This document discusses alternative finance sectors that support pro-poor entrepreneur-based innovation by providing flexible finance and integrated support beyond just funding. These alternative sectors invest in equity, offer management support, provide loans for growth entrepreneurs, and set up cooperatives. They finance different types of innovation like solar lights, efficient stoves, and rural hospitals. The results show complementary services create an ecosystem of finance where different innovations need different support. Policy recommendations include enabling innovation, coordinating support through an innovation agency and fund, and building capacity.

1. Innovation in Finance to Finance Innovation: Supporting pro-poor entrepreneur-based innovation Lina Sönne

2. The Entrepreneurship Definition Pro-poor entrepreneur-based innovation Solar lights for street vendors (hawkers) Energy efficient burners and stoves Gathering and processing hides, value addition and manufacturing Vaatsalya: chain of rural hospitals

3. The Finance Problem Conventional Finance: No finance from the core, e.g. Banks -too ‘risky’ No microfinance -too big No venture capital –too small Few government grants

4. The Alternative Finance Sector Aavishkaar: Micro Venture Capital Invests equity and offers management and strategy support BASIX: Livelihood Finance Provider Provides finance for growth entrepreneurs, links farmers with food manufacturers and sets up and supports farmer cooperatives (MACS) S3IDF: Social Merchant Bank Facilitates finance, technology and entrepreneurs for infrastructure CTD: Innovator Constructs business models based on local raw material and skills for poor rural communities Villgro: Incubator Incubates entrepreneurs and inventions

6. The Results (2) What do they do? Flexible finance Provision of finance Period of finance Integrated support beyond provision of finance How do they do it? Innovation in finance to finance Innovation Learning and feedback loops Networks are important Links to mainstream financial system- e.g. banks

7. The Policy Recommendations Enabling Environment Innovation prioritisation by Government(s) Innovation Agency Regulations Coordinate support Research: innovative in financial and non-financial support Innovation Fund Start-up grants Equity and debt investments Debt for on-lending: credit guarantees to attract external finance Capacity Building Train NGO’s and banks Direct support to entrepreneurs

8. The Summary Shift from microfinance and subsistence entrepreneurs to larger and integrated finance support and innovative entrepreneurs