The finance minister Nirmala Sithraman on Friday announced establishment of India’s first Social Stock Exchange (SSE) to raise funds by social enterprises and voluntary organisations in the country.
The exchange, which would work under regulator SEBI, will bring India in league with developed countries like the US, the UK, Singapore and Canada which already have such exchanges. Social Stock exchanges are like stock exchanges where people can trade stocks or shares related to social enterprises.
However, the fine-print of SSE in India is still unknown and would be clear in the days to come. What would be important would be how social enterprises and voluntary organization are defined and who would qualify for it. Besides, who will run these exchanges? Will NGO’s and not-for profits will qualify for such kind of funding - as funding through SSE would need to have profits to pay the investors?
According to experts social enterprises may include a gamut of companies including startups working in the space of agriculture, education, health, skill development, water management, solid waste management to name a few. Moreover, the special purpose vehicles formed like for Smart Cities and infrastructure projects could also raise funds under the arrangement.
Although, till the blueprint is ready, speculations will be rife, but experts have given a thumbs-up to the move. Jaijit Bhattacharya, president, Centre for Digital Economy Policy Research says, “It’s an innovative mechanism through which social entrepreneurs and social initiatives can raise crowdfunding through an online platform, in an efficient and transparent manner. It would contribute to the transformation of the sector and increase public participation in social initiatives. “
Hemal Zobalia, Partner, Deloitte India agrees with Jaijity and says, "FM’s request for SEBI to consider social stock exchanges for listing social enterprises and voluntary organisation is a welcome step as it will facilitate funding as well promotes governance in the social sector which is the need of the hour."
Sitharaman 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.”