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India courts moral investors with calls for social stock exchange

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According to Finance Minister Nirmala Sitharaman, this proposal could provide less expensive funding for social welfare projects.

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Indian Finance Minister Nirmala Sitharaman called for the creation of a “social scholarship”, allowing ethical investors to take stakes in social enterprises, volunteer groups and social welfare organizations.
This proposal would be a radical experiment in a country characterized by deep inequalities and rapid economic growth.
If this exchange were created, it could provide new and less costly sources of funding for social protection projects, while showing India’s independence from foreign aid to strengthen its position on social protection. World Scene.
“It is time to bring our financial markets closer to the masses and meet various social protection objectives related to inclusive growth and financial inclusion,” said Sitharaman in his inaugural speech on the budget on Friday.
Sitharaman’s plan for a social scholarship marks a new focus on corporate sustainability and social impact, said Amit Bhatia, CEO of Global Steering Group for Impact Investment. “Previously, the main goal of investors was to maximize returns,” said Bhatia. “In recent years, impact funds have multiplied and all major private equity companies have taken action.”
According to Bhatia, these “impact” assets have grown from $ 0 billion to $ 22 billion over the last two decades, and almost every major company in the S & P 500 publishes sustainability reports.
“It’s an unstoppable trend,” he said. “We have found a higher target for capital.”
According to him, a social scholarship, if created, would imply that the government creates a legal definition of “social enterprise” and that companies begin to measure the social and environmental impact of their work.
Exchange has another advantage: it could highlight the self-sufficiency of India in that it tries to obtain the status of superpower.
Over the last decade, successive governments in India, including Narendra Modi, have been hostile to foreign-funded NGOs. Critics view international NGOs as a neo-colonial enterprise and a way for Westerners to meddle in Indian affairs.
Between 2014 and 2018, foreign contributions to India decreased by 40%, largely because the government canceled the licenses of thousands of NGOs, according to Bain and Company’s 2019 Philanthropy Report.
“India has a very dynamic scene of social entrepreneurship,” said Subhash Chandra Garg, India’s finance secretary. “We have almost eliminated foreign aid, we are independent, we are financing our own development.”
Garg said the launch of the exchange was still in its “exploratory phase”. If created, the exchange will likely be regulated by the Securities and Exchange Board of India and allow charities to raise funds in the form of shares or trading units.
Modi’s critics suggested that the exchange could be used to increase the funds available to political organizations.

“No one I spoke to [in the Ministry of Finance] really seems to understand what they have proposed,” said Mihir Sharma, an economist at the Observer Research Foundation. “The safest thing to assume is that it has something to do with the professionalization of NGOs.” Source

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