The Case for Fundraising through the Social Stock Exchange

Shriharsh (Harshu) Ghate

March 25, 2025

It has been six years since the ﬁnance minister announced the formation of the Social Stock Exchange. However, the exchange has not really taken off, with only 10 listings and a fundraising of around INR 20 cr.

Part of the blame for the lukewarm response lies with the Social sector organizations for whom this exchange is set up. Some of their valid concerns, such as lack of reach to investors, fear of excessive reporting, and compliance notwithstanding, the SSE does provide an alternate funding avenue that is worth exploring.

The advantages, strategic and tactical, of using the Exchange outweigh the concerns, which can mostly be addressed through effective awareness creation and handholding.

Here are the Top 5 reasons for the social sector organizations to get listed on SSE:

Diversification of funding sources

In the initial stages of the organization’s existence, projects are funded mostly through individual donations or government grants. At later stages, CSR and FCRA become the main sources. In matured organizations (existence of more than 5-7 years – fund size beyond INR 5-7 crores), reliance on a single source can be risky more so when the source is driven by regulatory requirements, like CSR or FCRA. Minor tweaking of regulations can impact funds available for the sector. For instance, in the recent Budget, the Government announced the apprenticeship-based employment program (funded partly by the Government), companies have been allowed to take credit for the balance stipend paid to apprentices as their CSR expense. To that extent, the company’s obligation to contribute to external organizations has reduced resulting in a lower CSR pool to tap into.

Improving Credibility

As a part of the listing process, the organizations undergo due diligence concerning all their statutory compliances and ﬁnancial reporting, audits, etc. Post-listing disclosures and independent social audits are publicly available documents. Organizations that have gone through the entire process and are ready to follow the post-listing ﬁlings certainly enjoy far more credibility than others. Credibility not only with Donors and Regulators but also with employees, beneﬁciaries, and collaborating organizations. Listing not only creates a source that can be tapped repeatedly but also gives conﬁdence to other donors – corporations and individuals about the quality and reliability of the organization.

Developing a completely new source of investors

Investors on the SSE belong to categories such as Family Foundations, Family charity trusts, HNIs, and Ultra HNIs. Many organizations have not approached these investors and do not have visibility with them. Listing allows them to cultivate this channel and diversify the donor base.

Getting ready for the future

If one were to analyze the thinking of the government towards social sector funding, it is obvious that the Government looks at this sector to implement social initiatives in remote areas and is keen to strengthen worthy organizations. At the same time considering the increasing size of an already large pool of funds, it is keen to see the impact through tighter compliance, more visibility of projects, and independent impact assessments. Given this thinking, the Government may, in the coming days, want to route all sector funding through the regulated mechanism as SSE. For instance, Projects above a particular size or a particular domain may be required to be compulsorily listed. It is also likely that investments in SSE-listed projects would qualify as CSR. This will force orga- nizations to list their projects to attract CSR.

Most of the listed organizations believe that going forward, the bulk of the funding to the sector will be routed through the SSE and hence they want to be there well in time.

Developing capabilities in impact measurement, accountability, and transparency

It is beyond doubt that organizations that are well-organized, process-driven, and have a culture of measurement and compliance have a much better chance of survival and growth than others. Well-managed organizations with a progressive outlook, good quality donors, and a listed status have a better chance of recruiting good talent and retaining them.

It is high time, social organizations realize that while it is certain in the coming years, more funds will come into the sector, however they will be accompanied by more controls and demands for accountability and transparency. Simultaneously, the sector also needs to reduce excessive dependence on regulation-driven avenues such as CSR and FCRA by diversifying the funding mix. Fundraising through listing on SSE is one of them.

There is a To-do list for the SEBI and policymakers to give a further push for this initiative and one can debate who acts ﬁrst. If more organizations get listed and show positive inclinations it will force the policymakers to consider their grievances. Action from the sector will provoke the desired reaction.