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.

Offering support whereit matters most: Insights from assessing ecosystem needs and their impact on women entrepreneurs

Posted on by Saumya Dixit

This report highlights the gaps in ecosystem support for women entrepreneurs in Bangladesh. Awareness of available programs remains low, especially for finance, mentoring, and market linkages. Even when accessed, effectiveness varies. Only 20% of business owners meet at least three key needs, while half remain unsupported. Gender disparities persist, particularly in financial access and legal support. Policymakers must enhance gender-inclusive initiatives, improve outreach, and create unified support frameworks to bridge these gaps and promote sustainable business growth.

In small businesses, male and female business owners are more alike than we think

Posted on by Saumya Dixit

Women-owned businesses are inferior to those owned by men—both in terms of their owners’ confidence and business practices. This unfortunate sexist notion found prominence among people we interviewed in our research globally and, more recently, in Bangladesh. Data from the Women Business Diaries project in Bangladesh suggests a persistent perception that female business owners lack the aspiration, structure, or success of their male counterparts. Such misconceptions limit the potential of women-led enterprises and stifle their ability to scale, innovate, and contribute significantly to the economy.

Despite policy interventions, financial service providers often make credit decisions for women-led businesses based on the influence of male family members, especially for collateral-based or larger loans. This was a key finding that our previous blog covered in MSC’s Bangladesh study. Moreover, many banking professionals tend to trust women’s financial and business management skills less than men. Bureaucratic hurdles and gender bias raise barriers for women when they seek trade licenses, which restricts their access to affordable loans and opportunities for business growth.

The analysis of the Women Business Diaries project led us to select businesses with similar characteristics and focused on a diarist’s monthly income, expense, and profit. We removed outliers using the Interquartile Range (IQR) method to reduce the influence of extreme values and ensure a more homogenous sample. Next, we used an Euclidean distance algorithm to match each male diarist with a similar female diarist. This approach resulted in a refined dataset of 52 male and 75 female comparable diarists.

From the analysis, we found that women entrepreneurs are just as capable and ambitious as their male peers. Female business owners adopt similar practices, show equal confidence in key business areas, and share comparable aspirations for growth. The findings challenge stereotypes about women being less driven or effective in business.

Female business owners follow business practices akin to their male counterparts

Both women and men prioritize essential business metrics—financial management, growth, and operational consistency—and exhibit strikingly comparable approaches.

  • Record-keeping: How women and men maintain their business records differ slightly, although the overall approach of both genders is almost identical.
  • Supply chain management: Both male and female business owners favor direct supplier interactions and often place orders in person. Any differences in order frequency and supplier network size are negligible.
  • Customer management and demand patterns: Both genders source from local markets. Both male and female business owners experience high demand during peak periods, such as Eid. Both deal with increased customer visits to their stores to place and collect orders.
  • Money management behavior: Business owners of both genders actively plan for future expenses by setting aside funds. Cash management practices show similarity, with both groups maintaining similar cash reserves. Savings behavior also parallels, with 37% of male and 36% of female business owners saving in banks over a six-month period (Oct 2023 – Feb 2024). The median deposit amount is nearly identical, at BDT 1,300 (USD 11) for women and BDT 1,250 (USD 10) for men.

The figures below give a snapshot of our detailed findings across these four practices.

The gender-based difference in confidence levels in key business areas is almost zero

Confidence levels across essential business functions are nearly identical between male and female business owners. These functions include supply chain management, customer relations, record-keeping, and interactions with financial service providers. Notably, women entrepreneurs display a strong, consistent level of self-assurance when they negotiate with suppliers, manage customer expectations, or handle finances, which challenges the stereotype that they may lack confidence in business management.

Male- and female-owned businesses have similar aspirations and approaches to business growth

Both male and female business owners share similar investment priorities and focus on upgrades, such as shop infrastructure improvements and inventory expansion. This indicates that growth strategies are aligned across genders. Both male and female entrepreneurs prioritize reinvestment in their businesses to enhance operations and meet increasing demand. Close to six in 10 female and male business owners invested in growth activities between April 2023 and April 2024.

Additionally, the percentage of businesses that experienced significant revenue growth is comparable between genders.

We analyzed the significant growth or decline using revenue data gathered through daily diaries and evaluated using the Mann Kendal trend test. These findings show that female entrepreneurs thrive at par with their male counterparts under comparable structural systems, such as markets and support mechanisms.

The key takeaway for stakeholders—donors, policymakers, and practitioners—is the urgent need to strengthen or establish structural systems that are inclusive and effective for both women and men.

We must find ways to address this critical gap to build equitable and sustainable entrepreneurial ecosystems. For example, nearly 50% of diarists reported that none of their critical entrepreneurship needs were met, and only 1% had all their critical needs fulfilled. These needs span six key ecosystem areas: Entrepreneurship promotion, access to finance, business and technical skills, mentoring and networking, market linkages, and legal support. Addressing these gaps is essential for women entrepreneurs to reach their full potential.

In the next part of this blog, we will dive deeper into the needs of these female entrepreneurs.