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Small investments, big hurdles: Why SEBI’s SIP initiative needs a stronger backbone

Posted on by Deepesh Singh

SEBI’s proposal for ₹250 small-ticket SIPs aims to boost financial inclusion by making mutual funds more accessible to LMI (lower- and middle-income) groups. With SIP contributions rising from₹17,610 crore in December 2023 to₹26,459 crore in December 2024, India is witnessing a shift from traditional savings to market-linked investments. While this initiative leverages growing investor interest, reducing entry barriers alone won’t ensure success. Systemic challenges like financial literacy, trust deficits, digital access, and investor protection must be addressed. Without robust regulatory support and awareness efforts, small-ticket SIPs risk being an underutilized tool rather than a transformative financial solution.

Investor trust and awareness deficit

Unlike bank deposits that ensure capital safety, mutual funds come with inherent risks that can undermine trust in formal financial products if not properly communicated. Without sufficient investor education, LMI individuals may enter SIPs with unrealistic expectations, leading to premature withdrawals and disappointment. A 2019 assessment by the National Centre for Financial Education (NCFE) revealed that only 27% of adults were financially literate, with just 3% investing in stocks—a figure that drops to 2% in rural areas. This highlights the urgent need for awareness initiatives to bridge the knowledge gap and foster informed investment decisions.

High administrative costs for AMCs

Scaling small-ticket SIPs presents a cost challenge for Asset Management Companies (AMCs), as operational expenses remain high. Even within the Unified Payments Interface (UPI) ecosystem, transaction costs for low-value investments range from 80 paise to ₹1. With minimal management fees from small investments, revenue generation remains limited, making AMCs hesitant to actively promote these products. This reluctance could hinder SEBI’s goal of driving widespread adoption, highlighting the need for cost-efficient solutions or policy incentives to ensure the viability of small-ticket SIPs at scale.

Behavioural and retention challenges

Attracting first-time investors is just the first step; keeping them engaged is a bigger challenge. Research shows that many new mutual fund accounts go dormant within months, with young investors often speculating without fully grasping risk. Without effective retention strategies, small-ticket SIPs could see high dropout rates, reducing their long-term effectiveness and undermining SEBI’s financial inclusion goals.

Digital and infrastructure barriers

While digital platforms improve accessibility, India’s digital divide remains a significant hurdle, especially in rural areas where internet penetration and fintech adoption are limited. Additionally, the efficiency of financial service delivery, akin to the Gross Rent Multiplier (GRM) in real estate, remains a challenge. In the context of investments, a swift GRM—or rapid and tangible returns—becomes crucial. If financial products fail to deliver timely benefits, investors may revert to traditional savings methods or informal financial practices.

Successful micro-investment models worldwide offer valuable insights for SEBI. The USA’s Acorns leverages behavioral finance to encourage habitual investing—an approach SEBI could adopt through fintech partnerships. Kenya’s M-Akiba, a mobile-first government bond initiative, demonstrates how UPI can simplify SIP investments for LMI users. Meanwhile, Singapore’s CPF Investment Scheme links small-ticket investments to long-term financial security, a model India could explore by integrating SIPs with PM-Jan Dhan Yojana (PMJDY) or the Employee Provident Fund Organisation (EPFO).

However, without policy and ecosystem-level interventions, small-ticket SIPs may fail to achieve meaningful financial inclusion. To ensure long-term success, SEBI must go beyond simply lowering the investment threshold and adopt a multi-pronged strategy:

1) Financial literacy and awareness: SEBI should collaborate with educational institutions, NGOs, and fintech platforms to drive nationwide financial education campaigns. These should focus on risk awareness, realistic return expectations, and long-term investment principles to prevent investor disillusionment.

2) Incentives for AMCs and distributors: To encourage active participation, SEBI could introduce tax incentives or regulatory support for AMCs developing low-cost, diversified SIP products. Additionally, digital infrastructure subsidies can help reduce transaction costs, making small-ticket SIPs more viable.

3) Enhanced digital accessibility: SEBI should issue guidelines to streamline UPI-based payments and simplify KYC processes, ensuring seamless investor onboarding. AI-driven chatbots and virtual assistants can further enhance accessibility by providing real-time, user-friendly financial insights to first-time investors.

4) Robust monitoring and investor protection: Implementing a data-driven monitoring framework would help SEBI track adoption trends, investor retention, and potential misuse. Introducing capital protection funds or micro-investor insurance could mitigate risks, fostering investor confidence and sustained participation.

