India's stock regulator SEBI go through with novice Social Stock Exchange!
Social Stock Exchanges
Social Stock Exchange is a novel concept in India. The working group had a series of consultation with various stakeholders including voluntary organizations, social enterprises and philanthropic organizations in order to assess the difficulties faced by them in raising funds/ donating funds
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.
What are SSEs?
SSE is a platform which allows investors to buy shares in social enterprises vetted by an official exchange. Union Budget 2019 proposed setting up of first of its kind SSE in India. 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.
SSE is a platform which allows investors to buy shares in social enterprises vetted by an official exchange. Union Budget 2019 proposed setting up of first of its kind SSE in India. 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.
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.
SSE could become a repository of social enterprises and impact investors.
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
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
Global prospects
For Canada Backed by the Ontario government, the SVX is an online platform that allows investments in Canadian companies and funds that have “a positive social or environmental impact”. Retail investors are also allowed to participate.
In UK, Social Stock Exchange in London functions more as a directory connecting social enterprises and potential investors. Launched in 2013, it only accepts companies that pass its independent assessment on social impact.
In Singapore, Impact Investment Exchange runs a social stock exchange in partnership with the Stock Exchange of Mauritius, which is open to limited accredited investors who want to invest in social enterprises.
Kenya: The Kenya Social Investment Exchange, launched in 2011, connects vetted social enterprises with impact investors, both foreign and domestic. A listed social enterprise has to demonstrate social impact as well as financial sustainability beyond the funding period.
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