
“Early responses from REVIVE’s interventions confirmed our underlying hypothesis that the sector did not want donations, but an opportunity to build their capabilities and provide for increased economic stability for their families – they wanted to be active ‘participants’ in their progress and journey towards economic self-reliance,” says Priya Naik, Founder and CEO of Samhita.
Partners in collaboration to boost entrepreneurs
Forging a multi-intervention pathway for participants to graduate to the world of formal finance and organised sectors of the economy has meant carefully selecting partners that can best support these outcomes.
CSI funders include the 360 ONE Foundation, which provides support in designing and operationalising the financing instruments such as returnable grants and credit guarantees. It also supports the development of PCSs. The 360 ONE Foundation is the CSI arm of 360 ONE, India’s leading wealth and alternates-focused asset management firm.
It also includes the Walmart Foundation, which supports farmers and farmer producer organisations (FPOs) through access to finance and non-financial support. In addition, there are other multiple funders such as Accenture, S&P Global, Bajaj Finserv and Vinati Organics, which support skilling in green jobs and creating climate-resilient farmers.
Government and quasi-government organisations in India play a major role as well. Samhita has partnered with Common Services Centres which has 550 000 centres spread across India and are run by the village-level entrepreneurs (VLEs). These VLEs offer various government services and schemes through such centres.
Samhita is also developing a one-stop registry and accelerator network for informal microentrepreneurs in collaboration with the Credit Guarantee Fund Trust for Micro and Small Enterprises and the Small Industries Development Bank of India (SIDBI), two nodal government agencies for supporting MSMEs in India.
Samhita has also received support from philanthropy and multilateral funders such as the United States Agency for International Development and the Gates Foundation. With the support from the Gates Foundation, specifically, Samhita has collaborated with Open Network for Digital Commerce (ONDC), a nonprofit established by the Department for Promotion of Industry and Internal Trade in India to develop e-commerce for local, informal MSMEs. ONDC is part of the burgeoning digital public infrastructures in India. Samhita is also exploring a partnership with Open Network for Education and Skilling Transformations which supports the delivery of training, jobs and scholarships.
Finally, more than 20 financial institutions are helping to unlock access to credit at scale, with a focus on women in the NTC segment, while a network of more than 75 nonprofits across the country are involved in sourcing participants and delivering interventions (including Mann Deshi, Tisser, the Self-Employed Women’s Association (SEWA), the Digital Empowerment Foundation and others).
Governance and funding
Samhita-CGF executes and delivers outcomes for CSI funders (including 360 ONE Foundation) with the support of all its partners. It has acknowledged experts on its board of trustees and a dedicated network team to incubate and grow the THRIVE network.
CGF initiates formal commitments with all partners through MoUs that outline milestone-based commitments. It had partnered with 26 funders and 78 impact partners by mid-2024.
The collaboration is funded as follows:
- Secretariat funding: Raised from large foundations to forge collaboratives, develop partnerships and create public goods
- Programmatic funding: Raised from donors who fund specific programmes, with a 5% to 10% programme management fee
- Fee-based services (forthcoming): Monetising services to financial institutions and creating sustainable fee-based models on e-commerce work and loan origination and PCSs.
THRIVE operates through a network model, connecting isolated efforts and bringing together private, public, philanthropic and financial sectors through a technology backbone. This approach allows for:
- Unlocking vast amounts of resources through multiple partner contributions
- Creating significant economic value for participants, graduating them from beneficiaries to fee-paying customers
- Ensuring long-term sustainability through multiple philanthropic and revenue models
- Embracing an interoperable and scalable design, enhancing integration capabilities.
THRIVE’s achievements to date
Until 2023, REVIVE impacted 716 000 workers and entrepreneurs, including farmers, artisans, street vendors, beauty entrepreneurs, education entrepreneurs, construction and sanitation workers, truck drivers and owners, and more. Around 70% of these were women. More than 45 000 participants were supported through innovative instruments such as returnable grants, and more than 90% of them have repaid in part or full, although they are not legally obligated to do so as per the design of the instrument. These participants are now eligible for formal loans, thanks to the high repayment rates, ensuring a blended finance continuum.
THRIVE is co-creating PCSs in partnership with some of India’s largest financial institutions as well as the government’s nodal agencies. The scores will enable more than 40 lenders to develop an underwriting mechanism to unlock over a billion dollars in loans for informal and NTC borrowers, particularly women.
In addition, around 150 000 women aged 19 to 29 have been supported with health awareness and access to health products and services, and 10 000 women entrepreneurs have received e-commerce linkages. Credit has been unlocked for almost 10 000 women farmers in rural India.
PCSs as a proxy for formal credit ratings
Developing a first of its kind PCS is just one of the interventions that will make it easier to bring MSMEs into the formal economy over time.
The 360 ONE Foundation is providing programmatic funding to Samhita over three years to support the development of a PCS with SIDBI, banks, non-banking financial companies and credit rating agencies. PCS is an alternate tool which can be adopted as a proxy to formal credit rating by financial institutions to gauge the creditworthiness of NTC participants.
