Enabling Stakeholders to Take Purposeful Action for Large-Scale Social Impact

Enabling Stakeholders to Take Purposeful Action for Large-Scale Social Impact

“Beyond CSR, we believe in companies integrating social responsibility into their business practices. We have developed the Responsible Corporate Citizenship Continuum (RCCC) to articulate the role of the private sector in society and to provide companies with a framework to conceive human rights and social and environmental responsibility in their business practices as well as CSR.”

Priya Naik, Founder and CEO, Samhita Social Ventures is interviewed by CSR Mandate where she shares Samhita’s strategies and learnings over the last 10 years while collaborating with a variety of stakeholder such as companies, social enterprises, NGOs, governments, multilaterals and donors. Samhita has curated a number of collaborative platforms to address challenges such as gender inequality, water and sanitation and sustainable livelihoods, with each contributing stakeholder honing their core competencies to collectively create significant impact. In response to COVID, Samhita set up the India Protectors Alliance (IPA) to provide support and equipment to India’s frontline health care and sanitation workers, and REVIVE to pave the path for sustainable recovery of jobs and livelihoods by providing financial and technical assistance.

Frequently Asked Questions: Compliance & The Returnable Grant

Frequently Asked Questions: Compliance & The Returnable Grant

Returnable Grants (RGs) have emerged as a transformative financial instrument, driving economic empowerment and livelihood for vulnerable communities.

A Returnable Grant (RG) provides short-term, affordable, and flexible capital (zero interest and zero collateral) to individuals and entrepreneurs. The RG levies individuals with a moral (and not legal) obligation to repay.

Organisations such as Godrej, S&P Global, 360 One, Michael Susan, and Dell Foundation have embraced RGs as a central component of their projects aimed at supporting financial inclusion and livelihoods of informal workers, microentrepreneurs, farmers, artisans, and beauty entrepreneurs, and have seen its transformative impact through increased financial knowledge, increased incomes, and access to new skills and jobs.

This blog addresses frequently asked questions on compliance of Returnable Grants.

Here’s how it works

Donors who are interested in adopting Returnable Grants as a feature in their projects onboard a technical partner (Collective Good Foundation), who designs and structures the returnable grant, provides performance management support, and identifies the donor’s choice of recipients.

The criteria for selection are as follows:

  • First-time participants who are in need of capital, also known as ‘New to Credit’ or NTC, and can be introduced to the credit ecosystem through the returnable grants model
  • Potential ability of selected participants to repay as a cohort
  • Existing engagement or relationship with non-profit partners, to understand if the Returnable Grant can be a good layer on other interventions

Where does the Money Go?

Returnable Grants allow money to be directly credited into the  beneficiaryaccounts or given out as cash equivalents such as vouchers. This process is supported by non-profit organisations or non-banking financial company (NBFC) partners. Once a returnable grant is repaid, it is circulated back into the repayment ecosystem to support additional participants with similar needs.Returnable Grant Fund Flow

 

What are the FCRA/CSR norms, and how does it apply to organizations (donor and non-profits) using the RG model?

Compliance from an FCRA lens

What is the FCRA, and how does it apply to organizations using the RG model?

  • The FCRA is a regulatory framework that aims to regulate foreign contributions for economic and social programs.
  • This applies to foreign funds from foreign donors (foundations, bilateral agencies, multilateral agencies, HNIs, etc.)
  • RGs, designed within the FCRA guidelines, fall within the ambit of an economic and social program under Section 11(1) of the FCRA, 2010. This ensures the utilization of funds aligns with the intended purpose.

How does the RG model comply with FCRA regulations?

  • RGs are implemented through trusted partners, such as Non-Banking Financial Companies (NBFCs).
  • These partners distribute the funds to selected participants, who repay the partners instead of repatriating the money to the original funders.
  • This continuous circulation within the beneficiary ecosystem maximizes outreach and impact while complying with the FCRA guidelines.
  • Funds given by CGF (registered under FCRA) to the beneficiary Is not considered as sub-granting under FCRA as amended In September 2020.
  • Also, the NBFC Is simply the channel for transfer of FCRA funds to the beneficiaries Bank Account

Compliance from a CSR lens

CSR regulations apply to corporates registered under the Indian Companies Act.

How do RGs align with CSR regulations?

  • RGs can be categorized under Schedule VII of the Companies Act, 2013, which outlines eligible CSR activities.
  • By deploying RGs for approved initiatives, organizations fulfil their CSR expenditure obligations and contribute to social impact.

How is the utilization of RG funds tracked to ensure CSR compliance?

  • Once RG funds are received by the first set of beneficiaries, they are deemed to be utilized, satisfying the company’s CSR obligation.
  • As participants repay the funds, they are recirculated within the participant ecosystem and tracked to ensure compliance with CSR regulations. The recirculation within the beneficiary ecosystem Is purely a value added advantage of this model.

