Simplified Laws Guide to Taxation and Legal Concern The good news is that I passed an exam a few days back and became one of the first 50 Social Auditors in the Country! This allows me to explain the new concept such as: What is a Social Stock Exchange? Who is a Social Auditor? And how is it different from a Financial Auditor? Allow me three minutes to explain!
First, let’s consider the context. In many countries, including India, a significant portion of the population is poor or underprivileged and nations recognize the importance of sustainable development goals to support these underserved, disadvantaged sections of society. To help the needy, some countries have attempted to create a Social Stock Exchange as a platform for social enterprises to connect with funders, but most have failed. Only Canada, Jamaica, and Singapore have successfully implemented this concept.
In 2019, the Government of India mooted the idea of a Social Stock Exchange which has now become a reality. India, apparently, houses the highest number of Non-Government Organizations (NGOs) in the world, with an estimated 35 Lakh Organisations, which is 2.5 times the number of NGOs in the USA.
Let’s take a look at how NGOs operate. Their objective is to achieve a specific social goal, and they collect donations from donors to fund their activities. However, donors are often not informed about how their donations are used or whether the desired social impact is achieved.
Now, look at a different scenario. Wouldn’t it be more satisfying for donors to see the social impact of their contributions? If NGOs could publish impact reports that are verified by a third party, donors would be more inclined to support these organizations. This would attract more philanthropists, social venture funds, impact funds, individual donors, and CSR funds to donate and support these NGOs. As a result, society would benefit from inclusive sustainable growth.
Don’t you think to make this rosy idea work, there should be a government-regulated platform in place? Such a rosy place in India is called a Social Stock Exchange (SSE), which is under BSE and NSE.
Social Enterprises (SE), such as Trusts, Societies, Section 8 companies, and For-Profit Making Enterprises can get registered under SSE. They must follow the ICDS and LODR Rules framed by SEBI to be registered and/or listed in the Exchange.
These Enterprises can raise funds through various instruments such as Zero Coupon Zero Principal (ZCZP) bonds, donations from Mutual Funds, Equity, Debt, etc. Those who believe in the concept and trust the people behind the SE can purchase/invest in these instruments. These instruments are not encashable, but they are essentially donations! The difference between this model and the traditional way of donating is that donors have access to an organized platform and a well-informed idea of the NGO to which they are donating. They can also track the progress of the project they are supporting.
To ensure the validity of impact reports, a third-party independent evaluator called a Social Auditor assesses them through evidence, observations, interviews, and analysis. Social Auditors issue an independent Audit Report that covers both qualitative and quantitative aspects, in contrast to financial audits that primarily focus on financial data.
Social Stock Exchange is a promising initiative that can help bridge the gap between Social Enterprises and funders- An idea of good money chasing a good cause!
As a proud qualified Social Auditor, I will share more short notes on this topic in the coming days. For now, let me sign off.
SSE audit is a new field and congratulations for qualifying as an auditor. This was a long pending requirement. People who wish to help the NGO would be certain that they are donating to the right NGO for the right cause.
The audit report will also help the Govt to have a check on the activities and their genuineness. Prasad