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The latest episode of ‘Lessons from the Masters’ hosted Manish Kothari, CEO, ZFunds who in conversation with K.S. Rao, Head - Investor Education & Distribution Development, Aditya Birla Sun Life MF spoke about expanding mutual fund distribution business in rural India.
He said that mutual fund distribution has broadly gone through three phases. The first phase saw private banks catering to the urban affluent, followed by distributors (NDs and MFDs) focusing on the urban middle class in the next phase. The last phase witnessed the rise of digital distribution largely catering to urban millennials. However, each phase missed a big part of India i.e. rural investors.
Also, many usually misunderstand rural India as poor India. However, rural India houses professionals and entrepreneurs.
Manish thus believes that rural markets have minimal competition and hold huge business potential. In this regard, he shared three simple yet effective tips to tap these vast opportunities.
1. Provide the comfort of a physical intermediary
Rural investors commonly invest across five product categories - fixed deposits, insurance, chit funds, gold and real estate. ‘Physical involvement’ is the common thread here. While gold and real estate are physical assets themselves, fixed deposits, insurance and chit funds involve a branch manager, insurance agent and chit fund collection agent, respectively.
Seeking a physical intermediary is typical client behaviour in rural India. Add a physical touch and offer them this comfort.
Further, the lack of human touch in direct plans ensures that rural India remain out of bounds for them, thus reaffirming the huge business potential for distributors in rural India.
2. Simplify technology, simplify client servicing
Rural investors generally use basic smartphones that could run slow on account of multiple/heavy applications. Integrate technology and create a WhatsApp-based business model.
WhatsApp is a commonly used application and also a largely accepted means of communication. You can use WhatsApp to send unit allocation updates, periodic folio statements and portfolio summaries. Also, you can facilitate a seamless onboarding process through WhatsApp.
Having such a business model saves the need to download additional applications and enhances investors’ experience. Also, you can stay in touch with them meaningfully and build stronger ties.
3. Make financial learning a gradual process
Financial literacy can improve mutual fund inclusion in rural markets. While imparting financial knowledge has been a concern, the ‘MF Sahi Hai’ campaign and digital exposure have created a buzz.
Mutual fund education is a journey and not a one-time process. Even if you look at existing clients, their understanding of mutual funds has improved only over time. In this context, create a flexible learning experience in their language of preference.
Introduce basic concepts first and familiarise them with easy-to-understand mutual funds. Gradually as they get hold of it, start introducing other concepts and mutual fund categories.
