From UPSC perspective, the following things are important :
Prelims level : Social Stock Exchanges (SSEs)
Mains level : NGOs and their funding issues
A working group constituted by the Securities and Exchange Board of India (SEBI) on Social Stock Exchanges (SSEs) has recommended allowing non-profit organisations to directly list on such platforms.
Practice questions for mains:
Q. What are Social Stock Exchanges? Discuss how it will help finance social enterprises in India.
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.
- 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- Idea, growth stage and likewise, investors can also be grouped based on the type of investment.