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What are Social Stock Exchanges (SSEs)?

Social Stock Exchanges (SSEs):

A technical group on social stock exchanges (SSEs), constituted by the Securities and Exchange Board of India (SEBI), has recommended that political and religious organizations, trade organizations as well as corporate foundations should not be allowed to raise funds through SSEs.

  • Pursuant to an announcement made by the Finance Minister Nirmala Sitharaman in her budget speech for FY 2019-20 regarding Social Stock Exchanges SEBI had constituted a Working group and later a technical group under the chairmanship of Harsh Bhanwala, former chairman of NABARD.
  • The technical group report said both For-Profit Enterprise (FPE) and Not for Profit Organisation (NPO) will be eligible to tap the SSE if they are able to show their primary goals are social intent and impact.
  • Corporate foundations, political or religious organizations/ activities, professional or trade associations, infrastructure, and housing companies (except affordable housing) will not be permitted on SSE.
  • SSE is engaged in at least one of the 15 broad eligible activities. They target underserved or less privileged population segments or regions and should have at least 67 percent of its activities qualifying as eligible activities to the target population.
  • The report has also made a list of eligible activities that social enterprises can engage in such as eradicating hunger, poverty malnutrition, and inequality; training to promote rural sports; promoting gender equality by the empowerment of women and LGBTQIA+ communities; slum area development/ affordable housing; forest and wildlife conservation; promoting livelihoods for rural and urban poor; promotion of financial inclusion among others.
  • The panel has recommended different modes of fundraising for NPOs and FPEs.
  • For NPOs it has recommended fundraising through “equity, zero-coupon zero principal bond, development impact bonds, social impact fund with 100 percent grants-in grants out provision, and donations by investors through mutual funds”.
  • For FPEs it has recommended fundraising through equity, debt, development impact bonds, and social venture funds.