Setting up the first regulated, non-profit focused ‘social stock exchange-listed’ social venture fund can be a major milestone for India’s non-profit sector. Discuss (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· A type of alternative investments fund (AIF) permitted by India’s securities regulator, the Securities and Exchange Board of India (Sebi), an SVF is an intermediated structure that can receive funds from donors and investors, who are issued units in exchange.
· Much like a mutual fund, it is managed by a professional fund manager, who then ‘invests’ the funds. The difference being that an SVF can invest in securities issued by social sector organisations, including non-profit organisations (NPOs).
SVF a promising financial innovation
· It unlocks the benefits of a collective grant-making entity that is managed by a professional ‘fund manager’.
· For donors, it offers an opportunity to discover better or lesser-known NPOs through an expert funder manager. This is comparable to what a general partner does for limited partners in the venture capital/private equity world.
· It is cost-effective, as it limits the need for donors to have their own in-house teams and domain expertise to diligence grantees. It enables access to a large NPO pool without the need for on-ground presence, which is especially useful for foreign philanthropic funders.
· For NPOs, it broadens the pools of capital by crowding in new funders and lowers overheads and reporting requirements. This is because they have to deal only with the manager of the collective entity, and not with individual donors. This liberates NPOs from the burden of reporting to different donors in different formats and reporting cycles and frees up more of their organisational mind space to focus on their mission.
· For the non-profit sector as a whole, it enables the creation of new far-reaching opportunities for impact at a scale, which may otherwise not happen, such as large collective efforts around specific causes like adolescent girls, migration, etc.
· The ‘trust-mark’ that comes with being a regulated entity provides greater confidence to new non-traditional funders. The regulatory umbrella of Sebi brings in greater credibility and accountability and also minimises the perception of idiosyncratic risks associated with a non-regulated, traditional grant-manager.
