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:
- 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.
- 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.
- 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.
Topics: GS-I: Social Empowerment Communalism Regionalism Secularism • GS-II: Government Policies and Interventions for Development in Various Sectors • GS-II: Social Sector Services Health • GS-II: Social Sector Services Education Human Resources