Royston Braganza
Royston joined Grameen Capital in 2007 to launch the organization as CEO. He currently oversees all aspects of operations in India. Grameen Capital, founded by Grameen Foundation USA, IFMR Trust and Citigroup, is a first of its kind social business enabling Microfinance Institutions and Social Enterprises develop wider access to the capital markets.

SDG Impact Bonds: Funding the Global Goals through coalitions with inclusive businesses

Interview by Susann Tischendorf with Royston Braganza, CEO, Grameen Capital India
South Asia
19. May 2021

First, could you let us know a little bit about the GOAL SDG Impact Bond series and what gap it aims to fill.

In 2018 in New York, while addressing a session at the UN General Assembly, one thing that struck me very hard was the number $30 trillion. That was the size of the gap of SDG financing. With my investment banking hat on, the first thing that I thought was, there’s no way this is going to happen from donor money and grant funds alone. With my Grameen hat on, I said, “What can I do?” We've done this before, we've done it in microfinance, where we challenged conventional wisdom… why don’t we think small instead of thinking big, why don't we just break it up instead of thinking billions and trillions? Everyone wanted to do big deals – impact bonds of $100 million or more. And I wondered, “Can we do €1 million bonds for hundreds of them?” Keep it small, keep it material to the bottom of the pyramid.

We also noticed another interesting trend happening globally - a movement towards “pay for success.” The world has moved in the last decade from paying for input, to paying for output, to now paying for outcomes. In line with this, the world was already trying out impact bonds including Social Impact Bonds and Development Impact Bonds, but they were taking two to three years on an average to get a bond done. In the social sector where I come from, anything that takes two to three years is a crime when you're working with vulnerable populations, because there is a real risk - they may not last that long. We decided that instead of three years, we would do it in three months. Not the first (and hopefully not the last) audacious “goal” we set for ourselves. Interestingly, we called our innovative product offering SDG Impact Bonds GOAL – Grameen Outcome Accelerated Lending. We provided initial capital to implementing partners - inclusive businesses / social enterprises - and mutually agreed on impact milestones while providing them financing, and then we searched for outcome investors when the project was already underway.

Forming this new special coalition with an SDG impact focus, what was crucial in making it work efficiently at this time?

Well, I think what we did differently was that our company focused on lending to inclusive businesses and set up a separate pool of capital for lending to those enterprises – initially from our own balance-sheet. We decided to be the risk investors for the initial stage of the pilot. So we saw our journey as having three phases. The first phase, even though it's called an impact bond, it's not a classic bond because we are the ones providing the loan to the entrepreneurs. In the second phase, we said we will do €10 million Euro bonds. At that stage, we will still put a million dollars of credit facilities but we will bring in a few other social investors as co-investors. And in the third phase, we will do a €100 million bond. And then we will list it on a social stock exchange, for which collaboration with the government is underway in developing the same. I think what's really different is our bite-sized approach.


two men holding a document
Image courtesy of Grameen Capital

In terms of choosing the inclusive businesses that you're working with, was there competition among them, and how did you make the selection?

Here, the SDGs came to our assistance because they are very well-categorized in sectors. We have good visibility of each of the sub segments and the social enterprises included within those segments. We had to find businesses who were also buying into the vision, because we didn't have the upfront commitment of outcome funders. If they didn't find outcome funders, they would have to pay it up. So to that extent it was a leap of faith. At the same time, if it worked out, you can imagine how hugely beneficial it was to the enterprise because if it was a for-profit social enterprise, if they met all the outcomes and we found an outcome funder together, that outcome funder would incentivize them with the full interest amount.

So the point is not so much having to pick the best names, but it's important that we can showcase the diversity of business models within each SDG Goal. There's a lot of work and this requires a lot of knowledge of the bottom of the pyramid and engaging with social enterprises. We really enjoy that.

To what extent do you think that this project of yours with this focus on inclusive business and also the SDGs helps to scale other inclusive businesses? Does it?

What we're doing is not just financing social enterprises. What we're doing is bringing to the forefront - to mainstream investors, to governments, to corporates - more opportunities and proving that if you fund social enterprises there are huge social and commercial benefits, much like microfinance. The capital markets want big ticket sizes. So unless we showcase something worth their while, they will not really pay attention to it. And so what we're trying to do is much bigger than just us or the handful of enterprises that we're putting into a bond. We're saying, this is a product that can scale as well. We want a product that scales so then we can put it on a social stock exchange, not only in India but globally on stock exchanges and alternative exchanges – London, Luxembourg, Singapore - focusing on sustainability. Really moving the needle globally.

And we have taken the first few baby steps, but significant ones nevertheless; within three months of announcing this initiative in September 2018, we completed the first SDG impact bonds for SDG 5 and within three months we did another on livelihoods and skilling. We created another one focused on SDG7 on clean energy, and then we worked on two Covid-19 impact bonds when the pandemic hit in 2020.

There is now interest in this model from all over the world. For example, from Argentina on empowering women in the rainforest region, to Nigeria in the health space, to South Africa in agriculture, to working with Maori women on community initiatives, there so much interest.

My dream is to create a globalized bond; probably a South-South SDG 5 & 7 Impact Bond on women’s empowerment towards building sustainable communities.

Indian women sitting in a room
Image courtesy of Grameen Capital

What do you really see as the power in coalitions, like the one you formed and you want to form to really reimagine sustainable business?

The world is talking about building back better. I think, can we build back better, cleaner, greener and more inclusive because that encompasses all the SDGs. We’re talking in terms of really supporting the whole regeneration of the economy; multiple stakeholders coming together. We're saying you can be outcome funders, you can be an impact investor, you can be a social enterprise / inclusive business… there are multiple roles available; that's the beauty of the SDG impact bonds. We can actually go to global corporations, to the United Nations, to the government, to banks, to high-net worth individuals, family offices, etc. and say, “What are your focus areas?” Some companies are only interested in one particular SDG, for example.

You mentioned the pandemic. Do you think that this global crisis has made it easier to advocate for these coalitions because of the problems that people are facing so much more, also at the community level?

The pandemic has made a huge difference. I think the pandemic has brought into sharp focus the need for resilience and the need for really supporting our inclusive businesses, as they are the first business casualties. So how would one balance the fight against Covid with meeting the SDGs? To my mind, the SDG impact bonds are one of the ways to do that. We are empowering small enterprises, but we're also creating a network of people there to say, “How can we support you in the fight against the pandemic?” That’s what our Covid Impact Bond did, working on reskilling women artisans and equipping and training them to make masks and other Covid-related products.

I'm assuming that you see that there are a lot of other coalitions being formed. What value do you see in these new platforms and coalitions?

I think the challenge with a large coalition with large entities is that they need to connect with the bottom of the pyramid. So if they're trying to reinvent the wheel then it may take time, which is sub-optimal given the urgency all around us. Therefore a coalition of coalitions or a collaboration of coalitions is critical. You need someone that's connecting different coalitions and saying, “This is what I can bring to the table. This is what you can bring to the table. Let's work together.” We are not going to be successful if we don't do something dramatically different. The line comes to mind: “There are decades in which nothing happens, and there are weeks in which decades happen.” We are living in those weeks. Let’s be part of the solution.