Going by Union Finance Minister Nirmala Sitharaman’s announcement in the Union Budget recently, India could very well follow in the footsteps of countries like the United Kingdom, Canada and Singapore in setting up a Social Stock Exchange.
Presenting the Budget on July 5, Sitharaman had said, “It is time to take our capital markets closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion. I propose to initiate steps towards creating an electronic fund raising platform – a social stock exchange – under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund.”
To cover a broad range
Social enterprises operate in a vast area that covers fields like health, education, disability, etc., point out experts, who add that the reach of these organisations is significant.
Dr KV Kishore Kumar, director and consultant psychiatrist, The Banyan, an NGO focusing on mental health, said, “Government alone cannot respond to the needs of the country, and therefore, NGOs will also have to support the government. Moreover, the penetration of the NGOs among the vulnerable population is much higher. Therefore, raising funds is a huge challenge.”
Calling the social security exchange a fantastic idea, he said that the government will be promoting the activities of the organisation offering services, bringing about transparency.
“Fund-starved NGOs will be benefitted. They will have to cultivate the necessary discipline to handle money, in line with the rules laid down by the government,” he observed.
How it works?
There are different kinds of SSEs and some restrict their role to being a directory. One such exchange is the one in the UK (Social Stock Exchange) that lists out social businesses that have passed the social impact test and provides insights into the different areas of operations for investors.
In Canada, the Social Venture Connexion links up organisations and investors. The only public SSE operates in Singapore, Impact Exchange, where even non-profit organisations can issue debt securities like bonds. The exchange in South Africa also called SASIX operates like a conventional one facilitating purchase of shares in social projects.
Impact investing the way forward
Rajagopalan Venkatraman, head, resource mobilization, NalandaWay Foundation, that works with underprivileged children and empowers them through arts, notes that giant strides are being taken globally towards impact investment.
“Trillions of dollars are being pumped into it and there is a huge buzz around it. We would like to see the link between such investment and the exchange,” he said.
The move will bring transparency and governance apart from dictating best practices in the development sector, he said, adding, “The regulatory board will be equivalent to the SEBI and will bring in place compliance and reporting.”