The Finance Ministry was thinking upon the idea of a social stock exchange and gave a hint about the same in the 2019 budget. SEBI constituted a panel for it and the panel recently gave its recommendations regarding the exchange. Some of the recommendations are as follows:
- Direct listing of non-profit organisations through the issuance of bonds and a range of funding mechanisms in a report submitted to the market.
- The social stock exchanges can he housed within the existing stock exchange and such as BSE and/or NSE. This will help the SSE leverage the existing infrastructure and client relationships of the exchanges to onboard investors, donors, and social enterprises (for-profit and non-profit).
- The profit social enterprises can also list on SSE with enhanced reporting requirement.
- To encourage, giving culture some tax incentives have also been suggested.
- Fundraising instruments like equity and SVFs have been recommended for social profit enterprises and zero coupons zero principal bonds, SVFs, Mutual Funds (MFs), various pay-for-success structures, other securities for NPOs.
Is it a new concept?
Well, it is not a new concept. It has been tried in some countries. There are various models of it, like in London it acts as a platform to connect social enterprises with potential investors. In Canada the platform is called SVX and it also allows retail investors to invest. The social investment exchange of Kenya helps welfare organisation to connect with domestic and foreign investors. The impact investment exchange in Singapore, in partnership with Mauritius, allows only accredited investors to participate. In South Africa, the SSE SASIX works like a regular stock exchange where impact investors can buy shares in social businesses based on location and mission.
SEBI has also asked for public comments on the same and they can be send to SEBI till 30th June.
It is definitely going to help NGOs, if implemented.
