Since 2023, a few organizations have successfully raised funds from social stock exchanges (SSEs). Out of the 100 Not-for-Profit (NPO) entities that have registered with SSEs, only 11 have managed to raise a total of ₹41 crore. The number of entities listing on SSEs has decreased from seven in the previous fiscal year to five in the current one.
Ramesh Swamy, Director of SGBS Unnati Foundation, emphasized the importance of SSEs in establishing trust and credibility for NGOs. He mentioned that while there has been a significant number of registrations, the low number of listings is attributed to the strict disclosure requirements and the necessity to clearly define social impact. Swamy also highlighted the need for the regulator to incentivize and create a conducive ecosystem for donors.
Recent proposals by SEBI aim to enhance participation in SSEs by reducing the minimum application size for issuances to ₹1,000 or ₹5,000. SEBI also plans to broaden the list of eligible activities for social enterprises to include various welfare programs. Additionally, NPOs may now register with SSEs for up to two years without raising funds, as many struggle with the cost of annual reporting and impact assessment.
Experts pointed out that a major challenge lies in providing visibility to the track record and impact of social enterprises. Akshaya Bhansali, Partner at Mindspright Legal, suggested promoting proper distribution channels to educate retail investors on investment opportunities through SSEs. She also recommended allowing Corporate Social Responsibility through SSEs and permitting foreign funds with stringent due diligence and reporting requirements.
Bhansali praised SEBI’s proposal to expand the list of eligible legal structures for NPOs and the provision allowing them to register with SSEs without fundraising for two years. This inclusive approach enables more organizations to access the platform and adapt to its processes before engaging in fundraising activities.
In conclusion, it is crucial for exchanges and listed NGOs to leverage social media and other platforms to increase awareness of their presence. SSEs were introduced in the FY20 Budget with the objective of listing social enterprises and voluntary organizations. The success and growth of SSEs depend on continuous improvements and initiatives to attract more participants and investors.
