A Social Stock Exchange (SSE) allows social enterprises to directly list their securities or financial instruments on the recognized stock exchanges. This acts as an alternative means for such organizations to raise funds. The recognized stock exchanges include the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
SSE marks a progressive step towards the socio-economic development in India. It operates just like a regular stock exchange by listing, trading and settling shares, bonds and other financial instruments. The main difference is that in an SSE, the listed organizations are required to report the social and environmental impact, in addition to the traditional financial reporting. In a nutshell, the scope here is not merely restricted to a ‘profit and loss’ status.
Objectives Of Social Stock Exchange
- According to the draft report of the Stock Exchange Board of India (SEBI), the SSE could be vital to rebuild the livelihoods of people affected by the pandemics;
- Meet social welfare objectives related to inclusive growth and financial inclusion;
- To facilitate capital to be raised;
- Provide investors with a more accessible investment means;
- Could be a new Corporate Social Responsibility (CSR) for individual companies to meet their CSR expenditure requirements. Tax benefits (under Section 80G of the Income Tax Act, 1961) will be available to the investors too;
- Provides transparency and accountability of transactions;
- Provide easier market access to the social enterprises;
- Maintain market discipline and healthy competition;
- Give access to international finance.
Benefits of SSE
- Help in improving visibility and knowledge of all stakeholders about their participation in the building of the nation’s economy;
- Build awareness about the needs and obstacles faced by the social sector;
- Implement procedures to standardize social, financial transactions;
- Create a suitable environment for the investors, whose aim is to give the maximum positive social impact and accordingly place environmental, social and governance features within the chase of profits and growth.
How SSE will bring about a ‘revolution’ in India?
The definition of ‘Social Enterprises’ includes the following potential entities:-
- Section 8 or Licensed companies;
- Companies limited by guarantee;
- Private and Public Limited companies having social welfare as their primary objective;
- Non-Governmental Organizations (NGOs);
- Co-operative Societies;
- Social Enterprise Incubators.
As per the latest reports, there are around 2 million social enterprises in India, making the nation a robust, yet dynamic, social entrepreneurship environments around the world. SSEs can bring about a positive impact on the Indian economy and society.
However, lack of funds staggers their progress. SSE, thus, acts as a ‘bridge’ for a social enterprise to acquire necessary funds and then execute its activities.
In India, the concept of SSE gained popularity when Mrs Nirmala Sitharaman, the Finance Minister, stated the same in her 2019-2020 Budget speech. SEBI then formed a working group to make suitable recommendations for a regulatory framework, to list financial instruments issued by the social enterprises and to promote responsible investing practices in India.
How will this concept aid India during pandemic?
SSE exists in one form or the other in countries like the United Kingdom, Singapore, South Africa, Canada and Brazil. It is yet to take off in any country. With the pandemic in the picture, all organizations have been hit drastically. Social enterprises are no exception to this, as their primary source of income is donation and that too, in comparatively lower amounts.
India needs an estimated amount of over USD 2.6 trillion in investment to meet the United Nations Sustainable Development Goals by 2030. Capital is a significant factor if India climbs up the ladder of the Human Development Rank from its current position of 129. Hence, this concept helps these social enterprises, to come out of yielding poor results and improve their condition by getting them listed in the stock exchanges. In this way, more funds can be generated, and these social organizations can sustain themselves during uncertainty.
How will this platform boost social and environmental impact on investing in India?
India’s count of Non-profit organizations (NPOs) is more than double the number of schools and 250 times the number of government hospitals, which implies to 1 NPO for 400 Indians!
The introduction of the SSE will induce more of ‘social awareness’ amongst the minds of the investors. Profit maximization will not be just the sole intention. Also, with more transparency in the various transactions, it is of no doubt that the investors will be more responsible and alert in their dealings.
With so many changes being made on and off to improve the condition of the economy and to address the plight of the common man, one can hope that these will turn out to be useful in the post-COVID scenario.