How ₹250 monthly Mutual Fund SIPS could empower low-income earners despite existing barriers
In January 2025, the market regulator introduced the concept of ₹250-amonth 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.
Most fund houses have SIPs that mandate a minimum investment of at least Rs 1,000 a month. Some fund houses allow Rs 500 SIPs, only a handful of fund houses allow investors to invest with as little as Rs 100 a month. It is financial unviable to run such micro-sized SIPs at a large scale. But technology, would bring this cost down in future.
The idea really is bring down the cost, so that the bottom of the pyramid (investors with lower income, or lower disposable income left to invest) can come into mutual funds. This, would lead to a tremendous growth of the Indian mutual fund industry.
The problem starts from trying to convince them to opt for an MF instead of buying a gold necklace. Convincing low income earner to invest in mutual fund over traditional assets requires financial education and trust building.
However, once they’re in, there are structural hurdles to cross–and not all find it easy to complete the process.
What makes investing hard for low income earners
- KYC and documentation issues : PAN – Aadhaar linking delays, name mismatches, add missing documents like passbook or cancel cheque stall onboarding.
- Limited digital access and know how : Many don’t have email IDs struggle with mobile apps and aren’t comfortable using digital platform beyond UPI
- Language and form filling hurdles: Forms and interface in English deter many , even basic input steps free overwhelming without help
- Fear of fraud and scams: Past phishing attempts and lack of trust in unknown apps or calls create hesitation around digital finance
- No dedicated support for small investor: Mutual fund distributor have little incentive to serve those investing Rs. 500 – Rs.1000 monthly leaving them with few guidance options.
What can be done?
There is little incentive for MF distributors to service clients who invest ₹250-500 a month. The average commission that an MF pays to a distributor is 0.5 to 1%. An investment of ₹6,000 a year would fetch a commission of ₹42.
The 1,400-odd registered investment advisors cater to white-collared workers or high net worth individuals to make business sense.
Account-opening could be streamlined and apps should allow prospective investors to create a UPI account that can be given to their employers.
Another helpful step would be to conduct investor awareness sessions in local languages that low-income earners can understand in their own way.
I have started with my household helpers, security guard to create awareness in this direction and would we happy to start by convincing at least few of them to invest in this financial product, benefiting both the low income earners as well as the industry.