The goal of the Association of Mutual Funds of India (Amfi) is to greatly increase the size of its investor base. The Times of India stated on August 20 that the organization is working with India Post to train approximately one lakh postmen to act as distributors of mutual funds.
Through the Association of Mutual Funds in India (AMFI), the Indian mutual fund (MF) sector is launching a new project to increase mutual fund distribution in rural and smaller towns.
Where is it starting?
They have chosen four states as testing grounds (pilot project):
Bihar
Andhra Pradesh
Odisha
Meghalaya
What is the objective?
They aim to have at least ten mutual fund distributors in each district of these states by the end of the year.
In order to prepare college students to become mutual fund distributors, they intend to train them in these areas.
In the first year, 20,000 new distributors are to be added.
Why this initiative?
There is currently virtually little use of mutual funds in many Indian rural and small towns. Large cities are home to the majority of distributors and investors.
AMFI intends to train nearby college students in order to:
Give young people access to new employment options.
Facilitate mutual fund investing for residents of small towns.
Increase the mutual fund industry's presence throughout India.
Solving KYC Problems
Many rural people don’t have Aadhaar.
By working with India Post, AMFI will use postal staff to make KYC (Know Your Customer process) easier and more accessible.
Why This Is Important
Right now, 65% of mutual fund investments come from the top 30 cities, while only 45% come from the rest of India.
This means huge untapped potential in smaller towns and rural areas.
Difficulties with Distribution
Although over 30,000 new distributors sign up each year, the net addition is only roughly 10,000 because many of them depart.
AMFI aims to build a far larger and more reliable distribution network since this is too tiny for a nation like India.
The Development of Indian Mutual Funds
In 2019, there were 2.1 crore investor accounts (folios); currently, there are 5.6 crore.
AMFI is certain that this figure will shortly quadruple once more because
With 80 crore bank accounts, India offers a vast pool of possible investors.
In India, assets under managed, or AUM, account for 21% of GDP.
AUM is 100%+ of GDP in industrialized nations; the global average is 65% of GDP.
Thus, there is still a great deal of space for expansion in India's MF sector.