Fiinovation and the CSR funding pot at the end of the rainbow

On 18 February at the World Corporate Social Responsibility (CSR) Congress in Mumbai, Soumitro Chakraborty, CEO of Innovative Financial Advisors Pvt Ltd (Fiinovation), was the toast of the town. The Congress focused on companies helping implement sustainable development goals in health, education and the social sector. That night, Chakraborty won the ‘CEO of the year’ award for Fiinovation’s work in the social development sector.

This was hardly a coming-out party for Chakraborty. Indeed, the bespectacled CEO and his Delhi-based organisation have frequently been conferred with a number of CSR-related awards.  Already a decade-old, Fiinovation calls itself a fundraising consultant firm—helping non-profits raise CSR funds from corporates.

The homepage of Fiinovation’s website

Fiinovation’s rise to prominence in the CSR space coincides with the government’s 2014 mandate that companies spend 2% of their three-year average annual net profit on CSR activities each financial year. This is applicable to firms with at least Rs 5 crore ($730,000) net profit or Rs 1,000 crore ($146 million) turnover or Rs 500 crore ($73 million) net worth, starting in the year ended March 2015. 

Ever since then, CSR funding has snowballed. According to estimates by ratings agency CRISIL, CSR spends by Indian corporates in the four years since the government mandate crossed the Rs 50,000 ($7.3 billion) crore mark earlier this year.

And as this pot of CSR gold grows larger, it presents an opportunity for shrewd firms like Fiinovation looking to be the go-between in these interactions between the worlds of commerce and social work. Fiinovation’s revenue grew by 13% in the year ended March 2018, clocking in at Rs 9 crore ($1.31 million). 

But even as revenues grow and accolades come thick and fast, there is a rising tide of accusations against Fiinovation. Small, disparate organisations across the country claim that Fiinovation signed agreements with them to raise CSR funding, but never came through. The upfront payments—the company charges a 10% commission, of which 4% is paid in advance—made to Fiinovation were, in many cases, never returned. 

According to a list accessed by The Ken, somewhere around 5,000 organisations have faced similar issues. The list was shared by a former company insider who requested anonymity. The Ken could not independently reach out to each one of them, but of the thirteen we reached out to, all told a similar story—Memorandum of Understanding (MoU) signed, no funds raised. Only two of them got a refund of commission.

The Ken also has a copy of the police complaint filed against Fiinovation by one of the organisations—Samekit Jan Vikas Kendra, a Christian non-profit based in Jharkhand. In addition, The Ken has accessed a letter sent by 35-year-old NERD (Non-conventional Energy and Rural Development) Society, Coimbatore, as well as a copy of the MoU and receipt issued by Fiinovation to Tarapur Social Development Society (TSDS), West Bengal.

As small, needy social sector organisations blindly queue for their serving of CSR largesse, they open themselves up to a host of potential pitfalls.

Out of reach

Abhishek Humbad is the founder and CEO of Goodera, which manages the CSR funds of more than 200 companies. All told, Goodera is in charge of about 25% of the country’s CSR spends, according to Humbad. He estimates the total annual CSR spend in the country is around Rs 10,000 ($1.45 billion)-12,000 ($1.75 billion) crore.  

The sheer size of the annual CSR pool has necessitated a more professionalised approach in the way it is disbursed. Monitoring and evaluation of projects is now a board-level responsibility. As such, CSR is no longer simply a matter of benevolence—companies need systems, processes, technology, tools, and professionals to handle it. 

“This means that there is a segment—an opportunity to create more value from the huge quantum of money. There is a rise across the value chain, right from defining the strategies. There are consultants who will do NGO matchmaking and contracting. This is [leaving] material impact in terms of reducing leakages or having the smaller nonprofits also get access to corporate capital,” Humbad says, adding that these are ideal outputs.

Goodera does not raise funds for NGOs as it is a conflict of interest. It only manages CSR funds for corporates. “In the case of our platform, the company sets up a request for proposal, which goes out to NGOs. Then, NGOs bid for it… it is a huge evaluation process,” Humbad explains.  

Ultimately, Humbad explains, it is essentially a sales job to get funding, and this is where Indian NGOs fall short. “There is a lot of difference between a US NGO and the Indian NGO in terms of fundraising capabilities. The US NGO is almost like a sales organisation. Whereas, Indian NGOs are implementation organisations without a sales arm,” he said. 

Opportunity knocks

Limited in their ability to raise donations independently, smaller social sector organisations are susceptible to the sales pitches of firms who say they can facilitate funding. “We hear from NGOs that many aggregators come to them saying we need all your documentation and then create a profile on a platform. They pay for the flow, and then nothing happens for a couple of months. It eventually dies down,” he said.

