Ideas ... Social Capital Exchange
An initiative of Dureen Shahnaz

Stock exchange to facilitate investments in social enterprises

COMMENTARY

Peter Burgess

Stock exchange to facilitate investments in social enterprises

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SINGAPORE: Asian investors will soon find it easier to invest in social enterprises or companies with social causes. A special stock exchange catering to them will be set up in Singapore within a year, with the backing of the Rockefeller Foundation.

The move will help such firms raise capital by opening them up to the average retail investor. Currently, investing in them is only available to institutional investors and high net worth individuals, according to experts at the Global Social Innovators Forum in Singapore on Thursday.

The new stock exchange will seek to attract social enterprises promoting causes in India, Bangladesh and Thailand, similar to a social exchange presently based in London.

It is also expected to attract micro-credit enterprises or firms that provide affordable loans to the poor.

Durreen Shahnaz, founder and chairman of Impact Investment Exchange Asia, said: 'If you're putting money into, say, micro-credit enterprise, you're not only getting back a financial return from that because you're getting interest back, but you'll also make some sort of social impact.'

According to experts, funds investing in micro-financing banks that offer loans to the poor have been averaging 5 per cent returns in the past year.

The segment is worth over US$2.7 trillion in the United States alone and is expected to be the next growth sector in the financial industry.

Shahnaz said: 'The Grameen Bank is financially sustainable now, but it only could go to scale because it had a lot of support and strong foundations from the government.

'I think that speaks in itself - any entity with a social mission and if it's going to give a financial return, needs that ability to scale and that's where the investments come in,'

An example of a social enterprise with a sustainable business plan is Qifang. It is an online service that helps Chinese students find a way to pay for their education, through a P2P lending model.

While it is currently free, it is set to start making money from charging minimal fees for its loans. This is one way where investors can expect to get their returns.

Calvin Chin, CEO of Qifang, said: 'People realise that they have to invest in companies that are actually profitable if you include their social impact. There's a famous saying, 'You can't have a sustainable business in a failing society', and I think that's really true.'

Right now, experts said investors are still new to the concept of investing in such social enterprises and the challenge is to create greater awareness of this asset class.