MICROCAPITAL STORY: Sahara Mutual Fund of India Launches Systematic Investment Plan (SIP) as a Microfinance Saving Scheme

Sahara Mutual Fund (SMF), an asset management company, has lodged a draft offer document with the Securities and Exchange Board of India (SEBI) to create the Sahara Daily Fund (SDF). The SDF will be a daily systematic investment plan (SIP) where people can invest with a minimum of 10 Indian Rupees (Rs.) (USD 0.20). The SDF is aimed at providing daily wage earners with a microfinance saving scheme. Units are purchased and can be traded on any business day. There will be a dividend option (payout or reinvestment) and a growth option. Dividends will be distributed, subject to profits being available, based on the units held by the account holder.

The SDF will invest in debt and debt related instruments to generate returns with low levels of risk. No more than 10 percent of its net assets will be in foreign securities. The collection of cash will be made using mobile technology through authorized collection agents. The fund will charge an entry load of 2.25 percent and 1 percent exit load if redeemed within one year. This will reduce to 0.5 percent if redeemed after one year but before two years and there will be no exit load if redeemed after two years.

Naresh Garg, chief executive officer of Sahara Mutual Fund said, “There are several micro-credit schemes available in the country for the poor, but there are hardly any micro-savings schemes available.” In India self help groups (SHGs) are the predominant method of microfinance savings and loans. Groups of 20-30 women form together and require periodic fixed and compulsory savings before loans are made. Loans, funded by the savings, are then disbursed after a certain period of time. However clients usually join to obtain loans, not to save and there is usually little voluntary savings beyond the compulsory amount.

A recent MicroCapital story reported on a survey of 150 microfinance institutions (MFIs) and investors conducted by Microfinance Insights. The survey indicated that 85 percent of MFIs and 61 percent of microfinance investors think MFIs should offer more than just financial services such as savings and insurance. A report produced by the MIX Market, the microfinance information clearinghouse, for 2008, indicated that Indian MFIs had a relatively low penetration rate (3.5 percent) when compared to other countries in Asia due to its high population.

SMF was established on 18 July 1996 by Sahara India Financial Corporation Limited. It has 13 debt and equity schemes available to investors. The asset management company of SMF is Sahara Asset Management Company Private Limited, incorporated on 31 August 1995. As at 31 March 2008 it had Total Assets of Rs. 187.6 million (USD 3.97 million). Total Investments were Rs. 157.7 million (USD 3.3 million).

By Sally Levy, Research Assistant

Additional Resources:

Symbiotics: India: Sahara Mutual Fund Unveils Rs 10 Micro-SIP

Sahara Mutual Fund: Home

Sahara Daily Fund: Scheme Information Document, April 15 2009 lodged with SEBI

MicroCapital Story: 85 Percent of Microfinance Institutions (MFIs) and 61 Percent of Microfinance Investors Say MFIs Should Offer More than Financial Services According to Microfinance Insights Survey

Microfinance Paper Wrap-up: MIX and Intellecap Present the Asia Microfinance Analysis and Benchmarking Report 2008

CGAP (Consultative Group to Assist the Poor), Sustainability of Self-Help Groups in India: Two Analyses, April 2007