Good intentions on social exchange
At a time when non-profits face stiff challenges in fund-raising, the government has announced a social stock exchange for welfare enterprises and voluntary organisations.
Speaking about the electronic fund-raising platform, FM Nirmala Sitharaman (https://timesofindia.indiatimes.com/topic/Nirmala-Sitharaman ) said it was time to bring India’s capital markets closer to the masses and meet various social welfare objectives related to inclusive growth and expanding the financial umbrella. The objective is to enable social enterprises to list themselves on the exchange and raise capital as equity, debt or as units like a mutual fund. Countries like the UK, Canada, Singapore and others have such social exchanges.
While microenterprises like Self Employed Women’s Association (Sewa) have welcomed the move, hoping that it would aid in easier funding, the move is likely to impact only a small slice of the sector. Sewa director Reema Nanavaty said, “There is tremendous scope for scaling up these micro-enterprises. To achieve this, there is a dire need for “women’s livelihood fund” — a mixture of equity, grant, loan and patient capital which will enable workers to access the formal financial market.”
Puja Marwaha, CEO CRY, said, “The concept is innovative and experimental and hopefully the entire social sector will find it interesting, especially in the times of challenging environment — both on compliance and on fund-raising. This move should facilitate the sector to gain a more professional, respectable and recognised space.” However, director at Ashoka University’s Centre for Social Impact and Philanthropy Ingrid Srinath said that the proposal would mean a complete reversal of laws governing NGOs. “The announcement flies in the face of historically restrictive laws that govern funding for NGOs, where non-profits cannot even take loans, invest in stocks or earn business revenue above a certain limit or accumulate surpluses for that matter.”
She said that it was a confusing announcement. “All international social stock exchanges the world over are limited to social enterprises which are organisations structured as businesses also fulfilling a social purpose. There is so far nothing for voluntary organisations anywhere. Is the proposed exchange also limited to such enterprises,’’ she added. NGO HelpAge India Mathew Cherian agreed, adding that the move could be useful for social ventures, microfinance institutions which are governed by Section 8 of the Companies Act and have a profit motive and not for organisations like his. Srinath said, “If the government does intend to reverse this, it will have to revisit the definition of non-profits, which at present include organisations like MKSS that spearheaded the RTI movement at one end of the spectrum and BCCI that governs Indian cricket
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