India is a country with a vast potential for social and economic development. In the latest Global Economic Prospects report released by the World Bank, India is ranked second on the list of the fastest-growing economies in the world, with a projected growth rate of 6.1% in 2023.
While economic indicators and GDP growth provide valuable insights, true development is a multifaceted concept that encompasses numerous dimensions. It encapsulates the quality of life, social well-being, environmental sustainability, and equitable distribution of resources amongst a nation’s population.
There is considerable work that needs to be done to alleviate the population from poverty, unemployment, gender inequality, inadequate education, and healthcare. Overcoming these challenges will require a collaborative effort from all stakeholders – including the government, businesses, and civil society.
The development sector plays a pivotal role in tackling these pressing challenges to accelerate the country’s development. However, insufficient funding remains a significant hindrance to its endeavours. According to the Nationally Determined Contributions (NDCs), India requires US$170 billion per year from 2015-2030 to achieve the Sustainable Development Goals (SDGs). Only a fragment of this is currently accessible.
Why Social Stock Exchange
Adequate financing is essential to support the implementation of innovative projects, expand outreach to marginalised communities, and scale impactful initiatives. Upon addressing this financing gap, the development sector will be able to harness its capabilities to drive lasting positive change, uplift millions of lives, and create a more equitable and sustainable future for India.
Recognising this, Finance Minister Nirmala Sitharaman during the Budget Session of 2019-20, proposed the idea of an electronic fund-raising platform called the Social Stock Exchange (SSE) under the regulatory ambit of SEBI. This was a move welcomed by many. The stated vision behind this is to help provide a platform for impact-focused organisations to raise capital and create social and environmental impact.
A Sector Coming of Age
The launch of the SSE is a significant step for the development sector. A mere decade ago, impact investing was a nascent idea and undertaking. Though there was a lot of excitement surrounding it, there were also significant doubts about whether impact investing, which involves investments aimed at generating positive impact alongside financial gains, could truly establish itself as a full-fledged industry and gain momentum.
The rapid convergence and evolution of this sector are evident with the recent launch of the Social Stock Exchange. Even globally, with various countries establishing SSEs, this conversation is taking a new shape for the sector.
Mutually Beneficial Pact
As the SSE continues to grow and develop, it is expected to play an even greater role in promoting social and economic development in India. As more organisations start registering themselves under SSE, it will allow them visibility to a larger pool of investors.
Up until this point, there was a lack of a dedicated platform for social businesses to raise capital. Likewise, the other end of the spectrum – impact investors, also faced the gap of a reliable space that allows them to discover and assess investment prospects. The transparency promoted by SSEs is essential for the growth of the social enterprise sector. Investors need to be able to trust that social enterprises are using their money effectively and responsibly.
The SSE’s mechanism is robust, as it will list securities that raise money for both non profits & for profits social enterprises. This is a beacon of hope for every stakeholder in the civil society that has been working for the country’s acceleration to realise its sustainable development goals. While supporting development projects, the mechanism is also poised to act as a catalyst and help in creating jobs, driving innovation, and building a more inclusive society.
Crucially, this helps to create a platform that enables Indians to directly contribute to social development initiatives. Traditionally, causes have received significant support from foreign donors. With SSE, the non-profit sector is optimistic to witness increased local involvement and engagement in driving positive change.
Authored By Kiran Vernekar, Global CEO, Raintree Foundation