EM3 Agricultural Services works at the muddy end of India’s ongoing story of economic growth. The company was founded in 2014 to provide smallholder farmers in India with access to mechanized equipment—not by selling it to them, but renting it, on demand, by the hour, through a platform that links them with equipment owners.
The economic challenges faced by smallholder farmers in India mirror the economic injustices faced by billions of the poor and marginalized around the world—largely forgotten, or exploited, by the private sector, and sidelined by policy choices designed to promote big business. But not necessarily. Less than a year after testing the “Uber for tractors” concept, EM3’s owners turned for growth capital to Aspada, an investment fund set up in 2013 with a particular focus on, among other things, sectors of the Indian economy that were then largely ignored by mainstream investors.
Aspada had itself just been established by the Soros Economic Development Fund, the impact investing arm of the Open Society Foundations. Managed by a talented local team, Aspada sought out businesses that benefit the almost 500 million Indians who are living above the poverty line, but who are not part of the wealthier urban elites. Because of its mission to deliver positive social, economic, and environmental impact, it was prepared to accept higher levels of risk than a conventional investor, over a longer time period, and work with them to develop their business models.
In the case of EM3, Aspada’s investment led to further growth, which then attracted new, more mainstream investors. And in the fields, where a farmer’s plot of land may be four acres or less, the pay-by-the-hour machinery delivered productivity increases of around 20 percent for thousands of farmers, and secured the support of the state government of Rajasthan for a network of over 1,000 rental centers across the state.
Aspada invested in other businesses serving the needs of smallholder farmers, as well as businesses in other sectors. It financed Be Well Hospitals, which runs affordable, high quality health clinics offering affordable access to private medical care. It invested in Capital Float, which provides short-term working capital finance to small businesses without hard assets to use as collateral.
Altogether, by investing some $70 million in 17 such businesses, over the last six years, Aspada has not only impacted the lives of millions, but has shown the way for over $400 million of additional investment into its portfolio companies from global investors such as Sequoia Capital, Google, Ribbit Capital, OPIC, and Amazon, alongside numerous other local and international investors. It is exactly this kind of catalytic effect that Open Society seeks to achieve with its impact investment work.