Social Stock Exchange - Indian Economy
Introduction
Social firms that are committed to resolving various socioeconomic concerns are listed on the Social Stock Exchange as a platform. The SEBI controls them. In the budget for 2019–20, the concept of a social stock exchange was initially raised. It functions as a platform for listing social companies and charity organizations.
A Social Stock Exchange Is What?
• A social stock exchange is a type of stock exchange that offers non-profit organizations an alternative means of listing and raising money.
• It makes it possible for organizations supporting a range of social concerns to raise money.
• It demonstrates a reduced reliance on international aid agencies.
• These organizations are already in place in a number of advanced democracies, including the US, UK, and others.
• It makes it possible for better resource allocation, which leads to higher resource utilization.
Social Stock Exchange: Advantages
• They function according to established minimum requirements that attract participation from a variety of additional stakeholders, including investors, donors, etc.
• They aid in utilizing current connections and infrastructure to create newer networks.
• They lead to economic and social progress that is more inclusive.
• Better social audits, reporting skills by NGOs, etc. are the results.
• The implementation of supportive regulations, such as tax exemptions, etc., may result in better use of funds for charitable purposes.
• It would promote philanthropy that is related to performance.
Challenges
• There is no legal standard to distinguish between a social enterprise and a regular business.
• There is no framework for evaluating social impact.
• NGOs lack the resources necessary to keep track of their finances.
• Could result in the appearance of fresh intermediaries.
• Using or diverting money improperly.
Different Forms of Fundraising In Social Stock Exchanges
• Issuing bonds in the form of zero-coupon bonds, allowing various donors access to funds.
• Use of social venture funds, which are utilized to give those in poverty better possibilities.
• Use mutual funds to raise money.
• Grants are issued using pay for success models.
Indian Social Stock Exchange's current state
• In September 2020, SEBI established a technical group on social stock exchanges, which is now led by former NABARD chief Harsh Bhanwala.
The following was suggested by the technical committee:
• Trade groups, corporate foundations, political and religious organizations, as well as other organizations, should not be permitted to raise money through SSEs.
• Eligibility: If For-Profit Enterprises (FPEs) and Non-Profit Organizations (NPOs) can show that their primary objectives are social intent and impact, they will be permitted access to the SSE.
• Every year, SSE-compliant entities must submit a social impact report that contains "strategic intent and planning, approach, and effect scorecard."
• NPOs frequently have the structures of non-profit organizations, Section 8 enterprises, trusts, and societies. Examples of FPGAs include private limited companies, partnerships, and single proprietorships.
Fund-Raising Strategies
• Equity, zero-coupon, zero-principal bonds, development impact bonds, a social impact fund with a 100 percent grants-in grants-out clause, mutual fund donations, and other financing methods are available to non-profits.
• For FPEs, funding may come from social venture funds, development impact bonds, debt, or equity.
The following are permitted activities:
• In addition to promoting sanitation, safe drinking water, and health care (including mental health), social companies can aim to end hunger, poverty, malnutrition, and inequality.
• Slum area development, affordable housing, and other interventions are required to create resilient and sustainable cities.
• Promoting impoverished people's livelihoods in rural and urban areas, especially by raising the pay of small-scale and non-farm workers.
• Priorities include preserving forests and animals, mitigating the effects of climate change, and adapting to it.
• LGBTQIA+ organizations, women's emancipation, and gender equality are all supported.
• All three are encouraged: education, employability, and livelihoods.
Conclusion
An innovative idea in India, the social stock exchange could help private and nonprofit sector providers by directing funds. It acts as a forum for social entrepreneurs interested in making a good social effect to raise money.