The 360 ONE Foundation provides credit guarantees for loans provided to NTC MSMEs, allowing PCSs to be modelled based on repayment behaviour.
Developing the PCS model meant navigating regulatory complexities, particularly around financial risk and compliance, but THRIVE’s partnership with SIDBI and other financial institutions ensured the model adhered to financial regulations. This made it possible to extend credit to MSMEs while staying within the regulatory framework.
Overcoming challenges
A major challenge that had to be overcome at the outset was designing a financial model that complied with corporate social responsibility (CSR) regulations. CSR is akin to the CSIs and are mandatory contributions that need to be funded from a corporate’s net profits to comply, as per the Indian laws.
CSR requirements often encourage companies to execute projects with quick, tangible outcomes due to the annual cycles of CSR reporting, but THRIVE aimed for a long-term, systemic approach that will affect millions of underserved MSMEs over time. THRIVE therefore had to design a framework aligning with CSR regulations but also supporting long-term goals, such as building financial literacy, developing skills and providing ongoing access to market. The 360 ONE Foundation played a critical role by providing strategic funding and deploying funds in a CSR-compliant way that could unlock additional capital, such as co-funding, capital recycling and commercial loans.
Working with more than 25 funding partners, 75 NGOs and social enterprises, and government and quasi-government institutions has not been without its challenges. Some of the challenges experienced included aligning different funder priorities and timelines, overcoming the problem of less-than-efficient service delivery across India’s diverse geography by partnering with ‘last mile’ service providers, and ensuring two-sided market development by allocating resources with care.
Having the government as part of the collective ensures everything comes together, but government decision-making can be elaborate and evolutionary as there are detailed deliberations at the policy level.
A crucial way to overcome these additional challenges has been to engage in continuous dialogue and advocacy. This is critical because the long-term nature of the initiative requires sustained support. There has been a need to nurture enduring partnerships with preferred partners – but, at the same time, reaching out to other interested funders has helped to further the aims of the collective. “Multi-intervention sequential pathway design” is complex but worthwhile, says Abhishek Gupta, Associate Director, Measurement, Analytics and Products at Samhita, particularly with the right set of on-the-ground partners who are empathetic and able to solve problems creatively.
THRIVE aims to sustain its mission of designing interventions and programmes with sustainable exit opportunities for funders. The focus is on supporting the graduation of participants to the formal economy without the need for additional third-party funding. The initiative also aims to generate evidence and create best practices that can be disseminated across the sector to design scalable interventions.
Advice for companies collaborating for social impact
- Provide participants with choices based on their context and needs, fostering agency and empowerment
- Address the specific needs of women through customised support and focus on enabling women-led collective action
- Create solutions that benefit all ecosystem actors and solve market inefficiencies
- Develop an open network architecture that allows for customisation and interoperability
- Build sustainability into the model from the start, ensuring participant graduation from recipients to active customers and champions.
As THRIVE continues to evolve, it stands as a testament to the power of collaborative action in addressing complex social challenges. By bringing together diverse stakeholders and leveraging innovative financial instruments and technology, the initiative is paving the way for a more inclusive and empowered MSME sector in India, with the potential for global replication.
Innovating blended finance use cases with 360 One Foundation
360 ONE Foundation, in collaboration with Samhita-CGF, SEWA (a women’s collective) and Appreciate (a fintech firm), is driving two impactful projects to promote financial inclusion and livelihood enhancement for under-banked women and small-scale entrepreneurs across India. The first project, based in Gujarat, integrates more than 5 000 unbanked and under-banked women entrepreneurs into the formal credit system by providing PCSs and working capital loans, backed by a 10% first-loss default guarantee, to help these women grow their businesses. The second project spans pan-India, enabling 3 450 small-scale entrepreneurs to serve as business correspondents and facilitators through returnable grants, fostering financial access and inclusion for under-banked populations. Both projects use blended finance as a key tool for empowerment.
Empowering FPOs for climate-resilient farming, with Walmart Foundation
Supported by the Walmart Foundation in the Indian state of Maharashtra, Samhita-CGF addresses the ecosystem-level challenges smallholder farmers face by providing a comprehensive multi-intervention ecosystem approach to enhance income and climate resilience. Maharashtra’s agricultural sector faces deep-rooted inequalities, with 78% of farmers owning less than two hectares of land. Farmers in Maharashtra are grappling with significant agricultural challenges, primarily due to unseasonal rains and hailstorms, which in March 2023 alone damaged over 18 000 hectares of crops, plunging farmers into financial distress. Samhita’s initiative currently empowers 12 FPOs, impacting 10 000 farmers of whom 70% are women, by tackling low working capital through a returnable grants model designed for farmers, along with credit guarantee-backed loans for those needing larger financing. Additionally, the focus is on enhancing farmers’ climate adaptation capacities through climate-resilient training and by providing access to social security schemes. To build the capacities of FPOs, financial support through grants and infrastructural support is provided to FPOs, along with market linkages to secure large buyers for farmers. This initiative is empowering farming communities for a sustainable future.
Read more:
Find out how impactful collaboration can amplify change.
