Union Budget Proposes Targeted Stock Exchange Aimed at Boosting Social Enterprises

New Delhi: Among several firsts in her debut Budget speech, India’s first full-time female Finance Minister Nirmala Sitharaman on Friday announced setting up a stock exchange for enterprises in the social sector.

“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,” she said.

This stock exchange will enable investors to make impact investments.

Impact investments are made into enterprises and funds with the aim of delivering measurable social benefits or making environmental impact, apart from earning a financial return.

Globally, there are a handful of social stock exchanges, such as Singapore’s Impact Investment Exchange Asia and London’s Social Stock Exchange. These exchanges allow companies operating in sectors such as health, environment and transportation to raise risk capital.

Among the growing emerging markets, India has the maximum number of social enterprise start-ups. Currently, it is a challenge for many enterprises to raise funds because they need investors who are aligned with the need for such unique investments while also focusing on financial returns.

However, the fine-print of this exchange in India is still unknown and would be clear in the days to come. What would be important is how social enterprises and voluntary organisations are defined and who would qualify for it. Besides, who will run these exchanges? Will NGOs and not-for profits qualify for such funding, since funding through SSE would need to have profits to pay the investors?

According to experts, social enterprises may include a gamut of companies, such as start-ups working in agriculture, education, health, skill development, water management, solid waste management, to name a few. Moreover, the special purpose vehicles formed for Smart Cities and infrastructure projects could also raise funds under the arrangement.