The SEBI SSE Working Group published a report that describes the contours of a Social stock exchange that will act as a platform for fundraising, it also ensures better visibility for Non-profit organisations in the eyes of investors and donors. As per the human development index comprising three dimensions of education, healthcare & income. India is ranked 129 ranks among 189 countries, So SSE can play a major role to help the social sector to get more funds and thus creates a measurable impact in the long run.
According to 2019 Bains &company report, overall funding from private sector grew 15% pa from 40,000 crores to INR 70,000crore in 2018, along with that Philanthropic funding saw the highest growth at 21%pa that constitutes 63% of private funding in 2018 and balance 27% funds from CSR contribution by domestic companies. As a developing nation, India accounts for more than 20% of the world performance gap in 10 of the 17 sustainable development goals and 10% gap in another 6 of the set goals in 2030, It roughly translates to the requirement in the tune to INR 4.2 lakh crores annually. Hence the role of non-profit organisations is very crucial to attain the SDG goals. However, the huge shortfall in terms of funds available for various projects is woefully short than what is needed. At present, funds received to perform social sector projects are through means like CSR, Impact investing and Socially responsible investments. SSE envisages a framework, process in place where funding structures and securities are listed in a social stock exchange similar to the existing stock exchanges in India.
Measuring social impact
A very robust and efficient framework is also under consideration to measure the social impact by following a reporting standard for FPO’s and NPOs in India. The framework would go a long way to report the social impact uniformly, Moreover, it would result in better utilization of funds by NPOs, will help to create more credibility and trust among the donors and investors community. The minimum reporting standard will help NPOs to behave responsibly by deploying the received funds effectively to create an impact.
The Mutual Fund route
Here Mutual fund (AMC) act as intermediary to source capital from various individuals and institutional investors by allocating the money to market-based instruments. The returns generated from the investments are given to fund the operations of NPO. The returns from the fund would be considered as donations from the investors
Bond structure route
Here in this bond model, NPOs or implementation agencies with common social outcomes are aggregated by an intermediary, here the role of the intermediary is to attract funder with predefined outcomes, the funder receive significant returns if the activity meets its desired outcome. In this structure the intermediary needs to invest in these bonds or first loss guarantee positions to ensure the interests of both intermediaries and risk investors are aligned, it is a fixed-term contractual agreement between several stakeholders.
Pay for success through lending partners
In this structured model where an NPO or cluster of NPOs working towards a common social outcome from different parts of the country. In this model lending partners are banks & NBFCs which provides money to NPOs
Pay for success through grants
In this structure, CSR team from corporations choose an area where they wish to create a social impact, they select an NPO for implementation, CSR money is parked in an escrow account for minimum three years or a predefined period during which the impact is expected to be created.
New frontier in social sector funding
Countries like Brazil, South Africa, Canada, UK and Singapore also have SSEs, But India’s SSE model in comparison to others is far better because it provides a comprehensive solution for FPEs and NPOs. In the Indian context, the model tries to institutionalize a common standard for reporting, Create avenues for direct listing and funding routes. Providing new structures and instruments & Promoting the role of social finance.
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