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Social Stock Exchange (SSE)

Mr. Amod Kanth brief discussion on the subject above in the core group meeting of ICCFG held on 8th July on Social Stock Exchange (SSE) which is yet to be launched and we are still not clear how will it help us. On the initial reading of the Technical Group (TG) report some of the points that have come up, are being shared as under:
 
It appears to be a newly crafted good-purpose paper prepared by the highly experienced team in the working group under the guidance of country’s credible SEBI that translates the said 2019 Budget point announced by our Finance Minister into a govt. recommendation.
 
Initially surprising, SSE is made to stand in line with country’s BSE & NSE - a stock securities platform for Core & commercial transactions. A new concept for social investors & social enterprises in India. It is an option for all NGOs in India (not mandatory) to use this platform called Social Stock Exchange wherein they will be listed for trading under a regulatory framework with primary intent to unlock a new avenue for a large new capital pool to address funding gaps the Sector suffers from.
 
It is with objective to enable stronger identity and help build a greater recognition and appreciation for the Sector that SEBI structured certain framework of regulations under its ambit to add further transparency, visibility and investor’s confidence.
 
Participation in the proposed Social Stock Exchange (SSE) Non-profit Organization (NPO): A funding opportunity and a new visionary platform for my colleagues in the Civil Society Organizations (CSOs). I don't have any claims about my knowledge on the shares and the Stock Exchange to guide on this novel concept of SSE which was announced by the Finance Minister last year and is likely to be introduced soon. Last year the top officials of Finance Ministry and SEBI made a presentation before our CSOs Standing Committee chaired by the Vice Chairman NITI Aayog which we couldn't appreciate so much. Now, this detailed document makes the entire concept and initiative much clearer.
 
I am aware, there are far more knowledgeable persons within (our Core &) NGO groups with whom I am sharing the SEBI Technical Group (TG) report which had several leading experts from the voluntary sector as well. The TG was constituted by SEBI in September 2020 under the chairmanship of the Ex. NABARD Chairman Dr. Harish Bhawda. The TOR included development framework for onboarding the NPOs (Non-Profit Organizations), Social Enterprises (SEs) and FPOs (For Profit Organizations) on the SSE. It included defining the project in terms of social investigating/ enterprises, disclosure requirements regarding financials, governance, operational performance and , most importantly, social impact. The TG, as required, has recommended on matters related to scope of work, eligibility of ‘Social Auditors’ etc
 
Now, the technical issues of mode of fund raising, transactions, building of patient capital or philanthropic capital allowing the trading to non-profit organization is something which we need to understand in a more pragmatic way.
 
In a comprehensive report of over 72 pages, various details of regulatory framework, common minimum reporting, disclosure-based regulation, social impact reporting, governance structure of NPOs, self-reporting etc. have been highlighted.
 
From the simple reading which I have done, it appears to me that service delivery NGOs like Prayas eminently qualify to get into this process if some of us decide to undertake this task as an opportunity for fund-raising at a scale which we deserve but unable to achieve. 
 
These SSEs could be availed as Instruments or means of fund-raising on the basis of social Intent & Impact which would be measured through duly qualified and authorized Social Auditors. The Instruments being proposed are Social Impact Funds like, Development Impact Bonds (DIBs), Zero Coupon Zero Principal (ZCZP) bonds, Mutual Funds connected to social impact etc. Separate segments are proposed to be set up in the existing Stock Exchanges for the NPOSs and SEs (Social Enterprises) to facilitate the listing requirements. Additionally, it's proposed to set up a Capacity Building Fund (CBF) housed in the NABARD. 
 
Listing Guidelines for the NPOs have been described in great details in the SEBI’s TG report which may be read through carefully for further action when the SSE proceeds towards its creation. 
 
Briefly stated, NPOs like Prayas are expected to explain their Vision, Mission, Aims, Activities, Target segments being served; Outreach to accomplish the planned activities; Governance structures & Operations; Financials & disclosure-driven fund-raising; Compliances and Auditing -which all have to be deeply gone into and modified in order to qualify for the SSE.
 
Besides the credibility of the NPO, routine requirements like, Registration, MOA, PAN, FCRA, DARPAN & IT Exemptions, are listed out. 
 
Procedure is laid down to connect potential Fund Raisers and Investors. The qualifying Programs are generally the same as laid down for CSR funds which are listed out in Schedule 7 of the Companies Act 2013 (Section 135). 
 
The Advisory Board of SSE being proposed for over-sight shall include representatives from Development Organizations, NPOs, Stock Exchanges, Philanthropic bodies and Social Auditors. 
 
The Social Intent, Social Impact and the given objectives of the SSE are to be further harmonized with the SDGs (Sustainable Development Goals 2015-30), NITI vision and the CSR Areas and Sub-areas like:  
 
Hunger, Poverty, Malnutrition, Healthcare, Sanitation and Drinking water. Further, Education, Skilling, Employability & Livelihood; Women, Children, Gender Equality; Incubators for Social Enterprises; Rural Livelihoods, small & marginal Farmers; Slum area Developments; Disasters- Relief, Rehabilitation Reconstruction; Financial Inclusion, Migrant’s welfare etc.;
 
The service delivery NPOs who have operated in all these areas and sub-areas shall generally qualify, but they have to improve upon their governance, financial operational. 
 
Reading through the Mandatory Qualifications & Criteria for NPOs we (Prayas and such NGOs) find that we qualify in terms of the basic requirements. For example, the requisite Receipts and Payments of past year is just about Rs. 50 lakhs. Offer documents for NPOs for past year top donors etc and the Governance requirements like the Board, Financial disclosure etc are perfectly in place for us.
 
Provision for tax incentives, capacity building fund for NPOs, utilization of CSR fund, allowing foreign funds, assisting NPOs through proposed institutions will get further clarified as we move on.
 
As desired, I have held detailed discussions with Ms. Jyotsna Sitling IFoS whom I have also known as Jt. Secretary in the Ministry of Skill Development & Entrepreneurship, and she is sharing with me her experience in the related activities. We are in the process of developing the ideas on the subject with the hope and objective to create funds for the CSOs/NGOs who are deep into services in the social sectors. Perhaps, NITI Aayog CSOs Standing Committee is the right forum to give us direction. Our Core group could also intervene and address NITI Aayog and others who may be concerned.  

Amod K Kanth
Joint Coordinator- CSOs Standing Committee of NITI Aayog, General Secretary Prayas JAC Society & Former DGP & Chairperson-DCPCR