Time is running out for social scholarships in India

The current pandemic has clearly highlighted human values ​​and the desire to coexist and fight together against the viral catastrophe which has struck the planet. Many rare exemplary examples of care provided by poor and marginalized people circulated aggressively on social media, inspiring many more to join in the good cause. Many philanthropists have committed a large portion of their wealth to the welfare of society. Normally non-governmental organizations (NGOs) or non-profit organizations (NPOs) seek donations for social causes through public or individual appeal or explore the umbilical link with various institutions in India / India. foreigner.

There are concerns that NPOs are using the funds wisely or not, although many are subject to social audits and follow well-established ethical standards and social governance structure. Despite this, these NPOs have limits in accessing donations and donors have their own inhibitions in channeling donations. A Social Stock Exchange (SSE) can address these limitations in a more structured format that can potentially ensure better pooling of funds for welfare. It can also help to bridge the gap between the “haves” and “have nots” in society, at least to some extent.

According to the World Bank, the Gini coefficient, a measure of income inequality is represented by the Gini index. It provides a good reference on the model of concentration of income distribution. It should be read on a scale of 0 to 1 where 0 is the worst income distribution – high income inequality and should tend towards 1, the best income distribution – the lowest income inequality. The higher the number, the better the inequality. Among BRICS economies, Brazil – 0.53 (2019), Russia – 0.37 (2018), India 0.35 (2020), China – 0.38 (2016), South Africa – 0.625 (2018). In this league, India ranks at the bottom of the scale. The best in the league is South Africa at 0.625 while the United States has an index of 0.41 and the United Kingdom of 0.35 on par with India. In this context, the SSE can be an effective tool to increase a better distribution of income.

1. Compatible step for ESS:

An ESS is a well-regulated place for the NPO List to provide an alternative fundraising structure – a one-to-many and many-to-one fundraising investment model. There is a lot of potential for SSE in India with a growing NPO base currently set at nearly 3.1 million and that number may grow exponentially after the pandemic. Many entities in the corporate sector have their own foundation entities to use funds intended for corporate social responsibility (CSR). The establishment of a trust or a company under section 8 of the Companies Act 2013 is allowed to undertake activities of public interest under its direct administrative control. Companies can also outsource CSR tasks to established social enterprises – institutions / NPOs engaged in CSR activities for 3 years or more. The total CSR spent in India is estimated at 246 billion rupees and is increasing. The transformation of the social mindset is evident in the way communities began to celebrate different occasions to experience the ‘joy of giving’. The establishment of SSEs can, over a period of time, aim to unlock large pools of social capital and encourage a mixed financial structure, so that conventional capital can combine with social capital to meet the serious challenges of the market. COVID-19 and its consequences.

2. Overall experience:

ESS are known to be well-regulated institutions that aim to bridge the gap between the social sector and private capital by providing a platform through which donors and investors can fund and facilitate the growth of social purpose organizations. . Brazil established the world’s first ESS in 2003, with the creation of the Bolsa de Valores Socioambientais (BVSA).

Since then, stakeholders in several countries – including South Africa, Portugal, Canada, Jamaica, UK and Singapore have institutionalized ESS. These small businesses have aspired to harness the resources of financial markets and private capital to tackle some of the most pressing social and environmental problems. But the road to ESS is not smooth. They struggle to establish themselves and to maintain themselves. Many of them are no longer operational due to financial and other structural issues. Only ESSs in Canada, Jamaica and Singapore continue to work. Compared to traditional exchanges, the number of users is low and economies of scale are difficult to achieve. Setting up ESS is not the only solution, but nurturing them with adequate prudential standards and regulations will be more important to ensure their sustainability over the long term.

3. Initiatives in India:

Following the announcement in the 2019-2020 Union Budget to set up small businesses in India, the Securities and Exchange Board of India (SEBI) has taken several initiatives to institutionalize them. A working group has been set up by SEBI to explore the methods and diversity of ESS and how they can be structured. The committee submitted its report in May 2020 recommending the formation of SSEs for the nonprofit sector aimed at boosting development at the sector level. Implementing these recommendations can lead to the development of a dynamic and supportive ecosystem, enabling the nonprofit sector to realize its full potential to create social impact. The task force was followed by a technical advisory committee to shape the new venture. The group’s report found has been placed in the public domain for stakeholder comments. With such a thorough groundwork coming together well, the scene seems to have matured for SSE to find its way.

The shaping of organized institutions, such as ESS with its conditionalities and operational rigor, can accelerate ongoing philanthropic activities. Regularity of reporting, transparency, disclosure and sharing of research reports on the impact of the end use of funds can help NPOs develop as a critical sector to serve millions of vulnerable sections of society . The diversity and range of NPOs currently in operation and potential new entrants who obtain funds through small businesses can catapult the industry onto a growth trajectory that can make positive differentiation visible. It can ultimately improve the Gini index. Therefore, the time may have come for the debut of ESS in India.

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