In her maiden Budget speech in the Parliament, Nirmala Sitharaman proposed the set up of social stock exchanges in India that will allow the listing of social enterprises, bodies working for social welfare and other voluntary organizations. The proposed exchanges will be administered by the SEBI and will enable investors to carry out impact investing.
"It is time to take our capital markets closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion. I propose to initiate steps towards creating an electronic fund raising platform - a social stock exchange - under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organisations working for the realisation of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund."" said the FM while presenting Union Budget 2019.
How the Social Stock Exchange will operate?
The firms listed on the social stock exchange primarily entities working towards the realization of social-welfare objective will be able to tap the markets and raise both equity and debt via an electronic fund raising platform (EFP). Experts suggest that the capital market regulator SEBI may likely allow companies with a verified record to access public capital via this platform.
"The social exchange platform is an innovative measure to involve public participation in social causes through the equity route," says Puneet Maheshwari, director at Upstox.
No clarity provided in respect of trading, tax benefit transfer
Union Budget announced the creation of SSEs in India, nonetheless, the picture remains still hazy with no clarity on trading, tax benefit transfer and accountability of third-party using the platform for raising capital. Also, there remains uncertainty as to whether or not the ‘exchange' will engage in trading of securities issued by non-profit bodies or social enterprises.
Views on proposed Social Stock Exchange in India
"It may take some time for it to gain traction because initially, it will be a chicken-and-egg situation - should good enterprises come in first or should good investors show up first? But then, India being a vibrant social enterprise ecosystem, it will be successful", says a leading social impact investor.
Social Stock exchanges- In the global context
Social Stock Exchanges are present globally and allow entities operating in sectors including environment, transportation, health etc. in raising risk-capital. Few of the examples of Social Stock Exchanges or SSE are Singapore's Impact Investment Exchange Asia and London's Social Stock Exchange. These SSE are also present in Canada, South Africa, Brazil, Jamaica and Kenya.