Invested in change: Frontier Markets

We focus on a social enterprise with an implicit gender lens, and speak with two of the investors about their experience and decision making process in this and other gender lens investments. 

Today’s enterprise is Frontier Markets, a social enterprise that provides clean energy products, and last mile distribution of those products, to bottom of the pyramid (BOP) communities in rural India. While both men and women benefit from their clean cookstoves to solar torches, women are often employed to drive sales and provide customer service in the community, and so play a crucial role in the supply chain. 

Audrey Selian, Rianta Capital Zurich

What prompted your decision to invest in Frontier Markets? Tell us about your involvement with the company.
We recommended an investment to the trust we serve in Frontier Markets not because it was explicitly woman-led, but because of the mandate it fulfills in terms of provision of last mile service around a set of key energy products in India. We are a multi-round investor in the company and sit on the board, which happens to be all female right now.
Are you aware of how women and girls are affected by the work Frontier Markets does - and was that a consideration in your investment?
Yes, it is a natural component of nearly all the businesses we look at in India that women comprise some key part of after-sales service, financing configurations, and outreach at the last mile in peri-urban or rural parts of India.  On the other side of the equation, women are also the ‘discerning’ customer that stands at the gateways of the Bottom of the Pyramid, writ large – so it is to them that we must appeal with various products and services for the poor. It is an immutable fact about what works in the landscape.
Are there any insights or lessons you could share for investors starting out on their gender lens investing journey, around how to diligence or see women and girls in potential investments?
We now incorporate a gender lens due diligence module in our Artha platform that helps us tease out and more deeply understand the implications and role of women in the companies we support. I think if you are trying to access businesses that offer sustainable solutions to poverty, women and girls are absolutely key to ascertaining whether something is going to work or not. 

If you are trying to access businesses that offer sustainable solutions to poverty, women and girls are absolutely key to ascertaining whether something is going to work or not.
— Audrey Selian

One thing we find interesting and look for now are businesses that are able to incorporate equity or shareholding-type arrangements for women who comprise a key part of local production and supply chains.

Without the self-help group movement in India as the backbone upon which end-user finance has been constructed and developed, a majority of the socents that we see working wouldn’t stand a chance of survival.  Women as the ultimate household consumer – as in all markets – are also critical; they discern, they seek value for money, and they test and flex the practical aspects of any solution, be it water, energy, agri, or other.  

Eva Yahzari, CEO, Beyond Capital Fund

Could you give us a quick background into your investor journey, specifically around gender lens investing?

I have a finance background and in 2009 when my husband and I got married we decided to use our professional expertise to establish an entity which was philanthropic in nature but was also sustainable. And to really focus on supporting social enterprises as the core group through investment rather than grants. We didn't set out to have a gender lens - we felt that the work that we were doing would inherently have an impact on women and girls in the sense that our investments provide access to basic goods and services such as healthcare, clean water sanitation, energy access and also agriculture-related tools and innovations for the bottom of the pyramid.
We felt that this approach would be a good angle to tackle the gender issues that we perceived, but we decided not to explicitly look at female-run social enterprises or only companies that impacted the lives of women and girls.
What we are investing in is almost 90% overlapping with the work of Women Effect. I was a mentor for the Spring Accelerator and ended up being a mentor for one company that was already in our deal pipeline, called Sanivation. That business is not explicitly targeting women as their customers it just happens to have an impact on women by providing clean sanitation [for more on the gender lens aspect of sanitation and clean water, see this piece by’s Alix Lebec].

How did you first become aware of where women and girls stood in the overall picture?

Understanding the characteristics of a rural family across India and East Africa is not straightforward. But there are certain conventions, especially in India where I know the context quite well. Women are really the ones doing the heavy lifting not only in terms of the housework but also working in the farms for many hours during the day. Sanitation is a core issue that I know poses instability for the lives of women in the developing world. Safety is one major issue and there are also the consequences of water borne illnesses and missing their family and work responsibilities due to a lack of clean sanitation. Elsewhere, in East Africa women are spending a lot of time collecting fuel. Sanivation, although it's not an investment in our portfolio, is one company that is tackling many angles of a woman's life that can be stifled from education or generating income overall.

What can you tell us about your decision process investing in Frontier Markets? What appealed to you as an investor?

Make sure the capital is placed very carefully and the resulting investment results will proliferate the gender lens investment movement
— Eva Yahzari

We looked at a dozen renewable energy businesses, specifically many pure play solar companies for a 12 month period in 2012. We didn't find that any one company provided the overall access to renewables that we were looking to invest in. We also discerned too much technology risk with a pure play approach. What we found compelling about Frontier Markets was the multi product platform, the emphasis on distribution, and the impact of getting the products directly to rural consumers.
Thinking with a gender lens investing mindset, we loved the company’s CEO Ajaita Shah, her drive, her tenacity and her sheer energy. Following our first Board of Directors call with Ajaita, one of our board said 'we need to double what we're going to invest because she is amazing.' In addition to the company’s strong ability to execute, that says a lot.
Frontier Markets was really trying to get off its feet when we invested and did not yet have the solar saheli program fully running, which they've now developed significantly and are raising money for. This program has become an extra layer of impact for our investment, wherein we were funding global access to energy in rural areas and now female employment. We love businesses that have different layers of social impact. We view Frontier Market’s layers to be both access to the energy products but also micro-entrepreneurship. I also serve on the all-female board at that company which is a milestone in itself in India. 

Any final insights or lessons for investors who may be less experienced in this area?

There is no shortage of enthusiasm around social causes. My words of caution would be to make sure that the gender lens story is sound and investors should deploy capital based on hard facts, and companies that are going to win. Make sure the capital is placed very carefully and the resulting investment results will proliferate the gender lens investment movement. As an investor I always zero in on being judicious, on being strong in my due diligence efforts and having strong convictions regarding where capital is being deployed.