SEBI Panel suggests that NGOs can Directly List on Social Stock Exchanges

A SEBI-constituted panel on social stock exchanges recently suggested that non-profit organizations can directly hit on such a bourse through the issuance of bonds. Like the BSE and/or National Stock Exchange (NSE), the Social Stock Exchange (SSE) can be housed within the existing stock exchange. 

The set-up will indirectly help the SSE leverage the existing infrastructure and client relationships of the exchanges to on-board investors, donors, and social enterprises, the panel recommended in its report submitted to the market regulator. Various funding mechanisms have also been recommended including some of the existing mechanisms such as the Social Venture Funds (SVFs) under the Alternative Investment Funds. 

For organizations that would raise funds under SSE, a new minimum reporting standard has been successfully proposed. In September 2019, under the Chairmanship of Ishaat Hussain, Director at SBI Foundation and former Finance Director at Tata Sons, a penal had been set up to suggest possible structures and regulations for creating SSE to facilitate listing and fund-raising by social enterprises as well as voluntary organizations.  

The working group or panel consists of representatives of the stakeholders active in the space of social welfare, social impact investing, and representatives from the ministry of finance, stock exchanges, and NGOs. Soon after Nirmala Sitharaman, the Finance Minister in her budget speech in July last year proposed setting up such exchanges to take the capital markets closer to the masses and meet various social welfare objectives, the decision regarding the Sebi panel was introduced. 

The panel in its 72-page report held that “These recommendations, if implemented as a package, can result in a vibrant and supportive ecosystem, enabling the non-profit sector to realize its full potential for creating social impact. Considered to be a novel concept in India, Social Stock Exchange, and the working group had a series of consultation with various stakeholders including voluntary organizations, social enterprises, and philanthropic organizations to assess the difficulties faced by them in raising funds or donating funds.