Social enterprises work for the social and profit motive. The meaning of social enterprise has been impressing people around the world since long ago. Examples of a few social enterprises that worked for people below the poverty line are Grameen Bank, Bangladesh, The skill foundation, North America, Echoing Green, USA, Schwab foundation for social entrepreneurship, Rang De -India, and Omidyar network. Rang De -India is an online platform offering support to new and small businesses. These organisations arrange small loans to individuals to become successful in their profession. These enterprises prove that the words charity and profit-making are inclusive and not exclusive. Inclusiveness impacts the business. Hand-made products and the reuse of basic products help needy people. Producing and selling for the people below the poverty line is lighting up the idea of positivity. The third regulation of chapter X-A from SEBI deals with the SSE. Finance minister Nirmala Sitharaman spoke about the funding of social enterprises in the 2019 budget. The blog revolves around the latest news and the need for social enterprises in the current scenario.
What is social enterprise?
Social enterprises solve the problems of the targeted group. Social influence, innovation, entrepreneurial approach, financial sustainability and scaling form the nature of social enterprises. Charity sales offices, employment sourcing organisations, educational institutions, services that are not provided by the government, and organisations that develop the community and territory are the different models of social enterprises. SEBI says organisations that fall under the social enterprises are grouped into 15 types.
What are debt securities?
Social enterprises are known through the fifteen types of social activities. These enterprises are capable of raising funds through the equity and debt market. The alternative investment fund option opens the funds from the debt market. The NPOs with eligibility may raise funds from mutual funds, zero coupons zero principal bonds, social impact funds, and development impact bonds. The debt securities have the following characters:
• They are transferable and represent the creditworthiness of the company. Equity funds represent ownership, and debt securities represent creditworthiness.
• The equity market offers common shares, common stock and preferred stock. The different types of debt securities are corporate bonds, call money, CBLO, certificate of deposit, non-convertible debentures, treasury bills, government securities and commercial paper.
• The interest rate of the security is fixed based on the value. The owner is liable to pay the amount borrowed. The debt securities are issued along with an interest or with a discount.
• In the debt market, some securities are issued without a redemption date. And some are issued with a redemption date.
• Debt securities are listed among a group of investors interested based on private placement. They are traded through counter and stock exchange. Equity stocks are traded only through stock exchanges and not through the counter option. Stocks traded through OTC are referred to as unlisted stocks.
• They fall under the secured asset and unsecured asset. Some securities are secured with specified assets, and some are with unsecured debt.
• If the debt securities are issued with full recourse, they have a claim with the asset of the issuer. The securities issued with limited recourse have a claim with specified assets of the issuer.
Examples of a social enterprise:
The following enterprises work with a motto to provide service to poor people. It exemplifies social enterprise operations.
• A credit union is a type of organisation that provide financial services to a network of people. The CO-OP is an example of a network that connects the ATMs in the United States. They offer surcharge-free ATMs in US Navy bases and Canada.
• Community-based social enterprises work for the development of the local market. They trade and do marketing for the local market. An example of such an organisation is “The Recycled Orchestra” from America. They work for the local community. The organisation support music and does projects for international events.
• Non-governmental organisations do business and help people. These organisations do not run from donations or charity. BRAC from Bangladesh works for isolated people. This organisation provide employment, entrepreneurship and accessibility to resources.
• Social firms work for the labour market and provide service to the general public with concerns. Arvind Eye care is an Indian hospital that provides service to Indians at a low cost. This entity is an example of a social firm that works for a large group of customers. Hotels and libraries that operate as social firms support the labour market with employment and service. The idea behind the business is different, but the cause is the same.
• Co-operative associations are formed by members who have common social and economic needs. An example of such an enterprise in India is Amul’s cooperative society. This company work with a three-tiered structure for the dairy societies from villages in Gujarat.
• Fairtrade is the social movement for better trade conditions. Fairtrade products are chocolate, clothes, banana, coffee, flowers, tea, gold, juice, cool drinks, sweets, snacks, sugar, spreads, grains, oil, wine, herbs, spices, vegetables and fruits. The producers of this product are not earning much. Divine Chocolate is a UK-based company offering business to local cocoa producers.
• The micro-finance supports small businesses. These business models offer services to individual enterprises and group-based schemes. In India, there are more than 3000 microfinance companies. SKS Microfinance Ltd, SpandanaSphoorty Financial Ltd, and AsmithaMicrofin Ltd are the top companies offering services in the arena of microfinance.
The initiative of the government is for a good cause. It supports the weaker section. The systematic development of the economy is possible only by creating business opportunities, and employment for people below the poverty line.