ICICI Prudential Mutual Fund on 25 April launched ‘micro systematic investment plan’ (MSIP) in association with KAS Foundation, a micro-finance institution, to offer a mutual fund investment plan which allows a rural investor to take exposure to the booming stock market for as little as Rs50 every month.
KAS Foundation is one among the 200 non-governmental organizations (NGOs) through which ICICI Bank has pioneered micro lending and borrowing in rural India.
UTI was the first mutual fund to offer micro-investment option in mutual funds to the rural population. It follows the same structure of an aggregator who interface between the mutual fund and the small rural investors. It has about one lakh rural investors signed up for its pension plan through local organizations. UTI expects to add 10 lakh micro investors into its rank this year and plans to add more grass-roots organizations into its network.
KAS Foundation, which started four years ago, now has a rural base of 5.25 lakh customers availing of micro credit from ICICI Bank, primarily in Orissa and Maharashtra. These customers were split among 12,000 self-help groups spread over 24 districts in August 2005. The foundation has plans to expand its outreach to at least 20,000 self-help groups by 2007.
KAS foundation will now sell growth-oriented mutual funds schemes to these customers. It will be an aggregator on behalf of its rural customers and a single interface with the mutual fund. KSA, which interacts with its customers on a daily basis for servicing their loans and other financial products, can now sell mutual fund units too without any additional cost. It would have been financially unviable for the ICICI Mutual Fund to reach out and service such small investors otherwise.
“This model makes it economically viable for us to reach out to the rural customers through KSA and service investments as small as Rs50,” said Pankaj Razdan, managing director, ICICI Prudential AMC. The mutual fund will replicate this model with the network of 199 NGOs that ICICI Bank had built over the last four years. ICICI Bank had built micro-finance business worth Rs2,200 crore as on 31 March, 2006.
Nachiket Mor, deputy managing director of ICICI Bank, declined to reveal how much its micro-finance business has grown this year due to regulatory constraint. “What I can say is that we have a market of 500 million people and we have only just started at the tip,” he said. ICICI Bank has a total micro-finance customer base of 3.2 million, serviced through the network of 200 NGOs. ICICI Bank’s insurance subsidiaries—ICICI Prudential Insurance and ICICI Lombard —offer micro-insurance policies, especially life and health insurance, to its micro-finance customer base. With the micro systematic investment plan, ICICI Bank’s micro-finance aggregators now has a full suite of financial products tailored for the rural customers.