In the works: the promise and pitfalls of sachet SIPs

How ₹250 monthly MF SIPs could empower low-income earners despite existing barriers

- Sashind Ningthoukhongjam

In January, the market regulator introduced the concept of ₹250-a-month mutual fund investments—akin to selling shampoo in sachets instead of bottles—in a bid to bring India's low-income earners into the financial mainstream. While smaller ticket size addresses affordability, there are barriers that make gold jewellery and informal chit funds more attractive propositions for this category of savers.

But, this means low-income earners are left with low-growth savings or end up watching their lifetime savings disappear after investing them in fraudulent schemes. Mint talked to those who tried to get their house helps to invest in mutual funds. The problem starts from trying to convince them to opt for an MF instead of buying a gold necklace. However, once they're in, there are structural hurdles to cross—and not all find it easy to complete the process.

Trust and persuasion

It's not easy to convince low-income earners who typically buy jewellery for savings to invest in a financial product such as a mutual fund. Many times, they are apprehensive and unable to grasp the concept. For Ratnama, a house help, it all started when she told her employer Samit Singh's wife that they planned to set aside some money for their child. When Singh got to know this, he urged Ratnama to put part of it in equity mutual funds to get higher returns than fixed deposits.

Singh told Mint that he spoke to Ratnama's husband, an electrician, about how MFs work, investing categories, and the concept of net asset value, but the husband didn't understand.

“Although I explained everything in Hindi, he zoned out. Later, he told me he hadn't understood much but still wanted to invest in MFs as they trusted me.” After two months, Ratnama told Singh that some FDs were maturing and she wanted to invest ₹60,000 in mutual funds for her child. Singh decided to help them out.

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