Access to Micro-Savings for Remote Rural India

This note describes how innovative savings products like money market mutual funds can cater to the needs of rural households in India. Such financial instruments can be used for planning and investment. They can enhance the security of rural households by building capital for consumption and investment, and providing liquidity to meet emergencies.Rural households need relatively large sums of money for life cycle needs, emergencies and investment opportunities. They, therefore, need access to a basket of financial services. A look at rural financial markets, however, shows a lack of access to credit and other financial services.The note recommends the following measures for maximizing financial inclusion:

• Financial intermediation functions should be performed by mutual funds leveraging MFI distribution networks;
• Technically sound product and process structures should be developed to address the need for microsavings of the financially excluded population;
• Regulators should enable funds to route transactions at a quicker pace in order to bring about a change in the liquid mutual funds industry.