5) Integration with government schemes: Linking small-ticket SIPs with PMJDY or EPFO can leverage existing trust and infrastructure, driving greater participation while ensuring long-term financial security for LMI investors.

By addressing these systemic challenges, SEBI can transform small-ticket SIPs into a powerful tool for inclusive financial growth, making market-linked investments a viable option for all.

SEBI’s initiative has the potential to bridge the financial inclusion gap, but its success depends on multiple factors aligning effectively. A robust policy framework, adopting global best practices, can transform this initiative into a true enabler of financial security for India’s LMI segment. However, without addressing key challenges such as financial literacy, operational feasibility, investor protection, and long-term retention, small-ticket SIPs may remain a well-intentioned but ineffective tool. Risks for LMI investors persist due to a weak support ecosystem, low customer trust, and limited market awareness. Without policy interventions and ecosystem-level reforms, small-ticket SIPs may struggle to achieve their intended impact.

This article was first published in ET Edge Insights on 3rd March 2025.

The Gig Economy’s Big Moment: What Comes Next?

Posted on by Deepesh Singh

The Indian Finance Minister’s budget announced a comprehensive initiative to extend formal recognition and social security benefits to platform-based gig workers by providing their ID cards with registration on the e-Shram portal. This marks a significant step toward formalizing India’s rapidly expanding gig economy. With over 7.7 million gig workers in India as of 2020–projected to grow to 23.5 million by 2029-30 (NITI Aayog, 2022)–this sector plays a pivotal role in the country’s digital services ecosystem. From ride-hailing drivers to food delivery personnel and freelancers, gig workers have transformed urban economies, yet they remain largely excluded from formal financial systems and social security nets.

The announcement rightly acknowledges the need for formalization and financial inclusion of gig workers. It could help bridge the gap by enabling access to formal credit, insurance, and government welfare schemes. Currently, only 8% of gig workers have access to health insurance, and less than 2% contribute to retirement funds (NITI Aayog, 2022). Integrating this policy with financial literacy programs, microcredit solutions, and pension schemes such as Pradhan Mantri Shram Yogi Maan-Dhan (PMSYM) can ensure long-term economic security for this workforce.

For the policy to have a lasting impact, it must also address the intersection of the gig economy with India’s youth employment landscape. With over 62% of India’s population in the working-age group (15-59 years) and a median age of 29 years by 2030, structured skill development is essential. Young workers, particularly those from low- and middle-income segments, often lack career guidance and face a mismatch between acquired skills and industry demands.

In this context of the digital nature of work profiles (characteristic of industry 4.5 and 5.0), the flexibility allowed by digital interfaces, creating pathways for gig workers to join formal employment, and the flexibility to move back and forth will be crucial. After all, gig work should serve as a stepping stone to formal employment for those who seek stability and career progression while also being a viable, sustainable career path for those who prefer flexibility and autonomy. Some ideas worth considering include recognizing the skills of gig workers, such as those under the Recognition of Prior Learning scheme and recognizing and promoting gig work as work-based learning in formal education. Singapore’s Skills Future initiative provides lifelong learning credits to workers, enabling continuous skill development and career adaptability.

The government needs to maintain a delicate balance between providing social security benefits and not overregulating through the current labour laws, as the latter can limit the sector’s USP–flexibility and growth.

Further, investment in AI-driven reskilling programs and apprenticeships aligned with emerging job markets is imperative. For example, a 2023 NASSCOM report indicates that over 50% of Indian companies struggle to find workers skilled in AI, robotics, and cybersecurity. The World Economic Forum (2023) highlights that by 2025, 97 million new jobs will emerge globally in automation and digital sectors, many requiring adaptable skill sets. Tailoring training programs to meet these demands can enhance job readiness and economic productivity.

Collaboration with industry leaders and businesses can help. Employers should be encouraged to add minimum remuneration and skilling standards. Policies should incentivize companies to invest in gig worker training and offer learning stipends for gig workers to encourage participation in upskilling programs. More collaboration could encourage portable benefits models, such as those in France and the Netherlands, allowing gig workers to accumulate social security benefits regardless of their employer. Additionally, fostering collaboration among gig platforms, banks, and skilling institutions can ensure affordable access to credit, insurance, and continuous learning opportunities.

