Mutual funds are allowing SIPs with amounts as low as Rs. 50 in a bid to reach out to masses and shore up their assets under management
Mumbai: Logistical hurdles, high costs and distributor disinterest have remained core concerns for fund houses wanting to promote their schemes. Despite these barriers, fund houses have not shied away from lowering the minimum investment amounts in mutual funds. Fund houses have tied up with third party institutions like NGOs, micro finance institutions and co-operative banks to promote Micro SIPs.
Micro SIPs work on a financial inclusive model which aims to collect tiny sums from daily wage earners in semi urban and rural pockets of the country. Currently, Reliance, SBI, UTI, Birla Sun Life, ICICI Prudential and Axis Mutual Fund offer Micro SIP options.
Over the years, the minimum threshold limit of Rs 1,000 per month has fallen to Rs 50 and Rs 100 per month. For Micro SIP to become financially viable for fund houses, the assets under management have to be substantial.
Four years back, Reliance Mutual Fund slashed its minimum SIP amount from Rs 500 to Rs 100 per month. In 2007, ICICI Bank started offering Rs. 50 per month SIP to tap rural masses by tying up with a micro finance institution KAS Foundation. The corpus is managed by ICICI Mutual Fund. In 2008, ICICI allowed Micro SIP of Rs 100 in its Liquid Plan (growth option). Bharti Axa Mutual Fund offers daily SIP starting from Rs 300 per month while Sahara Daily Fund allows investments of Rs 10 a day.
In 2009, SBI Mutual Fund launched its SBI Chota SIP. SBI Mutual Fund markets this scheme with the help of self-help groups (SHGs), NGOs and micro credit institutions. SBI’s Chota SIP is said to have collected around 50,000 folios since its launch from unorganized work force across the country.
One of the popular schemes in this category is UTI Retirement Benefit Pension Fund. Under its micro SIP option, the scheme claims to have two lakh investor accounts. The fund is popular among milkmen, farmers and women in states like Gujarat, Bihar, Madhya Pradesh and Rajasthan and is collecting 5,000 to 6,000 new folios every month. UTI permitted Rs 35 per month SIPs in this scheme in 2005.
The latest to join this bandwagon is Axis Mutual Fund which allows Rs 100 per month investments under its Axis Triple Advantage Fund with effect from April 01, 2011.
“Promoting these schemes is a costly affair. There are logistics issues also. We are not allowed to accept cash and third party cheques. You can’t promote such schemes in leading financial dailies or magazines. Fund houses have to bear all the banking charges,” said a marketing head of a leading fund house.
“It depends on what fund houses want to focus on. It has to make economic sense. You have to make money out of it. It’s not only about reaching out to investors but it’s also about making profits,” said a marketing head of a private mutual fund house.