Sebi-regulated Social Stock Exchange lets social enterprises raise funds via zero-coupon, zero-principal bonds; investors get 80G tax breaks and Sebi-tracked reports

The Social Stock Exchange (SSE), regulated by Sebi, enables social enterprises to raise funds through zero-coupon, zero-principal (ZCZP) bonds. This innovative funding mechanism allows investors to receive 80G tax breaks while ensuring accountability through Sebi-tracked reports.¹⁴

To qualify for the SSE, non-profit organizations (NPOs) must have a three-year track record and engage in activities aligned with national development goals, such as education, healthcare, and environmental sustainability. Political and religious bodies are excluded from participation.

The ZCZP bonds are unique; they do not pay interest or require principal repayment, effectively making the investor a donor. The bonds are issued in dematerialized form, with a minimum issue size of ₹50 lakh and a minimum application size of ₹1,000. They cannot be traded and are tied to specific projects.

Ketan Deshpande, founder-chairman of Friends Union for Energising Lives (FUEL), shared that their first ZCZP issue raised ₹1 crore to fund the education of 40 girls, highlighting the community's engagement in philanthropy. He noted, “We had very good examples: a security guard’s daughter was to be brought into the mainstream of education.”³

The SSE also offers corporate donors a streamlined process, exempting them from conducting their own impact assessments, which can be costly. Deshpande estimates fundraising costs at 4-5%, significantly lower than traditional methods. Ramesh Daswani, CEO of Light of Life Trust, emphasized the legal assurance that funds are dedicated to specific projects, stating, “You cannot ask for money for an existing programme.”

Overall, the SSE represents a significant step in connecting social enterprises with funding while ensuring transparency and accountability in the use of funds.