A Sebi-constituted panel on social stock exchange has suggested that non-profit organisations can directly list on such a bourse through issuance of bonds.
The social stock exchange (SSE) can be housed within the existing stock exchange such as the BSE and/or National Stock Exchange (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 panel recommended in its report submitted to the market regulator.
Further, a range of funding mechanisms have been recommended including some of the existing mechanisms such as Social Venture Funds (SVFs) under the Alternative Investment Funds.
In addition, a new minimum reporting standard has been proposed for organizations which would raise funds under SSE.
The panel was set up by Sebi in September 2019 under the Chairmanship of Ishaat Hussain, Director at SBI Foundation and former Finance Director at Tata Sons, to suggest possible structures and regulations for creating SSE to facilitate listing and fund-raising by social enterprises as well as voluntary organisations.
The panel or working group consists of representatives of the stakeholders active in the space of social welfare, social impact investing, representatives from the ministry of finance, stock exchanges and NGOs.
The decision came after Finance Minister Nirmala Sitharaman 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.
"These recommendations, if implemented as a package, can result in a vibrant and supportive ecosystem, enabling the non-profit sector to realise its full potential for creating social impact," the panel said in its 72-page report.
Social Stock Exchange is a novel concept in India and the working group had a series of consultation with various stakeholders including voluntary organizations, social enterprises and philanthropic organizations in order to assess the difficulties faced by them in raising funds or donating funds.