Social Impact: Exploring the Concept of Social Stock Exchanges

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In the ever-evolving landscape of finance and investment, a new concept has emerged with the potential to revolutionize the way we support and fund social enterprises and voluntary organizations. The brainchild of Hon'ble Finance Minister Smt. Nirmala Sitharaman in her Budget Speech for FY 2019-20, the Social Stock Exchange (SSE) is a visionary idea aimed at creating a regulated platform within the ambit of SEBI (Securities and Exchange Board of India). This platform is dedicated to listing and supporting social enterprises and voluntary organizations striving for social welfare objectives.

Objectives of the Social Stock Exchange:

At its core, the SSE is designed to achieve several vital objectives these are - Bringing Together Social Enterprises and Donors. The SSE acts as a bridge, connecting social enterprises with potential donors and investors. It facilitates the funding and growth of these enterprises, which often struggle to secure adequate financial support. Ensuring Robust Standards, One of the key features of the SSE is its commitment to maintaining rigorous standards of social impact and financial reporting. This ensures transparency and accountability in fund mobilization and utilization. Public Funding Mechanism, The SSE functions as a separate segment within existing stock exchanges. This means that social enterprises can raise funds from the public through this platform, gaining visibility and credibility.

There is some eligibility for listing, To be recognized and listed on the SSE, an organization must establish the primacy of its social intent. This includes both non- profit organizations (NPOs) and for-profit social enterprises (FPSEs). SEBI's ICDR Regulations, 2018, provide a comprehensive list of criteria, including eradicating hunger, poverty, malnutrition, promoting education, employability, equality, and environmental sustainability, among others.

It has some ineligibility Criteria, Certain types of organizations are ineligible for SSE listing. These include corporate foundations, political or religious organizations, professional or trade associations, infrastructure and housing companies (except affordable housing), and NPOs dependent on corporates for more than 50% of their funding.

In Money Raising Mechanisms it has NPOs, Non-profit organizations can raise funds through the issuance of Zero Coupon Zero Principal (ZCZP) Instruments via private placement or public issue. Additionally, they can receive donations from mutual funds. FPSEs, For-profit social enterprises can raise funds without SSE registration. They can do so by issuing equity shares, engaging with Alternative Investment Funds, including Social Impact Funds, or issuing debt instruments. Development Impact Bonds, A noteworthy feature is the availability of Development Impact Bonds, which are delivered upon the successful completion of a project, meeting pre-agreed social metrics at pre-agreed costs/rates. The introduction of the Social Stock Exchange marks a significant step towards mobilizing financial resources for social good. By providing a regulated platform, it empowers social enterprises and voluntary organizations to attract investment and achieve their noble missions. As it gains traction and more organizations join this innovative ecosystem, we can anticipate a brighter future where finance becomes a potent tool for positive social change.

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