Taking Stock of the Social Sector

Context: The recent report published by SEBI provided guidelines and recommendation regarding setting up of Social Stock Exchange (SSE) in the country.

Highlights of the report: 

• Distinguished model: 

• Envisioned SSE goes beyond performing a simplified role of matchmaking or discovery platform

• It proposes innovations funding instruments and structures, enhances reporting standards, and promoted vital sectoral institutions.

• Innovation in funding instruments: 

• Proposes Zero Coupon Zero principal bond: effectively a donation but issued as an instrument listed on SSE providing Non Profit Organisation (NPOs) more visibility.

• Utilizing already available instruments: 

• Social venture Funds(SVF): currently permitted under Alternate Investment Fund by SEBI can function as grant-in grant-out funds.

• Mutual Funds (MFs): can be used for channeling funding to NPOs. (The Cancer Fund of HDFC Mutual Fund)

• Enhancing reporting standards :

• Uniformity in reporting standards: to facilitate objective decision making.

• Measurement of social impact: from the perspective of the intended beneficiaries that the NPO seeks to serve. 

• Provision of credible and standardized information: through Information Repositories (IR) can help in building confidence in NPOs.

• SSE as a regulatory body: for existing IRs like GuideStar, DARPAN, and Credibility Alliance.

• Bringing social auditors: to evaluate the impact in a standardized way.

• Capacity Building:

• Capacity building unit: recommended a fund of Rs 100 cores in which contribution from GoI, corporates, and philanthropists can be collected.

• Help to smaller NPOs: through specialized pooling mechanism of the capacity building and enhanced reporting standards

• Allowing ‘For Profit’ social enterprises (FPEs): 

• To raise equity capital through SSE subjected to adherence to the criteria of conventional enterprises by demonstrating ‘positive social impact’.

• Incentivizing retail investors: through exemptions like retention of Section 80G, allowing CSR funds to be deployed on SSE, trading of CSR spends, and lowering existing minimum thresholds for SVFs.

Conclusion: Covid-19 has demonstrated the vital role the social sector plays in supporting and informing government initiatives. SSC creates a supportive ecosystem for the sector.