Do you know how the talk around sachetisation of mutual fund SIPs started? In the annals of economic history, certain strategies emerge that redefine the landscape of consumer / investor behavior.

One such strategy, originating in the 1970s, was sachetisation. 

This ingenious marketing move introduced products in small, affordable quantities, transforming the way consumers interacted with goods and services.

The genesis of sachetisation in India can be traced back to the humble shampoo sachet, which sparked a market explosion. Over time, this strategy proliferated across various sectors, from food to personal care items, making products more accessible to diverse socio-economic segments. 

The beauty of sachetisation lay in its ability to allow consumers to experiment with products without committing to large purchases, thus breaking down financial barriers and democratizing consumption.

Today, we witness a similar trend emerging in the financial sector: sachetisation of mutual fund SIPs. Make no mistake – we are a country of 140 crore +, where around 80 crore amongst us are beneficiaries of the free ration program: PM Garib Kalyan Ann Yojana. 

As can be seen from the widely available stats, this is the country where 50 crore+ accounts were opened under PM Jan Dhan Yojana. It means we just granted them access to formal banking channels for the first time.

Against the backdrop of these initiatives, the need for extending other financial products to the masses should be considered. 

Enter the sachetisation of Systematic Investment Plans (SIPs), a concept championed by SEBI Chairperson Madhabi Puri Buch.

Micro SIPs, with investment options as low as Rs. 250, Rs 550 or even Rs 10, can open prosperity doors for millions of Indians, especially those living on modest incomes. 

Already, several leading Asset Management Companies (AMCs) have embraced this concept, offering SIPs below Rs. 500. This move not only benefits investors but also fosters growth for the mutual fund industry by expanding its investor base & AUM.

Concurrently, consider this as well: with just 2.79% of the population currently invested in mutual funds, there exists a vast untapped market potential. The average monthly incomes in urban and rural India (Rs. 21,647 & Rs 14,700 respectively) underscore the need for financial products tailored to diverse economic realities. 

Another key point is about the daily wage workers who earn much less, approximately Rs 9,280 & Rs. 7,360 in urban and rural areas respectively.

Now, think what amount they can afford to invest per month in a SIP. Definitely hard to touch Rs. 500 mark for most of them. The barrier is too high, in the era of high inflation.

Surely, sachet SIPs, with their low entry barriers, can bridge this gap.

We already have BSBDA demat accounts in place, which can act like Jan-Dhan of financial markets. Believe it or not, each and every individual has an urge to provide for their future/ their children. So, hunger for sachet investments is there for sure. What we lack at the moment is the channel to allow such small investments. 

Again, sachet SIPs can be that channel, enabling individuals to embark on a journey of wealth creation, no matter their income level.

Furthermore, the stagnant investment per folio over the past five years indicates a need for innovative approaches to attract new investors. Lowering the investment threshold through sachet SIPs could spark a surge in participation, leading to a more inclusive and resilient mutual fund market.

But the significance of sachetisation extends beyond mere accessibility. It fosters a culture of financial discipline and empowerment. It also instills the habit of regular saving and investment among individuals from all walks of life. 

On the other hand, by nurturing a diversified investor base, sachet SIPs not only mitigate risk but also contribute to the stability and growth of the mutual fund industry as a whole.

Agreed, some from the mutual fund industry feel that SIP below Rs 500 is not viable economically. But then, as already mentioned in the infographic, it is actually helping funds grow. 

Certainly, we don’t want to stagnate at the 2.79% mutual fund penetration that we currently have. We can’t afford to be stuck at per folio investment in the range of Rs. 10,000 – Rs. 12,000 either.

Thus, in envisioning the future of financial inclusion, it’s imperative to recognize the transformative potential of sachetisation. By making investment opportunities more accessible and affordable, we pave the way for a more equitable and prosperous society. 

Lastly, the sachetisation of mutual fund SIPs isn’t just a market strategy; it’s a catalyst for social change, unlocking the doors to financial security and prosperity for millions across India. Afterall, why should top 10% only have all the fun?

So, let us recognize the power of small investments to catalyse big dreams and secure futures. For in the sachet lies the promise of a brighter, more equitable tomorrow for all.

Note: This post is for informational & educational purpose only. Not advice.