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.

Why 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.

Benefits

• 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.

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