Social Stock Exchange – Introduction of a new segment

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Apurva Dhamankar

1/3/20232 min read

A platform that enables the listing of non-profit and non-governmental organizations are known as a social stock exchange. Several non-profit organizations may use the Social Stock Exchange as a funding source in the future, which might help raise those businesses at the bottom of the socioeconomic pyramid. Many NPOs in India struggle with trust issues, which prohibit them from engaging in numerous charitable endeavors. The Social Stock exchange (SSE) was developed to lessen this issue, making it easier for Non-Profit Organizations (NPOs) to conduct their business.

To provide social businesses with much more options for raising money, SSE was established. This novel concept was built specifically to benefit the business and non-profit sectors by allocating more funding to them. Let's delve further into understanding SSE and how the new framework can support several NGOs in carrying out their good activities.

The idea of creating an SSE in India was first proposed by the finance minister in her budget speech for the fiscal year 2019–20, and the Board has indeed approved its creation to bring capital markets to the general public, particularly organizations devoted to social welfare, to make it simpler for them to raise funds. With this new paradigm, NPO could be listed.

The government has announced a new security under the Securities Contracts (Regulation) Act of 1956 called "Zero Coupon Zero Principal (ZCZP)" through a gazette notification, according to the exchange. "Subject to meeting the requirements for eligibility, NPO may issue the new instrument ZCZP openly or privately after registering with the SSE division of the NSE. Currently, the minimum issue size is set at Rs. 1 crore, while the minimum application size for subscription is Rs. 2 lakhs. A subscription to the ZCZP would be comparable to a charitable gift.

Undoubtedly, the introduction of Social Stock Exchanges is a positive development for the securities market that will increase the visibility and understanding of all parties involved, particularly the financiers, issuers, and clients of these social enterprises. To maximize the positive social impact and integrate environmental, social, and governance (ESG) considerations into the pursuit of profits and growth, these stock exchanges will be anticipated to fill the funding gap for such social enterprises. This will create the necessary social investment in the ecosystem.

Thank you.

Regards,

Bhakti Gala,

Kautilya, IBS Mumbai.

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