The process took almost four years, initiated by the constitution of a working group in the domain, followed by a comprehensive report, based on which a technical group was established, and then the introduction of zero coupon zero principal instruments for the first time in history via a notification by the ministry of finance. Immediately after, the Securities and Exchange Board of India (SEBI) took a stride ahead and made the distant dream of SSEs a reality by introducing a robust and thorough framework for them.
Subsequently, both BSE and NSE recently launched their SSE segments with a bunch of applications already on their tables, having a vision of making an impact in the social sector, where the donor, with full faith, may contribute, entrusting all he wants, smoothly to the NGO of his choice. This journey of creating a fiduciary relationship comes with the stamp of the nation’s one of the most prominent regulators, i.e., SEBI, and both the renowned stock exchanges.
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This has provided relief to the contributor that his money is handed over to the legitimate organisation for being used in the right direction and for the moral causes, as has been promised. These exchanges will provide a platform for investors to support social businesses and impact investing, revolutionising the traditional concept of stock markets.
With countries like the UK, Canada, Singapore, Brazil, and others that already have their SSEs established, the time for India has also come to wholeheartedly embrace this innovative model and bring the plans for socio-economic well-being and development to fruition, as it opens new avenues for social enterprises in the country.
The concept of SSEs revolves around trading platforms dedicated to listing social businesses that operate in a corporate style but with a social mission. SSEs allow ethical investors to invest in businesses aligned with their values, creating a parallel social economy. The comprehensive regulatory framework even suggests the guidelines, requirements, standards, and causes to which the organisations want to dedicate themselves for the purpose of getting listed.
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The sectors are not only restricted to poverty, inequality, healthcare, and education but also cover areas like empowerment of women and LGBTQIA, climate change, art, culture, and heritage. The list is diversely huge, including a wide range of sections, from sports for the specially abled and financial inclusion to bridging the digital divide and a lot more.
India, with its vast population and diverse social challenges, stands to benefit greatly from SSEs. These will enable social enterprises to raise funds from the public, enhancing their visibility and fostering transparency in fund mobilisation and utilisation. By providing a separate platform for social enterprises, the SSEs will attract ethical investors looking to make a positive impact.
This will not only bolster social businesses but also contribute to the country’s sustainable development goals. The three key pillars of a social trading platform could be the demand-side ecosystem (social organisations); the supply-side ecosystem (investors); and the infrastructure (the SSE and its intermediaries); however, the government would play a critical role as the market maker and influencer.
The above factors would also serve as a catalyst for social finance in the nation, offering several benefits. Firstly, these will provide much-needed capital to social enterprises that often struggle to access traditional funding sources. Secondly, these will enhance transparency by requiring regular audits of social activities and impact reporting, which will build trust among investors and stakeholders. Additionally, these SSEs will increase the visibility of social enterprises, attracting both retail and institutional investors interested in supporting socially impactful ventures.
The countries that have already ventured into space provide a good learning landscape for Bharat. While the UK’s SSE, for instance, serves as a directory of socially impactful companies, providing visibility to potential investors, Canada’s ‘Social Venture Connexion’ acts as a ‘trusted connector’, linking social businesses with interested impact investors and service providers. Whereas Singapore’s ‘Impact Investment Exchange’ functions similarly to the UK’s SSE, showcasing valued social businesses and impact investing funds.
South Africa’s ‘SASIX’ offers ethical investors a platform to buy shares in social projects based on sector and province classifications. These international SSEs provide valuable insights and understandings into building a robust and impactful model in India.
Since the country just started and is fixated on the idea, it still has a long way to go and scale up infrastructure and capacities; however, the active and continuous participation of stakeholders may prove to be a persuasive process, and efforts may lead to great success, setting standards in the domain once again for the world.
To ensure the accomplishment of the objectives of Bharat’s SSEs, several key considerations must be taken into account, including but not limited to the accreditation processes that must be established for social businesses, ethical investors, and intermediaries, along with the formation of proper rating mechanisms, the process of audits, and the qualification of auditors; the mandatory and timely disclosures on operations and activities; the filing of financial statements, balance sheets, and annual returns; and the public placement of annual and other time-to-time reports, amongst many other compliance requirements.
All this will make sure that SSEs flourish, resulting in the unification of numerous platforms with consistent funding, appropriate utilisation of resources, impact generation, measurement of the impact, and fair and transparent reporting procedures. The establishment of SSEs in our country marks a transformative leap in social finance, empowering social businesses and impacting investors to address critical challenges. By drawing lessons from international SSEs and fostering collaboration, Bharat is all set to create an inclusive and impactful SSEs’ ecosystem, shaping a better future for all.
— The authors, Srishti Vajpayee, is a Public Policy Professional, and Sumit Kaushik, is a researcher at O.P. Jindal Global University, and a social impact consultant. The views expressed are their personal.