Discuss the need for setting up of social stock exchange in India. What are the key challenges in their effective implementation?

Social stock exchange (SSE) refers to a stock exchange platform, to enable funding for enterprises with social benefits. An expert panel constituted by the SEBI has recommended allowing non-profit organisations to directly list on Social Stock Exchanges (SSE).

Need for setting up of SSEs:

1. Financial:
   • As per government estimates there are 31 lakh NGOs in India. Very few of them have access to funding.
   • Increased diversity for investors, looking to invest in social Enterprises.
2. Social:
   • NGOs and civil society organisations act as arms of the government, extending social services, e.g. role played in ration delivery during Covid.
   • Access to funds via SSE can enhance reach and impact.
3. Administrative:
   • Increased transparency through information of NGOs in public domain.
   • Reduced burden on government for funding social Enterprises.
   • Outcome-based funding.

Challenges in effective implementation:

• Measuring social impact is a difficult task with complex variables.
• Poor financial viability of social enterprises may lead to poor response rate on SSEs.
• Monitoring fraudulent NGOs/Enterprises and timely removal, e.g. Use of proxy NGOs for political funding.
• Lack of standardization with respect to NGOs and social organisations in India.
• Monitoring foreign funding into India, e.g. Report on foreign funding of to create disarray in India.
• Training and capacity building of social Enterprises, to utilize funding to deliver outcomes.

Way forward:

• Accreditation and common standards of service delivery.
• Allow only registered NGOs with FCRA and audit report compliance on SSEs.
• Proper tax and other incentives to investors.

Utilizing SSE effectively can help realize sustainable development goals with civil society as equal partner in growth story.