India’s mutual fund industry may have crossed Rs. 85 lakh crore in assets but the distribution network remains remarkably small compared to the country’s population.
An analysis of AMFI-Crisil data shows that India has just 2.46 mutual fund distributors (MFDs) for every 10,000 individuals. The number highlights how significantly underpenetrated mutual fund distribution continues to be across the country.
The distribution gap becomes even more apparent at the state level. Chandigarh, Goa and Delhi, which have the highest MFD density in the country, have just 10 or fewer distributors for every 10,000 people.
Chandigarh tops the list with 10.2 MFDs per 10,000 individuals, followed by Goa with 10 MFDs and Delhi with 7.2 MFDs.
Maharashtra and Gujarat, two of India’s more developed mutual fund markets, have 6.9 and 5.2 MFDs per 10,000 individuals, respectively.
In fact, only five states have more than five MFDs for every 10,000 people. This means that even in the better-penetrated markets, distributor availability remains relatively low.
The gap is much wider in several other parts of the country. Ten states have fewer than one MFD for every 10,000 people, while another 10 states have between one and two distributors. Nine states have between two and three MFDs for every 10,000 individuals.
Huge distribution opportunity
The numbers suggest that the next phase of mutual fund growth may not only depend on attracting more money from existing investors but also on building a much wider distribution network.
AMFI itself has highlighted the opportunity in these underpenetrated markets. According to the industry body, targeting and developing such regions could provide significant growth opportunities for the mutual fund industry.
“By bridging the gap and increasing the penetration in these states, the industry can tap into the vast untapped market, leading to an overall increase in mutual fund adoption and investments,” AMFI said.
It believes that the gap can be addressed through initiatives focused on increasing awareness, improving financial literacy and incentivising distributors to operate in these regions.
Cafemutual Take
For the mutual fund industry, this is an important distinction. The problem in many of these markets may not necessarily be a lack of potential investors but a lack of people who can take mutual funds to them.
With only 2.46 MFDs available for every 10,000 individuals nationally, the distribution network has considerable room to expand before the industry can claim that mutual funds have truly reached the length and breadth of India.
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