The Independent Commission for Aid Impact (ICAI) has raised concerns over the suitability of some investments made by the UK’s development finance institution British International Investment (BII) in India.
The watchdog found that taxpayer-aided money was being invested in an Indian fund that has invested in a cosmetics company and a social media site with content featuring glorification of Hamas’s attacks on Israel, abuse of women, and offers of sexual services.
The investment in the fund was made two months after BII’s chief executive had in April last year reassured a Parliamentary committee that future investments in India would be made if there was a “compelling argument” on inclusion and sustainability. The International Development Committee had raised concerns about an investment in a cosmetic surgery clinic.
ICAI said while BII, a public limited company owned by the Foreign, Commonwealth and Development Office (FCDO), had taken steps to improve its poverty focus, it was not carrying out proper due diligence and exposing itself to ‘reputational risks’.
ICAI Chief Commissioner Dr Tamsyn Barton, said, “Given how difficult it is to moderate large social media platforms to remove harmful content, we have to question why BII chose to invest in the India Quotient Fund and did not consider the reputational risk. How is this an appropriate investment for UK aid, which must have poverty reduction as its goal? It is just not clear why the use of capital from UK taxpayers is justified for investments in social media sites.”
In recent years, the UK has transitioned away from funding traditional poverty-focused aid projects in India, but provides aid in the form of development investment, research partnerships and other activities that support the ties between the two countries.
This includes the £1 billion investment made by BII between 2016 and 2021. During the period 2017 to 2021 the UK government provided £2.8 bn of aid capital to BII which it uses along with its existing assets to invest in businesses and programmes in low-income countries. During the ICAI review, 28 per cent of BII’s portfolio was invested in India.
In its 2023 review of UK aid to India, ICAI concluded that BII was not convincingly linking its investments to poverty reduction.
The latest report, following up on the 2013 recommendations, found that in 2023 BII invested $8 million (£6.43 mn) in India Quotient Fund IV. The Fund reportedly invests in agri-tech, fin-tech, software as a service (SaaS) for small and medium-sized businesses, as per BII website.
However, ICAI found that several businesses of India Quotient Fund IV are not mentioned. These include a cosmetics company, three social media sites, and a debt collection business.
On one of the social media sites, ShareChat, ICAI found content featuring abuse of women, offers of sexual services, and glorification of Hamas’s attacks on Israel.
The other investments from the same fund that do not receive direct investment from BII, but that create reputational risk “by association”, include dating sites.
ICAI’s 2023 review also recommended that BII funding should go where it is most needed and support inclusive economic growth.
FCDO’s India team had made some progress on this work, but the watchdog noted it needed further development.
The watchdog lauded BII for steps to start implementing its recommendation on mobilising private finance to tackle climate change, with the creation of a new ‘investor desk’.
It also welcomed FCDO’s commitment to supporting Indian civil society groups in areas such as court reform, LGBT+ rights, and digital media.