Common compliance:

  • Once the first round of RGs are disbursed, funds are recorded as utilised for the project – fulfilling FCRA and CSR regulations
  • Repaid funds are given to other deserving participants within the eco-system. Money is never returned to the donor and continues to rotate in the participant ecosystem until all funds are utilized.
  • Alternatively, at the end of a certain period, the donor can choose to spend the money as a grant for aligned activities, compliant with CSR and FCRA norms
  • Donors can choose to receive updates and impact reports until all funds are exhausted

 

What are some key considerations for non-profits using the RG model to ensure compliance with CSR regulations?

  • Adhering to FCRA guidelines when utilizing foreign funds for RGs.
  • Aligning RG activities with the approved categories in Schedule VII of the Companies Act, 2013.
  • Ensuring beneficiaries receive the funds in their designated bank accounts.
  • Verifying that the funds are used for specific business use cases and not for activities prohibited by law.

Are Indian not for profits typically tax exempt? Who are the secondary recipients who can recover and redeploy Returnable Grants

  • Yes, Indian non-profits are tax exempt.
  • Secondary recipients can only be not for profits, or designated intermediaries on behalf of the NGOs such as NBFCs (Non Banking Financial Corporations)

What are the factors affecting the returnability of a Returnable Grant?

  • The timeline of a Returnable Grant depends on nature and requirement of the cohort.
  • It may be returned during any time period – from a few months or within a few years – depending on the size of Returnable Grant, nature of cohorts and changed field conditions.

Are there any restrictions on the use of RG funds for CSR activities, and if so, what are they?

  • While there are no specific restrictions, organizations must ensure that the utilization of RG funds aligns with approved CSR activities as per Schedule VII of the Companies Act, 2013.

What reporting and monitoring requirements are associated with the use of RG funds for FCRA/CSR activities?

  • Organizations must maintain proper records of fund utilization, prepare periodic reports, and ensure transparency in reporting.

Returnable grants (RGs) provide a compliant and transformative approach for donors and non-governmental organizations (NGOs) to create sustainable impact in communities they service. By embracing RGs, donors can unlock greater financial resources to drive economic empowerment and improve livelihoods for vulnerable individuals and entrepreneurs. The unique design of RGs instils a sense of responsibility and empowerment among recipients, fostering a culture of self-sufficiency and long-term success.

Through the adoption of RGs, donors and NGOs have a powerful tool to effect long term positive change with vulnerable and at-risk communities.

The most vulnerable dictate the strength of our value chains

The most vulnerable dictate the strength of our value chains

COVID-19 has exposed the weakest links in our supply chains, the largest impact of which has been felt by the poor. As we rebuild rural livelihoods, we need to innovate towards decentralisation, write Harish Hande and Jeffrey Prins in India Development Review (IDR).

While we take a fresh look at how we innovate in value chains, they need to be understood from the perspective of the most vulnerable.

Are healthcare facilities accessible to India’s tribals?

Are healthcare facilities accessible to India’s tribals?

“India no longer has the luxury of continuing to wait and watch as millions of its tribal peoples suffer and die from preventable causes.”

There is a much higher incidence of maternal and under-five mortality, stuntedness, tuberculosis, and cardiovascular diseases among India’s 104 million tribals compared with the larger population.

Piramal Swasthya and The Bridgespan Group map out the reasons for the lack of reduction of health challenges in tribal areas based on their field studies.

They outline factors such as barriers in access to healthcare and information, insufficient number of public health facilities, and lack of data.

They stress that for scalable and population-wide impact to be achieved, especially to meet India’s national aspirations of Sustainable Development goals of health and well being- a focused and collaborative approach between all stakeholders of society is the only way forward.

Innovative lending practices can improve traditional microfinance

Innovative lending practices can improve traditional microfinance

Research on the traditional microfinance model reveals the alterations that can be made to further small businesses and welfare gains. Vikas Dimble, Associate Director of Knowledge and Research at Samhita, and Ahmed Moshfiq Mobarak, Professor of Economics at Yale University emphasize the importance of flexible lending models, using local information to select eligible beneficiaries and allowing beneficiaries to make use of microcredit beyond entrepreneurial purposes.

The key to COVID-19 prevention in slums

The key to COVID-19 prevention in slums

Slums across India have been disproportionately affected by the COVID-19 crisis. 42% of Mumbai’s population lives in slums and therefore they require carefully planned measures to ensure that preventative and primary care remain accessible.

The Bridgespan Group and WHO emphasise that community participation is the key to implement any COVID-19 preventive interventions in the slums.

This is as a model of care, designed while incorporating community participation is more likely to be accepted and effective in the long-term. To elaborate on the practicality of their recommendation, they describe activities where communities have been engaged and relay how this principle helped the programs in Mumbai slums.

Protecting human capital to emerge from the crisis

Protecting human capital to emerge from the crisis

Corporate leaders recommend fortified social security provisions for gig economy workers. Business leaders called for reimagined approaches to social security and employer-employee relationships in the gig economy in light of the gaps that the COVID-19 crisis has revealed.