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.

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