Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Table 29: India population data
Divide the total population by the number of households to obtain an average
household size. Then multiply by the economic activity rate to obtain average
number of earners per household.
India
Total Population 973
Households 183.3
People per household 5.3
Economic activity rate 69%
Earners per household 3.7
Source: WRI, UN Statistics Division. Note that the average number of people per household is
calculated based on population and household numbers for the entire population, not just the
BoP.
Table 30: Indian household income bracket conversion
Multiplying the per capita income by the number of earners gives a household
income bracket.
Per capita income bracket India household
income brackets
2002 PPP 2005 PPP 2005 PPP
A 3,000 3,260 11,923
B 2,500 2,717 9,936
C 2,000 2,173 7,949
D 1,500 1,630 5,962
E 1,000 1,087 3,974
F 500 543 1,987
Source: WRI.
Calculating the number of households
Having translated the per capita income brackets into per household income brackets,
we can then reference the population data provided by WRI again to see how many
people fall within the brackets that will afford our products or services. But again, in
the case of housing, it is most relevant to have the number of households (rather than
number of people), so we need to translate the population data. Table 31 shows the
steps to the calculation. We start with the number of people in each income bracket,
and then focus in on the urban population (since our housing case study was for
urban populations). Once we have the number of urban people in 2005, we can grow
that number using the WRI’s urban Indian population growth rate, which is 0.9%
over the period from 2005 – 2010. Finally, we scale the number of urban people in
each bracket by the economic activity rate from Table 29 to get the total number of
people (earners and non-earners), and then divide by the average number of people
per household.
Table 31: The number of households in India's BoP income brackets
To grow the population from 2005 to 2010, apply India’s 0.9% urban population growth rate for 5 yrs.
India
Household
Income
brackets
Number of
people
% Urban Number of
urban people
Number of
urban people
Number of
households
2005 PPP 2005 2005 2005 2010 2010
A 11,923 31.5 68% 21.3 22.3 6.1
B 9,936 68.3 53% 36.5 38.1 10.4
C 7,949 147 37% 55.0 57.5 15.7
D 5,962 309 20% 61.2 64.0 17.5
E 3,974 349 8% 28.6 29.9 8.2
F 1,987 19.3 6% 1.1 1.1 0.3
Source: WRI. 0.9% growth rate is the urban population growth rate for India over the period from 2005 – 2010 according to the WRI
database.
Relationship between revenues and invested capital
Shifting from the income statement to the balance sheet: Assume a ratio of
expenses to total invested capital = 1 to 1
Our analysis estimates the potential market for selected goods and services to BoP
consumers. We present the revenue opportunities, assume an operating margin and
hence arrive at estimates of expenses and profit.
In order to move from the income statement to the balance sheet and calculate
required capital it is necessary to make an assumption regarding the relationship
between Invested Capital and the revenue base of the company. This relationship is
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