In the Union Budget 2020-21, the finance minister had proposed to establish Electronic Social Stock Exchange (SSE) to enable social enterprises such as NGOs to raise capital to meet their social cause. Accordingly, SEBI had appointed Ishaat Hussain committee to recommend the various modalities related to the working of Social Stock Exchanges. Based upon recommendations of this committee, the SEBI has recently notified the framework for the setting of Social Stock exchanges
Understanding Social Stock Exchange: The Social Stock Exchange enables entities such as NGOs to raise finances for social sector projects such as Education, Housing, Drinking water etc.
For example, Brazil's Socio-environmental Impact Exchange (BVSA) was the first SSE. Some of the other SSEs across the world include- UK Social Stock Exchange, South Africa's SASIX, Canada's Social Venture Connexion.
Rationale
- Conventional capital focusses more on financial returns and not on socio-economic returns and hence does not invest in social sectors.
- Address the financial constraints of around 3 million non-profit organizations.
- Provides a great opportunity for donors, philanthropic foundations, companies with CSR obligations to contribute to socio-economic cause.
- Enable India to meet various Sustainable Development Goals (SDGs)
SEBI'S guidelines on Social Stock Exchanges (SSE)
Establishment: SSE to be set up as separate segment under the existing stock exchanges such as BSE, NSE etc. Hence, SSE would not be standalone exchanges, rather, they would be set up under the existing stock exchanges only.
| Categories | Present Route for availing Funding | Funding through Social Stock Exchange |
| Non-Profit Organisations (NPOs) Societies Trusts Section 8 Companies (Companies set up under Section 8 of Companies Act for charitable and non-profit objectives) | Individual donations Contributions made under the Foreign Contribution (Regulation) Act CSR grants Grants from government | Zero Coupon Zero Principal Bonds: These bonds do not carry any interest. The NPOs which avail funding through the issuance of such bonds need not repay back. Well suited to investors who are looking to create social impact but do not wish to have their funds returned to them. Social Impact Funds: Category -1 Alternate investment fund registered with SEBI. Mobilises capital from different investors to make investment in social sectors. Minimum Investment to be Rs 2 lakhs. Mutual Fund: Operate as a standard Mutual Fund. However, the returns generated are channelled towards the financing of NPOs. The returns will be considered as donations made by the investors to NPOs. |
| For-Profit Organizations Companies registered under the Companies Act and willing to invest in Social Sectors. | Shares and Bonds | Shares and Bonds to be issued in the Social Stock Exchanges. |