Micropensions: using the partner-agent model to develop old-age security for low-income people in India

14-Apr-2010    This paper by Sybille Gianadda offers a very comprehensive overview of the way in which micropension provisions operate,.

While interning at the Centre for Micro Finance (CMF), at the Institute for Financial Management and Research (IFMR), in India in 2007, Gianadda researched the characteristics of an existing micropension scheme. The paper documents how the fragmentation of the joint family set-up has created a strong need for micropension provisions. The micropension scheme described is a voluntary, funded, defined contribution plan based on individual accounts. At maturity the accumulated balances can be withdrawn in a lump sum, a periodical income or acombination of the two.

The study focuses on MFIs as channels through which micropensions can be distributed to the bottom of the pyramid. In an attempt to explore whether the partner-agent model is the best way for MFIs to provide their clients with old age security, this study also reviews the few other existing products referred to as “micropensions”. Finally, the research assesses the challenges faced by the different stakeholders as well as the potential areas of improvement.

The first chapter documents the Indian context of ageing of the population, fragmentation of the joint family set-up and lack of coverage of the unorganized sector. The three following sections consider the micropension scheme respectively from the perspectives of the asset management company, the MFIs and the clients. The fifth chapter reviews and compares the few other experiences of MFIs offering financial products designed to save for old age. Finally, a sixth chapter explores the future of micropensions.


 
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