Fiinovation, for its part, promises to mobilise funds through the Pradhan Mantri MUDRA Yojana (PMMY) scheme as well as CSR funds from corporates. PMMY is a scheme launched in 2015 which provides loans up to Rs 10 lakh ($14,600) to non-corporate, non-farm small/micro-enterprises. These loans are disbursed by commercial banks, regional rural banks, small finance banks, micro-finance institutions and non-banking finance companies, and don’t require third-parties to facilitate them. Instead, the borrower can approach any of the lending institutions mentioned above or even apply online.

In exchange, the non-profits partnering with Fiinovation agree to pony up 10% of the total funding raised as a commission—4% as an advance and 6% on completion. For small organisations, the lure of a CSR windfall can be heady, overriding apprehensions about the size of the commission. According to Yashasvini Priya, human resource manager at Fiinovation, organisations that partner with Fiinovation go through multiple levels of vetting. The initial vetting is based on documents, but as the donor proposal nears finalisation, an onsite and physical vetting is mandatorily done. Multiple non-profits The Ken spoke to, however, claim that no such vetting was ever done. One of them was the Bharat Vikas Parishad Seva Sansthan (BVPSS).

Arvind Goyal, a chartered accountant by profession and the president of BVPSS, vividly remembers walking into Fiinovation’s office in Okhla, Delhi, two years ago. Goyal, then still the secretary of BVPSS, came bearing files. He had flown all the way from Kota, Rajasthan, where the 26-year-old BVPSS runs a hospital and research centre. Goyal was hoping to raise funds to expand the hospital.

Goyal’s visit was the culmination of a series of telephone conversations with Fiinovation’s Chakraborty. Finally, he’d been asked to visit Delhi, documentation in tow. He only met Chakraborty once, but his first impressions put him at ease. “Their office was well-furnished and impressive to look at. They (Fiinovation senior management) told me that they hadn’t raised such a large amount—Rs 2.2 crore ($321,000)—before but have successfully raised smaller amounts. They said that they have done a lot of rural development work,” Goyal recounts.

That same day—10 March 2017—Goyal signed an agreement with Fiinovation, agreeing to pay an upfront fee of Rs 10.12 lakh ($14,800) along with tax. “I transferred the money through a bank transaction. They promised Rs 2.2 crore funding within 240 days—by November 2017,” he said.

The funding never materialised. The advance money was never returned. 

Fiinovation’s Priya accepted that some fundraising efforts do not work out as proposals for donations sometimes fail to pass muster with audits done by donors, but Goyal and other non-profits claim that this was never mentioned at the time of signing the MoU. This possibility is also not explicitly mentioned in the MoUs The Ken has accessed. And while Fiinovation claims to “have a dedicated customer support department which deals with clients’ queries and grievances” and tries to resolve them as fast as possible, conversations with their clients tell a different story.

Selling dreams

“I’m made false promises every time I contact Fiinovation for my refund for the past two years. Finally, I sent a legal notice (a copy of which The Ken reviewed) in April this year for which I did not receive any reply. I’m fed up now,” Goyal rues. The BVPSS eventually raised money on their own to fund the hospital expansion.

BVPSS is hardly the only organisation that bought into Fiinovation’s allure and was left counting the cost. Most of them have a similar story. They stumbled across the company in their search for funds. Some found out about it through SMS announcements sent out by Fiinovation, others found the company’s website—the homepage of which is emblazoned with Chakraborty receiving a plethora of awards—compelling.

What came next was a convincing pitch from a sales executive, followed by a visit to Fiinovation’s plush Okhla office. Here, they’re treated to stories of funds raised and organisations that benefited from Fiinovation’s services. And then the clincher—promises of funding in less than a year.

Sold on the prospect of CSR funding, most are quick to sign on the dotted line. But what makes the decision easier is the refund clause in the MoU. Both MoUs explicitly mention a refund if Fiinovation fails to fulfil its fundraising—a complete refund if Fiinovation is unable to raise at least 50% of the committed value by the agreed deadline, or a 50% refund if Fiinovation fails to raise at least 75% of funding by the deadline. With these safeguards in place, small organisations with big dreams find it easier to part with the advance amount.
Mainak Roy, founder-CEO of Delhi-based Simple Education Foundation, says his organisation signed an MoU with Fiinovation to raise funding within a ten-month period. The Ken has accessed a copy of the MoU (signed in November 2017), which states that the advance would be returned should Fiinovation fail to raise funding by the stipulated deadline (September 2018).

Initially, Roy was informed that Century Plywood was interested in funding Simple Education. Later he was told that they’d dropped out, but other companies were interested. When he asked to pitch to interested parties in person, he was refused.

Simple Education hasn’t received any funding to date through Fiinovation, and it has been more than two months since they formally raised a refund request with Fiinovation. “Young and financially unstable non-profits are coming under their influence and losing out on valuable capital. Their work is getting stuck too,” Roy said.

Inside Fiinovation’s CSR gravy train

From the outside, Fiinovation presents a perfect picture. Big-name corporate partners such as the Aditya Birla Group and the Bill and Melinda Gates Foundation. Awards from all and sundry. A range of projects across sectors such as agriculture, education and healthcare. Ex-employees, though, say that this is only half the story.

