Taking Stock of the Social Sector

The Economic Times     13th June 2020     Save    
QEP Pocket Notes

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.

QEP Pocket Notes