Social Stock Exchange

Social Stock Exchanges : SEBI’s new Directions

Non-profit organizations has been allowed by an expert panel constituted by the Securities and Exchange Board of India (SEBI) to directly list on the Social Stock Exchange (SSE).

Social Stock Exchanges : SEBI’s new Directions

Top Current Affairs 3rd June 2020

Source | The Hindu


GS Paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.



Social Stock Exchange

Key Takeaways

  • The idea of the Social Stock Exchange (SSE) as a platform for listing social enterprise, voluntary and welfare organisations so that they can raise capital was mooted in the Union Budget 2019-20.
  • It works under the market regulator Securities and Exchange Board of India (SEBI).

Read More: Special Liquidity Scheme for NBFCs, HFCs and MFIs


Context: Non-profit organizations has been allowed by an expert panel constituted by the Securities and Exchange Board of India (SEBI) to directly list on the Social Stock Exchange (SSE).

What are the major recommendations of the SEBI regarding the Non-Profit Organizations?

  • Issuance of Bonds: Allowing non-profit organisations to directly list through issuance of bonds in the form of zero coupon or zero principal bonds.
    • Zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, drawing a profit at maturity, when the bond is redeemed for its full face value.
    • This would help to access funds from donors, philanthropic foundations and Corporate Social Responsibility (CSR) spenders as they will be encouraged to buy zero coupon bonds.
  • Social Venture Funds (SVFs): It recommends a range of funding avenues, such as Social Venture Funds (SVFs) under Alternative Investment Funds (AIFs).
    • Social Venture Funds (SVFs) are funds investing in early-stage social enterprises to expand opportunity for people living in poverty.
  • Enhanced Reporting Standards: Profit social enterprises be allowed to list on the platform with enhanced reporting requirements.
    • The social stock exchange can be housed within the existing national bourses like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Read More: Pradhan Mantri Matsya Sampada Yojana (PMMSY)



What is the significance of such a move by SEBI?

  • This move will help the Social Stock Exchanges (SSEs) to leverage existing infrastructure and client relationships with onboard investors, donors, and social enterprises. Certain tax incentives allowed under the recommendation would encourage participation in the culture of ‘giving’ among various stakeholders.
  • It would encourage banks and other investors to participate with non profit organisations and thereby making social and economic growth more inclusive.

What you need to know about Social Stock Exchanges (SSEs)?

  • The idea of the Social Stock Exchange (SSE) as a platform for listing social enterprise, voluntary and welfare organisations so that they can raise capital was mooted in the Union Budget 2019-20.
  • Social enterprise can be defined as a non-loss; non-dividend paying company created and designed to address a social problem.
  • It works under the market regulator Securities and Exchange Board of India (SEBI).
  • AIM: The aim of the initiative is to help social and voluntary organisations which work for social causes to raise capital as equity or debt or a unit of mutual fund.
  • It provides new and cheaper sources of financing for social welfare projects, while showcasing India’s independence from foreign aid .
  • SSE already exists in countries such as Singapore, UK, Canada among others. These countries allow firms operating in sectors such as health, environment and transportation to raise risk capital.

Read More: COVID-19 Economic Stimulus Package | Fifth Portion



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