In India, non-governmental organisations or NGOs are pivotal in addressing a wide range of socio-economic challenges. Despite their essential contributions, these entities often face numerous operational hurdles that can stifle their effectiveness and sustainability. The introduction of the Social Stock Exchange under the regulatory ambit of SEBI marks a significant step forward, aiming to revitalise and empower the not-for-profit sector.
The concept of a Social Stock Exchange (SSE) was first mooted in the July 2019 Budget by the Union Finance Minister Nirmala Sitharaman. The SSE was envisioned as a mechanism to bridge NGOs and social enterprises with the capital markets. This innovative platform is designed to unlock new capital sources, democratise donations, enhance transparency, and increase accountability. It would create a structured environment conducive to systematic funding and investment in the social sector.
While several other countries had attempted this idea with limited or no success, India’s SSE aims to become a global model by addressing the issues that plagued the earlier ones.
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Competition and financial hurdles
One of the foremost challenges faced by NGOs is maintaining credibility in a landscape where past misdeeds of a few have cast shadows of doubt over many. This scepticism is compounded by fierce competition among multiple NGOs vying for limited funding and visibility. The SSE addresses these issues by providing a regulated platform where only thoroughly vetted organisations can register. This platform also distinguishes NGOs based on their impact and uniqueness, helping them to stand out in a crowded market.
Moreover, NGOs often echo the sentiment “if you pay peanuts, you get monkeys,” highlighting a critical barrier. Inadequate compensation due to limited budgets hampers their ability to attract and retain talented individuals as employees. The perpetual scramble for resources leaves many organisations underfunded, curtailing their capacity to achieve their missions effectively. The SSE can revolutionise this landscape by opening avenues for NGOs to access capital markets, thus securing the funds necessary to offer competitive salaries and expand their initiatives.
Operational challenges
Compliance with stringent regulatory requirements presents another significant challenge, demanding considerable time and resources that could otherwise support mission-critical activities. Furthermore, the competence challenge—maintaining high levels of expertise and operational excellence—is vital for NGOs’ success and credibility. The SSE assists in these areas by providing frameworks that have streamlined the compliance burden. It also helps connect NGOs with a network of investors and advisors who bring additional expertise and oversight.
Additionally, collaboration among NGOs, governments, and private sectors can often be fraught with challenges due to differing agendas and lack of trust. The SSE promotes more structured and transparent collaboration opportunities, making it easier for NGOs to partner with other entities and multiply their impact. This setup not only facilitates mutual trust but also encourages a multiplier effect in the impact of collaborative projects.
To further support the ecosystem, the SSE is complemented by the Capacity Building Fund, which aims to enhance the capabilities of NGOs and social enterprises along with that of the potential investors, intermediaries, the existing stock exchanges and SEBI. This fund provides the necessary tools and training to meet the SSE’s listing criteria, ensuring they are investment-ready and equipped to leverage the platform effectively. By focusing on building long-term sustainability and operational efficiency, the Capacity Building Fund plays a crucial role in strengthening the foundation of the social sector in India.
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A new dawn for NGOs
The introduction of the SSE heralds a new era for Indian NGOs, addressing critical challenges and providing the tools they need to thrive. This platform not only boosts the visibility and funding of NGOs but also integrates them more deeply into the mainstream economic framework.
As the SSE nurtures the NGO sector with enhanced resources and regulatory support, it sets a hopeful precedent for empowering non-profits not just in India but across the world. With the SSE’s backing, Indian NGOs are better equipped to drive profound and sustainable societal transformations. It ensures that their missions continue to resonate and positively impact the communities they serve.
Now, the success of the SSE hinges on the collective effort of all stakeholders—government, private sector, and civil society. A “Viksit Bharat” can only be achieved when society, State, and markets collaborate effectively. The SSE offers a unique opportunity for this, making it a cornerstone for a more inclusive and responsive societal development. Let us come together to make the SSE a resounding success. It will shape a future where Indian NGOs can contribute more significantly to our nation’s progress.
Dr R Balasubramaniam is the Chairman of the Social Stock Exchange Advisory Committee of SEBI and is also the Member-hr of the Capacity Building Commission, Govt of India. Views are personal.
(Edited by Ratan Priya)