Bhopal: The Madhya Pradesh government unveiled the Social Impact Bonds (SIBs) while presenting its fiscal blueprint to the State Assembly on Wednesday.
An allocation of Rs 20 crore has been earmarked in the Budget to fund this initiative, with the bonds slated for introduction within a month.
SIBs operate as an accord with governmental entities, wherein funds are allocated towards enhancing social outcomes.
If predefined goals fail to materialise, investors forfeit their returns and receive no reimbursement for their initial investment.
“The state plans to introduce social impact bonds as a pioneering financial instrument. Through these bonds, social service providers will secure funding from risk investors to deliver services to the intended beneficiaries. The Social Stock Exchange, operated by the National Stock Exchange, serves as a unified platform to facilitate this entire process,” Finance Minister Jagdish Devda said in his Budget speech.
However, much detail is not available.
In the context of India, SIBs are emerging as innovative financial instruments supporting social endeavours. They invite investors to finance initiatives where returns hinge upon the fulfilment of established objectives.
The upcoming SIBs of Madhya Pradesh are set to be unveiled through the Social Stock Exchange (SSE) segment of the National Stock Exchange (NSE).
This platform facilitates the fundraising efforts of non-profit organisations (NPOs) and for-profit enterprises (FPEs).
The instruments will find application in state-backed projects under various departments, including those focused on social justice, education, and tribal welfare.
The distinguishing feature of SIBs lies in their dependence on the realisation of predefined social objectives – in the absence of which investors have to forego any financial gains.
Participants in such ventures are typically private entities or individuals keen on securing monetary returns while leaving a constructive imprint on society through their financial commitments.
An example is the inaugural bond launched by the National Bank for Agriculture and Rural Development (NABARD).
“The state has several social schemes that serve as an instrument for raising capital through product-specific vouchers, destined to support ventures yielding positive societal benefits. The state may raise funds through such bonds,” a senior government official told IANS.
India is increasingly embracing innovative strategies to convert its demographic strength into economic progress.
Among these endeavours is the introduction of the nation’s maiden skill bond by the National Skill Development Corporation (NSDC), undertaken in partnership with diverse collaborators.
(IANS)
