Apr 22, 2024
Social Stock Exchange (SSE)
What is a Social Stock Exchange (SSE)?
A Social Stock Exchange (SSE) is a platform where social enterprises (both non-profit and for-profit) can list and raise funds through various financial instruments. It operates under the regulatory ambit of the Securities and Exchange Board of India (SEBI) and is intended to help social enterprises grow and achieve their objectives by facilitating access to capital.
How does the SSE differ from traditional stock exchanges?
Unlike traditional stock exchanges where the focus is on profit-maximizing entities, the SSE focuses on organizations working towards social welfare objectives. It is designed for entities that prioritize social impact alongside financial returns, allowing them to raise funds through equity, debt, or units like a mutual fund.
What are the eligibility criteria for listing on the SSE?
Organizations eligible for listing on the SSE should:
● Be social enterprises working in any of the 17 areas identified under the SEBI regulations, such as eradicating hunger, promoting gender equality, and supporting financial inclusion.
● Target underserved or less privileged populations.
● Dedicate at least 67% of their activities to the aforementioned criteria.
What types of organizations are excluded from listing on the SSE?
Excluded from listing are corporate foundations, political or religious organizations, professional or trade associations, infrastructure and housing companies (except for affordable housing). These exclusions ensure that the SSE remains focused on entities with clear social welfare objectives.
What financial instruments are available on the SSE for fundraising?
For non-profit organizations (NPOs), fundraising can be done through the issuance of Zero Coupon Zero Principal Instruments (ZCZP Instruments) or donations via mutual fund schemes specified by SEBI. For-profit social enterprises (FPSEs) may raise funds through the issuance of equity shares on various platforms or debt securities.
What are Zero Coupon Zero Principal Instruments?
ZCZP Instruments are financial instruments issued by NPOs that do not offer any interest (coupon) and do not require repayment of the principal amount at maturity. These instruments are tailored to attract investors who are primarily interested in the social impact of their investments rather than financial returns.
Can foreign investors participate in SSE?
Currently, foreign investors, including NRIs, foreign foundations, and foreign social impact funds, are not permitted to invest in NPO fundraising under the existing regulatory framework. This restriction aims to manage the complexities and risks associated with foreign funding but may be subject to change as the framework evolves.
What are the expected benefits of the SSE?
The SSE aims to:
● Provide a regulated platform for social enterprises to secure funding.
● Enhance visibility and credibility of social enterprises, increasing their potential donor base.
● Ensure robust standards of social impact and financial reporting, enhancing transparency and accountability.
Since the introduction of the SSE segment on the BSE and the NSE, there has been an upward rise in the number of NPOs that have registered with the SSE.
What are some challenges facing the SSE?
Challenges include:
● Balancing financial sustainability with social impact, especially for organizations not traditionally involved in revenue-generating activities.
● Ensuring rigorous and fair evaluation standards for social impact.
● Navigating the legal and regulatory frameworks for new types of financial instruments.
How will the SSE impact social enterprises and the broader economy?
By providing a structured and regulated avenue for fundraising, the SSE is expected to stimulate growth in the social sector, leading to more efficient and scalable solutions for social problems. This could lead to enhanced socio-economic development and a more inclusive economic growth model in India.
These FAQs provide a comprehensive overview of the Social Stock Exchange in India, highlighting its purpose, mechanisms, and potential impact on the social sector.
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