It appears that the microfinance space cannot survive on a standalone basis and has to unleash value-added services. So this segment is throwing up distinct niches – like micro insurance and providing pension for the bottom of the pyramid.

Dia Vikas, a leading social sector investor, has brought together its 15 MFI partners to act as aggregators to implement NPS-Lite, a pension scheme initiated by PFRDA (Pension Fund Regulatory & Development Authority), for the poor from the unorganised sector. Through its 15 microfinance partners, Dia Vikas intends to reach out to more than 1.5 million people who will benefit from the pension scheme. Aimed to provide old-age income security to the economically disadvantaged section of society, NPS-Lite will have a matching government contribution up to Rs 1000 per client under the Swawalamban initiative of the government of India.

While no minimum annual contribution to the fund is mandated, PFRDA is recommending a minimum amount of Rs 1000 as savings per annum. As prescribed by the Reserve Bank of India for small deposit accounts, maximum investment limit of Rs 12,000 per annum is applicable under NPS-Lite. In keeping with the mandate of the MFIs, the exit route from NPS-Lite is also focussed at creating wealth at the bottom of the pyramid.  It is envisaged that on maturity, withdrawal amounts will be sent directly to the subscriber’s bank account and thus, NPS-Lite becomes a powerful financial inclusion instrument.

The vesting criteria and benefit vary according to the age of the subscriber. Those below 60 years of age will be required to invest at least 80 per cent of the pension wealth to purchase a life annuity from any IRDA-regulated life insurance company. The rest 20 per cent of the pension wealth may be withdrawn as lump sum. On attaining the age of 60 and up to the age of 70, subscribers will be required to invest minimum 40 per cent of his/her accumulated savings (pension wealth) to purchase a life annuity from any IRDA-regulated life insurance company. Additionally, the subscriber may choose to purchase an annuity for an amount greater than 40 per cent. The remaining pension wealth can either be withdrawn in a lump sum on attaining the age of 60 or in a phased manner, between age 60 and 70.

In case of a subscriber’s death due to any cause, his/her nominee can receive 100 per cent of the NPS pension wealth in lump sum.

K. C. Ranjani, managing director of Dia Vikas, said, “The microfinance sector in India has always stood for inclusive growth. This initiative of PFRDA further enhances the commitment of the sector and the government to implement measures that relate to economic independence of people entrenched in poverty. NPS-Lite will be implemented by all partners of Dia Vikas, which will have a positive impact on 1.5 million clients and around 8.8 million family members. Dia Vikas will extend all possible co-operation to its partners to facilitate its implementation.”

Said Rani S. Nair, executive director of PFRDA, “With growing competition, MFIs cannot survive without value-added services. I believe MFIs can deliver NPS-Lite in a more efficient manner because they deal with the poor on a day-to-day basis. We all need to work together towards providing dignity to human beings while taking advantage of the government’s co-contribution.”

Dia Vikas was established in early 2008 as a social investor to support the growth of Indian microfinance. Vikas, a leading social investor in the microfinance space, has cumulative investments of around $29 million in 16 socially focused MFIs. Following the Andhra Pradesh ordinance and the resultant credit squeeze, the microfinance sector is facing severe liquidity crunch. This liquidity crisis not only threatens to derail all growth and expansion plans of the MFIs but also makes it difficult for them to maintain their current portfolio. In the wake of such macro conditions, Dia Vikas, recently re-upped allocations in three of its partner MFIs – BWDA Finance Ltd (BFL), one of the major MFIs based in Tamil Nadu, north-east-based Rashtriya Grameen Vikas Nidhi and ESAF Microfinance.

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