According to one ex-employee, who asked not to be named, around 20 non-profits are brought in on a daily basis to the company’s Okhla office. Explaining the company’s functioning, the second ex-employee says that the two main teams are the sales and CSM (Client Support Management) teams. “While the sales team is big and robust—making hundreds of calls to NGOs across India every day—their CSM team is responsible for holding on to clients,” he said.

“Employees there work in silos, and it takes time for them to grasp what exactly is happening there. Day in and day out, project reports are churned out. Detailed project reports in every sector like health, education, livelihood and agriculture. Out of 100 NGOs they call, funding is raised for 25% of them and the contact numbers of this small group of people are given out to newer clients for giving good testimonials,” he said.

One such non-profit based out of Odisha which works in the agriculture sector reached out to The Ken saying that they had successfully raised more than Rs 50 lakh ($73,000) through Fiinovation. The caller, while refusing to identify her NGO, said while three of their projects are pending, one of them has been successfully funded. She says that she’d personally provided positive testimonials to prospective Fiinovation clients.

For those with less positive experiences, though, the CSM team is deployed to pacify them. “They are trained on how to handle callers. First, pacify and keep delaying the refund. If they sense that the client is powerful and has political connections, they put them in touch with a senior. If they threaten legal action, their money is refunded,” says the second ex-employee.

Multiple sources who claim Fiinovation reneged on its fundraising commitments say that when they demand refunds, they’re not even allowed inside Fiinovation. Requests to speak to the CEO are denied, whether in person or over a call. Fiinovation’s Priya indicates that such a situation is an outlier. “I can assure you that our intent has always been clear and once a client solicits refund (which is a procedural requirement as per a clause in the agreement), the process is taken up immediately upon confirmation. If there is something that has skipped the system, I will be happy to help them in this regard. Our entire business prophecy is based on ethics, transparency and workmanship,” she wrote in an email.

However, out of the 13 organisations The Ken reached out to, only two had received a refund at the time of writing this piece. Many have been chasing their refunds for years.

When the music stops

As non-profits begin to realise they aren’t isolated cases, many are now banding together to seek remedial action. “A few days back, I received an email where companies defrauded by them were getting together to form a group and file a police complaint,” says Palash Chandra Konai, head of 18-year-old TSDS. Maybe Fiinovation got a whiff of the impending complaint, he says, because they’ve said they will refund my money with 12% interest by July. “I will wait till the end of this month and then proceed legally,” he added. 

Konai had already wanted to file a complaint but didn’t do so because of what it would entail. “The company falls under Delhi’s jurisdiction, that is why I couldn’t file a complaint and pursue it,” he says.

Jamshedpur-based Samekit Jan Vikas Kendra (SJVK), meanwhile, filed a police complaint at the Okhla police station in December 2018. SJVK has accused Fiinovation of failing to refund the sum of Rs 20.53 lakh ($30,000) SJVK had paid the firm as commission. The complaint was filed some 15 months after the MoU was signed with Fiinovation, well after the MoU’s 240-day deadline had passed. As per the signed agreement, Fiinovation was supposed to raise funds for four of SJVK’s projects. NERD Society has also sent the firm a legal notice to which there was no reply.

(To read the full legal notice above, click here.)

While Fiinovation did respond to some questions from The Ken, it also avoided specific questions about how its tie-ups with non-profits come about, the amount of funding it has helped raise so far, and the success rate of its fundraising efforts.

Noshir Dadrawala, CEO of Mumbai-based Centre for Advancement of Philanthropy (CAP), says approaching ‘consulting firms’ for raising funds is never a good idea. CAP specialises in charity law and good governance practices for non-profit organisations. 

“People think there is a lot of potential with CSR funds with foreign funds not coming in (due to the government’s crackdown on foreign funding)… Never trust these consultant firms. I myself get calls with proposals and a fee. It’s been going on for years, and now it is going on more,” he warns. Further, he says, there’s no provision under the Indian Companies Act that punishes such firms. “The only way to go about it is filing a police complaint,” Dadrawala says.   

So what then for non-profits in need? “You have to fund yourself. One cannot trust these agencies to raise funds for you. If you’re unable to fund your project, then probably something is not right with your project. That’s why you’re not getting funding. You have to build your capacity so people would fund you, else you will be duped like this,” he said.   

Goodera’s Humbad reiterates this. “We need to look at how we can equip or empower these NGOs to effectively engage and communicate with potential and existing donors so that they can do more fundraising. But it is essentially a sales job to get more and more donations, and more digitally-enabled donations, rather than doing charity dinners, auctions, etc.,” he says.

Meanwhile, Fiinovation is growing. It announced the opening of a new office on its LinkedIn page. At what cost this growth has been achieved, though, is anyone’s guess.

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