Can social stock exchange help with the trust barrier?

Funding
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One of the big challenges for social organizations to raise funds from the mainstream population is overcoming the trust barrier— potential donors have a hard time trusting that their investment will be put to good use.

In the case of listed companies on stock exchanges, we have regulators & comprehensive disclosure norms that have built trust over time. If we had something similar for social organizations – a social stock exchange (SSE), could it help them raise funds easily and not just rely on Corporate social responsibility (CSR)?

We recently had an ask me anything session with Hemant Gupta, head of the BSE SSE, to discuss this.
BSE and NSE SSE’s will be operational in the coming months. Soon, you will be able to donate to a cause that you identify with, just like investing in a stock from Kite.

Through Zerodha and Rainmatter Foundation, we will:

  1. Help the first 5 organizations with the minimum fundraising.
  2. Evangelize the idea of SSE by nudging investors to have a small allocation in their portfolios toward social investments. Because that’s what it is—not giving, but a social investment.

Here is the link to the full conversation

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Can The SOCIAL STOCK EXCHANGE Help with the TRUST BARRIER?

While building the LifeX platform, a social network app for change makers, me and my team did some research about the social sector and found that there are more than 3 million NGOs in India, and more than 10 million worldwide, and there is no valid data about the impact each NGO has created. I’m sure collectively they all created something more or less, but there is no valid framework to measure the impact. It is mainly because of the complexity of the sector itself.

I’m sure something like SSE is very much needed and only time will tell how effective this framework will help to build trust between Funders and NGOs. As per the available information, SSE is listing only a project of a registered NGO to raise funds and the players in the framework will audit the results and show it to the funders within 3 years or soon may be based on the complexity and nature of the problem that the project is addressing.

Why there is a TRUST PROBLEM in the first place? let’s think about it from a first principle point of view…

I’m sure every NGO starts with a passionate and good intentional founder to solve some problem he might facing or he might just see it and decide to create some solution. For that, he chooses a legal entity called NGO and he approaches his friends, family and others to fund that project by explaining a problem and how he is going to solve it just like a bootstrap start-up except there is no payback for the funders.

This founder has to give them something meaningful in return. If it’s not financial returns for the funds people have invested, he can only give them the results of the project. Otherwise, no one likes to invest just like a startup.

After a few months or a year, when the project they have funded gets succeeded and managed to change lives, witnessing the change in needy people and experiencing their gratitude is the most satisfying part of funding the project. It creates a positive and impactful impression on the funders and an immense amount of respect is credited to the founder who takes initiative and gives them an opportunity to be a part of it. The project has changed lives for the better and managed to spread happiness.

When the founder moves to the next project giving another opportunity to the same funders, they would be willing to invest again because this founder has earned credibility and trust. This is the way to build collaboration and trust, any other way it won’t work.

I think this is how the founder of the NGO should earn trust. He has to be passionate enough to convince the funders and lead the project and should show the results to the funders. These people are called change-makers in social sector terms.

To scale this one project to hundreds and to thousands of projects we need a platform that might be a SOCIAL STOCK EXCHANGE.

We need to address all the stakeholders to participate more and more to create a large impact.

  • How can we measure an individual’s or change makers’ contribution to the world?
  • How can we acknowledge the change makers’ contributions?
  • How can we motivate the same change-makers to contribute again and also how can we motivate someone to become a change-maker?

If you can’t measure if u can’t acknowledge, and if you can’t motivate people to contribute again at a large scale how can any change-maker get to know the impact of his good deeds? how can we create more change-makers in the world?

So if we measure and acknowledge the change makers’ contributions and he/she gets to know that their contributions are helping someone, he/she will be motivated to contribute (it’s not money) again. and their acknowledgement seen by other people and at least some of them might inspire to take action to contribute and they will also become change makers and get acknowledged to inspire the next.

So the loop will continue and the data will get generated to measure each change-maker’s contributions. This data is to honour their life contributions and whenever they are in need, we need to serve them back. That’s what LifeX does with a social network app to recognize, measure and acknowledge the contributions of any individual or organization. We are creating one of the concepts to serve within the circles to measure the 100% impact of an individual or organisational level we called it SERVE CIRCLE, a framework is developing by LifeX.

I think we summarised it much better way in the pitch deck that we mailed to Rainmatter.

SOCIAL STOCK EXCHANGE is a revolutionary idea. We will be happy to be a part of it to contribute and make it evolve to create more impact.
Thanks to the people who are involved in SSE.

Thank you,
Team LifeX.

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Here is the launch video of the Social Stock Exchange.

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For Non Profit Orgs (NPOs), SSE is going to be better alternative way of receiving donations, but for For Profit Orgs (FPOs) some more remains possible.

A new type of demat account especially for SSE through which securities of FPOs can be bought and swapped but not sold.

That way, similar to regular SE, for example, one can buy shares of a company listed on SSE and also swap them for shares of others but not sell and cash out (essentially still a donation). From FPO’s point of view, this would encourage competitiveness for social impact to not lose trust of shareholders that can swap to better performing orgs.

Exploring such a solution that could enable building a new type of broking platform for SSE. Appreciate all feedback. :pray:

I hope this helps. :smiley: