2 years ago when Scam 1992 aired in India, it immediately gained a lot of popularity. The Indian masses, even those who weren’t familiar with stock markets, quickly caught up on the bears and bulls market.
Under the existing stock market in the country, the Securities and Exchange Board of India (Sebi) has notified a framework introducing a Social Stock Exchange in India, which will provide social enterprises an additional avenue to raise funds.
SSE – what is it and how can it benefit the non-profit sector?
Finance Minister Nirmala Sitharaman in her budget speech for 2019-2020 spoke about the SSE culture in India. She intended to foster social and environmental impact investing in India. She introduced the prospect of creating an electronic fund-raising platform for Social Enterprises and voluntary organisations to help them raise capital through debt, equity, and mutual funds.
The aim was to bring India’s capital markets closer to the masses and meet various social-welfare objectives related to inclusive growth and financial inclusion.
India has 1 NGO for every 400 people – SSE aims to exploit this huge market
Only the Social Enterprises (SEs) that are registered as non-profit organisations (NPOs) and for-profit social enterprises (FPEs), having social intent and impact as their primary goals will be eligible to participate.
The SSE is not going to be a list of the securities or other funding structures but also a pre-defined process under which the intent of the social enterprises will be determined through three filters viz.
- They should work toward 15 broad eligible activities which include eradicating hunger, poverty, malnutrition, and inequality, promoting gender equality, education, and better health care etcetera.
- They should aim to uplift the underprivileged and ones belonging to the lower rungs of the societal ladder
- They should have at least 67 percent of their activities qualifying as eligible activities to the target population.
The SSE has laid down multiple investment options like zero-coupon zero-principal bonds, mutual funds, social impact bonds, pay for success, social venture funds for NPOs and equity issuance, and social venture funds for FPEs for the investors who are believed to be investing with the intent to bring about social change. It also allows numerous tax benefits to investors.
Although it is too early to comment about the impact SSE will have on the social sector, it is definitely going to give the non-profits more visibility, giving them exposure to probable new donors and most importantly, will help create a common vocabulary and understanding of impact, enabling more and more people to invest in the social sector.
The Indian economy definitely needs a mix of conventional and social capital. Is SSE the answer to it? Do we need a more stringent legal and regulatory framework for it to benefit the social sector? Only time will tell.