In conclusion, formalizing gig workers through identity cards is a commendable move, but its impact can be realized only if it is integrated with financial and skilling initiatives from both the public and private sectors. By aligning market needs with youth aspirations, the country can unlock the full potential of its human capital and position itself as a global leader in the future digital and industrial economies.

This article was first published in The Print and The Tribune on 28th February 2025.

Mutual funds for small investors? A good idea that needs the right execution

Posted on by Deepesh Singh

SEBI’s recent move to introduce small-ticket systematic investment plans (SIPs) with a minimum monthly investment of just Rs 250 is a big swing aimed at boosting financial inclusion by making mutual funds accessible to lower- and middle-income (LMI) groups. SIP inflows are up, from Rs 17,610 crore in December 2023 to Rs 25,320 crore in November 2024 and there’s a real interest in market-linked investments. But let’s be real: Just dropping the entry fee won’t guarantee inclusion. For this, we would need to tackle the underlying issues that could stop this plan from truly helping those it’s meant for.

Imagine this: For many people in LMI segments, traditional savings channels just aren’t cutting it anymore. With inflation eating away at returns from bank deposits, the need for better options is pressing. Banks haven’t exactly been rushing to attract these potential investors. They often overlook the strategic efforts needed to engage this segment. So, how can a small-ticket SIP really make a difference in their lives?

Let’s picture a working-class woman juggling her job and family expenses. For her, setting aside even a small amount can feel daunting. Now, what if she could put away Rs 250 each month? It might sound like peanuts, but over time, it can grow into something significant. SIPs are all about building that saving habit — a habit that can be life-changing for folks who’ve always been left out of the wealth-building party.

But here’s the thing: Research by the National Centre for Financial Education (NCFE) back in 2019 showed that just 3 per cent of Indian adults invest in stocks, and that number dips to 2 per cent in rural areas. If new investors don’t really get mutual funds, they might pull out their money early, leading to frustration. SEBI needs to make investor education a priority, so people get the risks, the returns, and the long-term nature of these investments.

And while small-ticket SIPs might sound like a way to bring in millions of fresh investors, the truth is more complex. Processing these tiny investments on a massive scale isn’t cheap. Even with UPI, transaction costs for low-value payments can climb as high as 80 paise to Rs 1. Given how little revenue these small-ticket investments generate, Asset Management Companies (AMCs) might not be too thrilled to promote them aggressively.

Let’s look at some success stories from around the globe. In the US, platforms like Acorns have revolutionised how people think about investing by allowing users to invest as little as $5 or $10 at a time. This model has led to nearly 54 per cent of Americans owning mutual funds as part of their portfolio by making investing feel accessible and manageable — even for those on tight budgets. Similarly, Kenya’s M-Akiba initiative offers government bonds through mobile phones, making it easy for everyday citizens to invest small amounts regularly. Imagine if Indian students started learning about investing early on through similar schemes — it could change everything in the long run.

To truly unlock the potential of small-ticket SIPs, a multi-pronged strategy is paramount.

Build investor awareness: SEBI must forge strong alliances with schools, fintech platforms, and NGOs to spearhead comprehensive financial literacy campaigns. These campaigns should demystify investing, highlight the inherent risks, and stress the importance of long-term financial planning.

Incentivise AMCs: To entice AMCs to develop low-cost, diversified SIP products that cater to the unique needs of LMI investors, SEBI could offer enticing tax incentives or other forms of regulatory support. Lowering transaction costs through strategic subsidies or digital infrastructure investments would also be a game-changer.

Improve digital access: SEBI must streamline UPI payments and simplify those often-confounding KYC regulations to make investing more accessible, particularly in underserved rural areas. The integration of AI-powered chatbots and virtual assistants can also provide invaluable guidance for first-time investors navigating the often-complex investment landscape.

Prioritise investor protection: Establishing a data-driven system to meticulously monitor adoption trends, investor retention rates, and overall investor behavior is crucial. Introducing safety nets like capital protection funds or micro-insurance products can also shield LMI investors from potentially devastating risks.

Link with government schemes: Seamlessly integrating small-ticket SIPs with established government programs like PMJDY or EPFO would build trust and foster greater participation. This synergistic approach could pave the way for long-term financial security for millions of Indians.

While SEBI’s initiative is undoubtedly a step in the right direction, its ultimate success hinges on proactively tackling these multifaceted challenges. A robust policy framework, informed by global best practices, will be the linchpin in transforming this initiative from a well-intentioned idea into a genuine catalyst for economic empowerment. Without these essential reforms and interventions, small-ticket SIPs might end up being a missed opportunity to truly democratise finance in India.

