Indian Billionaire to Invest in Social Enterprise

SKS Microfinance's initial public offering (IPO) on the National Stock Exchange of India in August raised over $350 million for the company. One of the chief benefactors of the IPO was Vinod Khosla, the self made billionaire co-founder of Sun Microsystems who clocked in at 880th place on Forbes' most recent list of the planet's richest people.

SKS's IPO netted Khosla, who invested in the microfinance firm a few years ago, about $117 million. Now Khosla plans to start a venture capital fund that will be used to reinvest his returns into Indian enterprises that are fighting poverty while turning a profit. The fund should prove to be a tremendous boon to Indian social enterprise.

Khosla also seeks to change the culture of philanthropy in India by encouraging his fellow Indians to give more. India's economic growth over the last decade has brought unprecedented wealth to the country - Forbes estimates that no less than 69 billionaires hail from India, a dramatic increase from just seven in 2000.

But growth has not been evenly distributed. It is estimated that a full one-third of the world's poor call India home, with 42% of the country's inhabitants falling below the international poverty line of US$1.25 per day.

Although there's more money in India, philanthropic giving has been slow to catch on. A recent study by Bain & Company estimates that Indians' charitable giving accounts for a much smaller percentage of their country's GDP than Americans'. Furthermore, individual and corporate donations account for only 10 percent of all charitable giving in India, a paltry figure compared with 75 percent in the United States.

Bill Gates and Warren Buffet have announced that they may travel to India as part of their campaign to convince the very rich to give away half their wealth.

Khosla, 55, who moved from India to the U.S. as a graduate student in 1976, plans to use his philanthropic example to encourage other wealthy Indians to become angel investors and philanthropists. "It surprises me that in India there is not a tradition of large-scale giving and helping to solve social problems and set a social model," Mr. Khosla said.

Samit Ghosh, the chief executive of microfinancier Ujjivan Financial, said that rich Indians "are more into temple building and things like that, rather than putting their money into real programs, which will have real impact on poverty alleviation."

Efforts from people like Gates, Buffett, Khosla and Ghosh should begin to encourage wealthy Indians to begin to give back. Social enterprise practitioners would be wise to follow Khosla's activities in the coming months as his social investment fund begins to make capital ventures.