In her Budget Speech for the financial year 2019-20, Hon’ble Finance Minister Shrimati Nirmala Sitharaman proposed the idea of an electronic fundraising platform for social enterprises and voluntary organisations. 

Social Stock Exchange (SSE) is an electronic platform built following the Securities and Exchange Board of India’s regulatory guidelines (SEBI) for Not-for-profit and for-profit social enterprises. It is set up as a new separate segment on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). 

SSE will act as a medium between Social Enterprises and fund providers. The platform would help social enterprises working for the realisation of a social welfare objective to raise capital from a much wider pool of investors and donors. 

Currently, 39 NGOs have registered themselves with the NSE and 37 with the BSE. Under the SEBI’s Issue of Capital and Disclosure Requirements Regulations, any entity should meet three criteria to be eligible to get registered and listed on the SSE. 

The entity must be involved in activities prescribed under Regulation 292E(2)(a) of the Issue of Capital and Disclosure Requirements Regulations, like eradicating hunger and poverty, promoting health care and education, and promoting gender equality. 

The entity must target underserved or less privileged population segments or regions which have recorded lower performance in the development priorities of central or state governments.

Finally, the entity shall demonstrate either one of the following:

1. At least 67% of the immediately preceding 3-year average of revenues comes from providing eligible activities to members of the target population

OR

2. At least 67%of the immediately preceding 3-year average of expenditures has been incurred for providing eligible activities to members of the target population

OR 

3. Members of the target population to whom the eligible activities have been provided constitute at least 67% of the immediately preceding 3-year average of the total customer base/beneficiaries.

After consultations with the market regulator SEBI, the minimum issue size was brought down to Rs 50 lakh from Rs 1 crore for NGOs. Similarly, the minimum application size was reduced from Rs 2 lakh to Rs 10,000. 

First NGO Listing

On December 13, SGBS Unnati Foundation became the first NGO to be listed on the Social Stock Exchanges of the BSE and the NSE. The NGO sought to raise Rs 2 crore to train graduates from government colleges and assist them in employment placement via its UNXT program. The subscription for the issue was undersubscribed and reached 90%, raising about Rs 1.8 crore. 

Zerodha was the major donor, with a donation of Rs 1 crore. Rest was contributed by the National Bank For Agriculture And Rural Development (NABARD), Govind Iyer and Ashish Kacholia, donating Rs 30 lakh, Rs 20 lakh, and Rs 30 lakh, respectively.

Key Benefits for NGOs and Donors

• Improved Market Access- NGOs usually have a concentrated donor base and repeatedly approach the same people for funding. The SSE would provide a common meeting ground between social enterprises and investors or donors nationwide.  
• Transparent and Outcome-based Philanthropy: Performance of the social enterprises listed on SSE would be tracked by a qualified chartered accountant, enhancing transparency and accountability. The ‘social impact assessor’ will review the progress and issue a report. Donors will be able to track how their funds are being used. 
• Credibility: Investors or Donors would be more confident donating to NGOs listed on the SSE, as names like SEBI, NSE, and BSE are associated with them.