Social Stock Exchange (SSE)

  • December 14, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Social Stock Exchange (SSE)

Subject : Economy

Section: Capital Market

Unnati, specifically the SGBS Unnati Foundation (SUF), is mentioned as the first entity to list on the SSE.

  1. Listing on NSE Social Stock Exchange (SSE):
    • Unnati became the first entity to be listed on the NSE Social Stock Exchange.
  2. Nature of the Entity:
    • SGBS Unnati Foundation (SUF) is described as a not-for-profit organization (NPO) incorporated in 2011.
  3. Training and Fundraising:
    • SUF has a focus on training youth and had trained over 45,000 youth.
    • The entity raised ₹1.8 crore from various sources, including Zerodha, Nabard, etc.
  4. Zero Coupon Zero Principal (ZCZP) Instruments:
    • Upon listing, Zero Coupon Zero Principal (ZCZP) instruments with a face value of ₹1 each were credited into the demat accounts of the respective donors.
    • These instruments are not traded but are held in the donors’ accounts, and their value becomes zero at the end of one year when SUF’s project is completed.
  5. Purpose of Fundraise:
    • The funds raised were intended to train 10,000 youth across states and assist them in finding jobs.
  6. Transparency and Monitoring:
    • Listing on the stock exchange allows for checks and balances, including disclosing the purpose for raising funds and providing a timeline for their utilization.
    • Annual impact reports audited by social audit firms contribute to transparency.
  7. Credibility for Investors:
    • Listing enhances credibility and comfort for investors as they can monitor how the funds are utilized.
  8. SEBI Board Approval:
    • The SEBI board recently approved changes, including halving the minimum issue size of ZCZPs by NPOs on SSEs to Rs 50 lakh and reducing the minimum application size to ₹10,000 to enable wider participation.
  9. Future Listings:
    • There are 38 more NPOs registered with the NSE SSE, suggesting the potential for more listings in the coming months.
  10. Impact Investing and Social Change:
    • SSEs are described as representing a unique approach to impact investing, creating a bridge between donors and NPOs dedicated to driving social change.
    • SSEs offer advantages such as transparency, trust, efficiency, and cost savings.

It’s important to note that the impact of this development on the Indian economy depends on the scale and success of SSEs in promoting impact investing and supporting social enterprises and voluntary organizations. The inclusion of more NPOs and changes in regulatory requirements, as approved by the SEBI board, could influence the landscape of impact investing in India.

About SGBS Unnati Foundation: SGBS Unnati Foundation is a not-for-profit organization formed in November 2011. It focuses on providing vocational training for underprivileged and unemployed youth, particularly in the age group of 18 to 25 years.

The funds raised through the ZCZP bonds issued by SGBS Unnati Foundation are aimed at training up to 10,000 graduating youth from government colleges in various states to help them secure employment.

The training program includes 165 hours of training for each youth, comprising 90 hours of classroom learning over 30 days and 75 hours of self-learning content on a mobile application. The cost per head for training is ₹2,000 per youth.

About Social Stock Exchanges (SSEs) –

SSEs are trading platforms designed to facilitate capital raising for social businesses and non-profits by connecting them with ethical investors interested in organizations with both corporate and social missions.

The establishment of SSEs aims to provide a unified and coherent framework for funding, utilization, impact measurement, disclosure, and reporting in the social development sector.

  1. Purpose of SSEs:
    • SSEs serve as platforms for social enterprises and voluntary organizations to raise capital through various financial instruments, including debt, equity, mutual funds, and specific instruments like Zero Coupon Zero Principal (ZCZP) bonds.
  2. Coherence in Funding:
    • SSEs seek to bring coherence to the diverse funding sources for the social development sector, including corporate social responsibility (CSR), philanthropy, government funding, and retail charity.
  3. Uniform Frameworks:
    • SSEs aim to establish uniform frameworks for funding, impact creation, measurement, disclosures, and reporting across different social organizations.
  4. Initiative by the Indian Government:
    • The Indian government announced plans to set up an SSE in 2019 to enhance the ability of social enterprises to raise capital.
  5. Key Building Blocks:
    • The SSE consists of three key building blocks: the demand-side ecosystem (social organizations), the supply-side ecosystem (investors), and the infrastructure (the SSE and its intermediaries).
  6. Government’s Role:
    • The government plays a crucial role as the market maker and influencer in the SSE ecosystem.
  7. Regulation by SEBI:
    • The Securities and Exchange Board of India (SEBI) serves as the SSE regulator, overseeing the functioning of SSEs and providing guidance.
  8. Approved Financial Instruments:
    • SSEs offer various financial instruments approved by SEBI, including mutual funds, social impact funds (with grant-in/grant-out models), and ZCZP bonds.

ZCZP Bonds

A Zero Coupon Zero Principal (ZCZP) bond is a financial instrument that does not provide any periodic interest payments, and the principal amount is not repaid at maturity.

These bonds are issued with a face value, and they mature when a specified project is completed or after a predetermined period, typically 12 months from the date of allotment. They are issued to non-profit organizations (NPOs) for social development projects, promising a social return on investment rather than financial returns.

  1. Interest Structure:
    • ZCZP bonds do not provide any interest income to investors. Instead, they are structured as zero-coupon bonds, meaning that investors do not receive periodic interest payments.
  2. Maturity Conditions:
    • The bonds mature when the project for which they are raised is completed or after a fixed period, such as 12 months from the date of allotment.
  3. Listing on Social Stock Exchanges:
    • ZCZP bonds issued by non-profit organizations are listed on social stock exchanges (SSEs). While they are not available for trading in the secondary market, they can be transferred to legal heirs since they are issued in dematerialized form.
economy Social Stock Exchange (SSE)