The market regulator, Securities and Exchange Board of India, announced recently that non-profit organizations as well as for-profit social enterprises will be permitted to participate in financial markets and raise funds through equity, various types of bonds, and even tap into mutual funds. There will be a newly created social stock exchange where such entities would be listed. Permission, as per this decision, would be granted to those enterprises that are wedded to social causes and have demonstrated positive results of their activities on the ground. They will be allowed to raise finances through social impact funds having a corpus of Rs five crore. Although the regulations are yet to be framed, Sebi has indicated that organizations involved only in certain approved activities will be entitled to this facility. These activities include, among others, work to eradicate hunger, poverty and malnutrition, promoting healthcare — including mental health — education, gender equality, livelihoods and empowerment of women and LGBTQIA+ communities as well as encouraging environmental sustainability. This step taken by Sebi is certainly welcome. Many non-government organizations doing commendable work are often constrained by lack of financial resources.

However, if this measure is to succeed in having a meaningful impact, a few issues need clarity from the Central government. During the tenure of the current dispensation, there has been a significant trust deficit created between NGOs and the State. The government does not seem to be happy with private sector engagements in areas of social empowerment and improvement. There has been a crackdown on philanthropic outfits that receive foreign help of any kind. Many of these NGOs are well-known for their global imprint. Some of them have been forced to curtail their operations; others have shut down for lack of funds and on account of government scrutiny. How will the Centre view Sebi’s new decision? How strict will the new rules be? Would a few not-for profit organizations and for-profit social enterprises that are close to the Central government corner most of the funds? The financial markets are currently awash with funds because of the central bank’s accommodative policy to support growth. Bringing new players into the financial arena may serve a productive purpose, provided access to the market is granted fairly and transparently. The new rule should not be a source of easy money that can be siphoned off by opportunists and charlatans.