PRESS RELEASE: UTI Mutual Fund and REPCO Bank Offer “Micro-Pension” Initiative for Self-Help Groups

Original press release available here.

MUMBAI, January 8 – UTI Mutual Fund has today entered into a customised arrangement with Repatriates Co-op Finance & Development Bank Ltd. (REPCO Bank) to provide a Micro-Pension investment opportunity to members of Self Help Groups associated with REPCO Foundation for Micro Credit.

The Micro-Pension initiative aims to provide much-needed social security cover for low-income seniors. Under the initiative, members of the Self Help Groups associated with REPCO Foundation for Micro Credit, will contribute minimum amount of INR 100 (USD 2.55) every month towards UTI-Retirement Benefit Pension Fund up to the age of 55 years, so as to enable them to receive pension in the form of periodical income/cashflow after they reach the age of 58 years.

REPCO Bank was established in 1969 by the Government of India and is under the administrative control of the Ministry of Home Affairs, Government of India. REPCO Bank has promoted REPCO Foundation for Micro Credit, an NGO for extending supporting services to Self Help Groups financed by REPCO Bank solely with a view to increase the income level and standard of life of the group. The Bank has a large concentration of Self Help Groups in Southern States. Presently there are 3500 Self Help Groups consisting more than 70,000 members of which most are women beneficiaries. Initially around 10,000 members will be joining the scheme.

Shri U K Sinha, Chairman and Managing Director, UTI AMC said, “The Micro-Pension initiative will help inculcating the habit of regular savings among the low-income group, which will help them in planning for their future and will also enable them to share the benefits of growth of the Indian economy.”

“We hope that this pension movement will spread across workers of all categories and even those working in big establishments or professionals with higher income will also follow the example of pioneers like SEWA or REPCO Bank in understanding how it is important for them to build their own pension amounts during their working life,” Shri Sinha added.

Shri M Balasubramanian, Managing Director, REPCO Bank said, “REPCO Bank has in place an integrated Micro Credit programme for self help groups. Apart from extending micro credit, Bank provides training for capacity building, organises marketing of self help group products including global market, provides micro savings schemes, micro insurance and customised loans to self help groups. Now working together with UTI Mutual Fund, the synergy in operation would be unlocked to benefit the less privileged.”

“This micro pension initiative in alliance with UTI Mutual Fund – a pioneer in this sector, aims to provide an old age social security cover – a periodical stream of income generated out of small savings invested by creating group saving synergies and by bringing in best benefits of investments in capital markets by bringing in expertise of seasoned fund managers of UTI Mutual Fund,” Shri Balasubramanian added.

UTI Mutual Fund is a pioneer in launching Micro Pension initiative for the workers in the unorganised sector. The first micro pension initiative was launched by UTI Mutual Fund in April 2006 at Ahmedabad for self employed women of Shri Mahila Sewa Sahakari Bank (SEWA). Thereafter, UTI Mutual Fund has entered into customised arrangement with a number of organisations for providing its members an investment opportunity through a Micro-Pension initiative viz. Paradeep Port and Dock Labour Union, Bank of India, Bihar State Co-operative Milk Producers Federation Ltd. (COMPFED), Union Bank of India, Self Help Promotion for Health and Rural Development (SHEPHERD) and Mann Desi Satara Bank. More than 1 lakh members are covered under this initiative.

Why Micro Pension? Lack of Social Security for Unorganised Sector in India

One in every 6 people over the age of 60 in the world lives in India. A majority of our 8 crore elderly today however do not receive a pension — either from the government or from their employers. Traditionally, most of us have depended on the joint family system and support from our children when we stop working. But today, our children are often forced to migrate when they start earning and as a result, nearly 2 in every 3 households is a nuclear household in India. Therefore, we can no longer depend on family support in our old age.

The aged of today have no choice but to depend on their own lifetime savings to survive for nearly 20 years if they stop working at age 60. And if they have not saved enough during their working lives by then, they face the grave risk of outliving their savings and of facing poverty at a period of their lives when they may be physically unable to work. This is even more true for those engaged in manual work including farmers, head-loaders, rickshaw-pullers, weavers, construction workers and farm labour.

For the government, this is a very serious social and fiscal concern. Within the next few years, the problems of dealing with poverty are likely to be overshadowed by the problem of dealing with poverty among the elderly.

Especially since our current population of 8 crore elderly is going to witness rapid growth and we are likely to have nearly 20 crore elderly in India within the next 2 decades.

The plight of our current aged is partly driven by our labour market structures. Of the 36 crore paid workers in India today, only the 11% organised sector workers, including government servants and salaried employees in large private firms, enjoy pension rights and benefits.

However, most of India’s workforce is employed in the unorganised sector and has been traditionally excluded from formal pension and provident fund arrangements. These include self-employed workers like farmers, farm labourers, self-employed women, contract and casual labour and small retailers. If these workers do not have access to any formal pension scheme, many of them will have no option but to continue to work throughout their lives.

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