Will Social Stock Exchange increase investments in healthcare sector?
Neetu Chandra Sharma
- Social Stock Exchange is being seen as a tool that can give a practical shape to entrepreneur’s vision for a better society
- The idea may ensure capital for endeavours that address social good and wellbeing
New Delhi: As India is in a dire need to bump up investments in healthcare sector owing to swelling pressure on the existing health system, the recently announced Social Stock Exchange (SSE) aiming at listing social enterprises that could raise capital from investors, floats hopes for improvement in health facilities, especially in remote areas.
As proposed by the finance ministry, a SSE will allow listing of social enterprises and voluntary organizations to raise capital by way of debt, equity or as units like mutual funds through an electronic fundraising platform.
With scores of nongovernmental enterprises working in healthcare space in India, the idea may respond to the social, health and environmental realities of the day by ensuring capital for endeavours that address social good and wellbeing. The attempt can also be looked as method to address funding barriers and support a favorable market ecosystem for promising social enterprises working in healthcare, especially in rural areas.
“SSE is a powerful idea and has the potential to direct hitherto un-accessed Public Equity Investments (Individual Investments) to this sector. Impact Investments have been around more recently and attract money from big and institutional investors. Securities and Exchange Board of India (SEBI) getting involved can increase the checks and balances of those who avail these funds," Ravi Sreedharan, Founder of the Indian School of Development Management (ISDM) said.
The Social Stock Exchange is being seen as a tool that can give a practical shape to entrepreneur’s vision for a better society thereby improve access to better treatment and diagnostic facilities in remote areas in the country. “Small NGOs need access to funds. SSE may work for benefits of big organization that are professionally managed. The need for resources is high for not for profit working in remote and underserved areas in healthcare and social sector. If this process enables them to access funds without much compliance requirements, should be welcome," said Dinesh Aggarwal, Technical Health Advisor, IPE Global, an international development consulting company.
Countries like Canada, United Kingdom, Singapore, South Africa, Brazil, and Kenya have already initiated their own social stock exchanges to nurture and support social businesses beyond traditional markets for a meaningful impact. Social Stock Exchanges in Brazil and South Africa work primarily as a platform that helps investors reach issuers of non-profit and social enterprises where investment may be done based on area of work, domain etc.
“It’s a win-win situation for both people and society, if properly implemented. While investors would get a better and more potent opportunity to extend a helping hand towards ever changing needs of society such as health and care for elderly, this will also improve the system for people. Over the centuries, society and business complemented each other and commercial activities originally evolved primarily to address the needs of society," said Himanshu Rath, founder director Agewell Foundation, an NGO working towards welfare of the elderly.
“However, with the concept of profit making commercial activities have overtaken the needs of a balanced social order, it is implied that SSE would be most useful in balancing the widening gap between the haves and haves not. At the same time, social entrepreneurs will not only get social returns on their investments, but also comparatively good economic return as they will be investing in not-for-profit making enterprises," he said.
As per a McKinsey Report titled ‘Impact Investing: Purpose Driven Finance finds its place in India’ (2017), Impact Investment in India could grow between $6 billion to $8 billion by 2025. In order to ensure relevant and context specific development for the people and planet, improving living standards and scaling up social efforts, a new kind of purpose driven investors is rising. Joining this league are mainstream investors who were once seen as funders seeking financial profits.
“SSE is a step in the right direction especially for a sector like healthcare where large-scale investment is the need of the hour. Such an exchange will enable public participation in social causes albeit through the equity route and organizations will have a great visibility and chances of raising capital. Such a model can have a very positive impact on building healthcare infrastructure in Tier 2 and tier 3 cities and achieving the goal of quality healthcare for all," said Praveshh Gaur, Founder, Director, Srauta Wellness, a health venture.
However, social and business experts have raised a concern, that shaping up of this idea would require right set of experts on board, a careful examination of countries running SSEs and proper filtration of all the possible loopholes so as to ensure a massive social and environmental impact.
“We need to be cautious about a few things. SEBI will have to understand that Social Purpose Organisations and the impact of their work is far more complex than For-Profit organizations. We expect SEBI to involve a wide range of experienced and knowledgeable people from the Sector as there is a possibility of abusing this well-meaning idea," Sreedharan said.
Experts have argued that for the non-profit sector and Social Purpose Organisations, the market and Exchange’s traditional evaluation based on numbers alone will not work. “The most visible area of concern for SSE globally is to be able to standardise accreditation and India needs to learn from the mistakes of existing SSEs to find a dynamic and responsive model. The nature and context of social challenges and social enterprises and Social Purpose Organisations in the country are diverse. It is imminent that our SSE is able to respond to these contexts, Sreedharan stated.
“Furthermore, within social purpose and developmental work, evident impact based on direct efforts may not be visible. There needs to be acknowledgment and methods that allow accepting non quantifiable Social Returns on the Investments made for social enterprises and organizations," he said.