Recently, the Economic Survey released by the Union Ministry of Finance on January 29, 2021 highlighted the concept of setting up a Social Stock Exchange (SSE) in India for raising capital by orgnanisations working for the realisation of a social welfare objective.
- It will be under the regulatory ambit of the Securities and Exchange Board of India (SEBI).
- SEBI constituted a working group (WG) on social stock exchanges back in September 2019.
- The WG has outlined its vision and made recommendations, which include the participation of NPOs and for-profit enterprises (FPE) on SSE subject to committing to minimum reporting requirements.
Need of SSEs
- India needs massive investments in the coming years to be able to meet the human development goals identified by global bodies like the UN.
- This can’t be done through government expenditure alone. Private enterprises working in the social sector also need to step up their activities.
- Currently, social enterprises are very active in India. However, they face challenges in raising funds.
- One of the biggest hurdles they face is, apparently, the lack of trust from common investors.
- There is a great opportunity to unlock funds from donors, philanthropic foundations and CSR spenders, in the form of zero-coupon zero principal bonds. These bonds will be listed on the SSE.
- At first, the SSE could become a repository of social enterprises and impact investors.
- The registration could be done through a standard process.
- The SEs could be categorized into different stages such as as- Idea, growth stage and likewise, investors can also be grouped based on the type of investment.
Back to Basics
What are Social Stock Exchanges (SSEs)?
- An SSE is a platform which allows investors to buy shares in social enterprises vetted by an official exchange.
- The Union Budget 2019 proposed setting up of first of its kind SSE in India.
- The SSE will function as a common platform where social enterprises can raise funds from the public.
- It will function on the lines of major stock exchanges like BSE and NSE. However, the purpose of the Social Stock Exchange will be different – not profit, but social welfare.
- Under the regulatory ambit of SEBI, a listing of social enterprises and voluntary organizations will be undertaken so that they can raise capital as equity, debt or as units like a mutual fund.