SEBI proposes to list Non-Profit Organizations directly on stock exchanges

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SEBI constituted a panel on the social stock exchange that has proposed that non-profit organizations can directly list on such exchanges through the issuance of bonds. The social stock exchange (SSE) can be included within existing stock exchanges such as the Bombay Stock Exchange (BSE), National Stock Exchange (NSE).

This proposal will facilitate the SSE to leverage the existing infrastructure and clientele relationships of the exchanges to investors, donors, and social ventures including both profit and non-profit. Moreover, a range of funding mechanisms has been suggested including some of the existing mechanisms such as Social Venture Funds (SVFs) under the Alternative Investment Funds (AIF). Also, a reporting standard has been recommended for all those organizations which would raise funds under SSE. It also recommends that profit social enterprises can also list on SSE and certain tax incentives have been proposed.

The panel was instituted by SEBI under the Chairmanship of Ishaat Hussain, Director at SBI Foundation, and the former Finance Director at Tata Sons. The panel aimed to devise possible arrangements and regulations for creating SSE to facilitate listing and fund-raising by social entrepreneurs and voluntary organizations. The working consortium consists of the stakeholders active within the space of social wellbeing, social venture investors, representatives from the government, and stock exchanges.

Social Stock Exchange in India is an innovative concept and the panel has undergone several sessions for consulting with stakeholders such as voluntary organizations, social ventures, and philanthropic organizations to evaluate the complexities faced by them while raising funds or donating funds. It is believed that these recommendations if implemented, can result in a vivid and supportive ecosystem that enables the non-profit sector to realize its full potential for creating social impact through community action.

The economic damage and hurdles posed by the COVID19 pandemic have led to such a proposal for NPOs being able to list directly on stock exchanges. As a major sect of the Indian population is greatly struck and the informal sector does not seem to hold well.

For India to recover from the pandemic, a significant amount of patient capital is much needed to repair and rebuild livelihoods, which is the backbone of the economy. A conventional approach towards capital infusion that prioritizes financial returns may not be sufficient to support the restoration process.

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