This article was first published in The Indian Express on 27th February 2025.

Enhancing the financial health of women-owned microenterprises (WMEs) in South Africa

Posted on by The Helix Institute at MSC

A tale of grit and growth

Zanele, a 25-year-old woman from Soweto, exemplifies the resilience of many women entrepreneurs in Gauteng. She runs a small spaza shop that supports her four younger siblings and contributes to the local community. Zanele inherited the shop two years ago after her mother passed away, and used up all her modest savings to sustain the business. In common with 43% of WMEs in South Africa, Zanele relies on informal loans with high interest rates, eroding her already thin profit margins. For her, survival means keeping the shop open to feed her family, often at the expense of potential business growth.

Thandiwe, a 34-year-old beauty salon owner in Mamelodi, turned her dream into reality four years ago after completing beauty school. Though her business is formalized, she faces challenges managing cash flow and separating personal and business finances.

At 45, Gugu represents the aspirations of a growth-oriented entrepreneur. She runs a successful catering business and recently diversified into construction. Unlike Zanele and Thandiwe, Gugu maintains disciplined financial management, separates personal and business finances, and leverages formal bank loans to drive growth. Her approach demonstrates how strategic financial practices can unlock opportunities for reinvestment and expansion.

These women’s stories reflect broader trends among WMEs in South Africa. Despite their diverse circumstances, they all navigate significant barriers to financial health and business growth while contributing meaningfully to their communities.

Women entrepreneurs: Driving South Africa’s economy forward

South Africa has 2.6 million micro, small, and medium enterprises (MSMEs) that contribute 40% to its GDP. Women-owned microenterprises (WMEs) comprise 46% of these MSMEs. Yet, they stare at a staggering USD 6-billion gap in finance due to limited access to formal financial services, gender biases, informal operations, and the COVID-19 pandemic’s lingering effects.

MSC interviewed 600 WMEs in four districts of Gauteng—Johannesburg, Pretoria, East Rand, and West Rand—to uncover the determinants of their financial health. This blog sheds light on our research findings, explores the diverse financial realities of women entrepreneurs, and highlights ways to enhance their financial resilience.

Understanding WMEs’ journeys

Our findings revealed that 87% of WMEs in the trading sector are not registered, which limits their scalability. Informal operations restrict access to critical government support and hinder growth due to difficulty securing clients and partnerships.

Financial management issues worsen these challenges. Nearly half the WMEs surveyed do not separate personal and business finances. While 55% of them find it easier to manage cash flow this way, 48% want to avoid the costs of separate accounts. These practices hinder cash flow management, financial planning, and thus sustainable business growth. Additionally, savings and investments are the most widely used financial tools, especially in manufacturing, where WMEs achieve higher revenues and profits.

Our research uncovered the following three WME segments based on their businesses’ financial health:

  • Determined survivalists: Zanele, a 25-year-old woman from Soweto, personifies this segment. She runs a small spaza (informal shop) to support her four younger siblings. She inherited the business from her mother and used her savings to sustain it. Like 43% of WMEs in South Africa, she too depends on high-interest informal loans, which erode her profit margins. Zanele seeks household stability. Her focus is on survival rather than growth. Entrepreneurs in this segment prioritize simplicity and often mix personal and business finances. This group has the lowest earnings.
  • Strategic optimizers: Thandiwe, a 34-year-old beauty salon owner in Mamelodi, represents this segment. She formalized her business after she completed beauty school. Despite this, she struggles to manage cash flow and separate her personal and business finances. Entrepreneurs in this segment seek operational efficiency and moderate growth. They manage finances well and use available resources, such as state funds, digital tools, and skilled human capital.
  • Growth seekers: People in this segment pursue ambitious expansion. At 45, Gugu exemplifies a growth-oriented entrepreneur. She runs a successful catering business and has diversified into construction. Unlike Zanele and Thandiwe, she follows disciplined financial management, separates business and personal finances, and secures formal bank loans for expansion. Her approach showcases the benefits of structured financial practices. Entrepreneurs in this segment have the highest earnings and assets.

The table below gives a detailed insight into the financial behavior of these three segments.

Key challenges WMEs face

These personas face diverse challenges and opportunities, which emphasize the need for tailored support to meet their needs.

