Ramesh S Arunachalam
Rural Finance Practitioner
A range of options exist for alternative distribution channels but the major ones are producer organisations, governments, state livelihood missions, agriculture and other corporates, banks, insurance intermediaries, telecom companies, retailers and others – they are keen to enter the market and need to be capacitated and incentivised to extend (and distribute) coverage of client responsive pension services to low income people in a sustainable and scalable manner.
Among these, a major channel through which micro-pensions could be distributed[1] are the post offices. They have established presence in interior areas and this outreach could be used to service low income clients with regard to micro-pensions. As government machinery and for other good reasons, post offices enjoy a high degree of credibility. While their personnel are experienced in handling small savings, they may need to be trained to service pension schemes. Moreover, the post office may need to offer more flexibility in terms of deposit timings and even perhaps doorstep collection services to ensure regularity of savings. An experienced asset management company should handle funds management, for and on behalf of post offices
In terms of product substitutes, reverse mortgage arrangements are another product and channel that can be considered.
Thus, it appears that a variety of channels, as given above, must be used to expand the coverage of micro-pensions and this alone can help achieve the goal of including large numbers of elderly poor people in the future, in India’s financial system.
Ideas for suggested pension equivalent (substitute) products, based on discussions in India with various stakeholders and low income clients are given below:
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[1] Several industry experts including Asher et al (2007) concur with this view but suggest that some capacitation will be required.
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