  • Competition: In the service sector, more than 50% of WMEs report declining profits due to market saturation. In contrast, the manufacturing sector uses higher revenue streams, asset bases, and customer diversification to withstand competition. These findings suggest the need for sector-specific interventions to enhance resilience and profitability.

  • Financial access: Access to affordable, timely credit remains a tall hurdle. Many WMEs rely on personal funds or informal networks for working capital and prefer banks for formal borrowing. Despite the growing availability of digital financial solutions, adoption is low as people lack awareness, struggle to navigate digital platforms, and distrust formal institutions.

  • Financial management and resilience: MSC’s research found that more than 64% of WMEs in the trading sector lack financial safety nets, which makes them vulnerable to economic shocks. In contrast, 36% of manufacturing WMEs maintain separate business emergency funds, which reflects stronger financial management.

Across all three sectors surveyed, only 11% to 24% of WMEs set aside personal emergency funds. While savings remain a primary funding source, emergency funds become more prevalent as WMEs progress from determined survivalists to strategic optimizers and growth seekers.

  • Business management: Strong business acumen determes WMEs’ success. For instance,           Gugu’s catering business flourished due to her ability to manage cash flow, reinvest profits, and secure long-term contracts. However, many WMEs across sectors struggle with cash flow and financial management.

Our research highlights varying recordkeeping practices. Better recordkeeping can enhance financial planning, facilitate access to credit, and support overall sustainability. Yet, while 99% of WMEs in manufacturing keep written records, only 72% of WMEs in trading follow the same practices. This gap underscores the opportunity to improve administrative practices, particularly in sectors with lower recordkeeping rates.

The infographic below summarizes challenges WMEs face at different stages of their lifecycle:

The road ahead for inclusive growth

Financial education and entrepreneurial training are critical to equip WMEs with the business skills to ensure better credit management and business sustainability. Course content should cater to diverse learner personas. It should start with foundational concepts and then increase in complexity. The course can also use gamification to enhance engagement. A centralized course-tracking platform can reduce duplication of course content and help financial service providers underwrite credit facilities by disbursing facilities to borrowers with an understanding of the facility.

MSC’s research on the financial health of WMEs indicates the importance of culturally relevant financial education. Partnerships with local NGOs and the private sector can improve dissemination and ensure that training materials reflect the social and economic realities of WMEs and address biases related to race and class. Blended delivery methods, which include digital and in-person sessions, are vital. The use of local language, local case studies, and local tutors can improve the relatability of the materials delivered. These programs should also have periodic monitoring and evaluation to assess learning outcomes. Moreover, these programs should include group sessions to reinforce positive behaviors and mentorship to address the mental blocks WMEs face.

The journey of South Africa’s women-led microenterprises is not just a story of struggle—it is one of resilience, ambition, and transformation. From Zanele’s determined fight to keep her family afloat to Thandiwe’s drive for efficiency and Gugu’s bold expansion into new industries, each entrepreneur embodies the untapped potential waiting to be unleashed.

But potential alone is not enough—these women need bridges. They need financial tools that understand their realities, training that speaks their language, and policies that empower—not exclude. The question is no longer whether we should invest in these women—it is how quickly we can act to ensure that their businesses do more than just survive. They must thrive.

Her Digital Gateway: How women in India access and use smartphones

Posted on by Deepesh Singh

Digital financial services (DFS) have grown significantly in India over the past decade due to increased mobile phone adoption, affordable data rates, and comfort in smartphone-based technology. However, the gender gap in mobile phone ownership and Internet use limits the equitable realization of benefits.

A study of 3,300 female users across five Indian states reveals that gender-disaggregated data can help design gender-intentional financial products. It can contextualize factors that influence women’s DFS adoption, such as access to shared smartphones, financial management practices, and gaps in current financial services. Read the report to learn more.

The report was first published on the RBIH website.

Enabling digital inclusion: Lessons learned from a field experiment to encourage women entrepreneurs to adopt digital tools

Posted on by Saumya Dixit

Women entrepreneurs in Bangladesh often struggle to adopt digital financial tools even though they have adequate access. MSC intended to bridge this gap and organized a structured intervention through which we delivered hands-on training in MFS, agent banking, and e-commerce. While service adoption increased modestly, confidence in independent use surged as 79% of previous MFS non-users embraced the service. However, rural entrepreneurs and those with lower education levels lagged. The expansion of personalized training and improved access to banking agents could further accelerate digital inclusion and business growth.