KfW picks up 30% equity stake in IIMPS

The deal marks the first direct equity investment by
German development bank KfW in India

Invest India Micro Pension Services (IIMPS), India's leading aggregator of regulated micro-pension and long-term micro-saving products for economically active poor, has announced the successful completion of its recent round of funding of US$3.75mn from new investor KfW and existing investor Michael & Susan Dell Foundation which had earlier invested US$1mn in 2011 in the company’s Series-A round of funding. Noted economist, Swaminathan Anklesaria Aiyar also participated in this round of funding. Other IIMPS institutional shareholders include UTI AMC and SEWA. Unitus Capital was the sole financial advisor to the transaction, while HSA consulted IIMPS as their legal advisor to the transaction.

IIMPS provides economically active but financially excluded urban and rural poor with convenient and secure access to an integrated pension, savings and insurance product solution using a unique, scalable and sustainable technology-led Micro Pension® model. Founded by Gautam Bhardwaj and Ashish Aggarwal in 2006, both veteran experts on pension sector reforms and implementation, IIMPS is the only firm globally that is committed exclusively to educating, encouraging and enabling the working poor to accumulate micro-savings for their old age in a secure, affordable and well regulated environment. In the IIMPS model, low income individuals save on average Rs.200 per month towards their old age while they are young. These monthly savings are distributed between the government's NPS-Lite Swavalamban and the UTI Retirement Benefit Pension Fund.

IIMPS works with RRBs and scheduled commercial banks for automated collection and transfer of micro-savings of the poor to regulated product providers. More recently, and in collaboration with VISA, IIMPS has developed a convenient and affordable prepaid-card based micro-payment solution to enable the unbanked poor to directly transmit their periodic long-term micro-savings to IIMPS financial product partners. IIMPS strategic and business partners include NABARD, LIC, UTI, VISA, SBI, MicroSave, Janalakshmi, Ujjivan, Arohan, SEWA Bank and CTRD.

IIMPS works with a range of "outreach partners" including regional rural banks, MFIs, SHG federations, milk unions and other social enterprises for delivering financial literacy to their clients and in enrolling them for the integrated Micro Pension solution. Over 500,000 low income informal sector workers in urban and remote rural locations across multiple States of India have been educated and enrolled already on a voluntary basis for this integrated long-term micro-savings solution. Over the next 3 years, IIMPS plans to upscale the impact of its model by educating and enabling 5 million low income households to save for their old age.

To support this process, KfW, the German development bank and one of the leading bilateral development banks in the world, has invested US$3.28 million into IIMPS on behalf of the German Federal Ministry for Economic Cooperation and Development. KfW commits more than 500 mn Euro of financial commitments per annum in India in the area of sustainable economic development, energy and natural resources management and KfW is one of the world’s largest micro-finance investors. This deal complements its portfolio of Indian micro-finance, micro-insurance and impact investments deeply focussed on sustainable improvement of economic, social and ecological living conditions of excluded persons across multiple countries. This deal marks the first direct equity investment by KfW in India. During the same equity investment transaction, the Michael & Susan Dell Foundation has invested an additional US$400,000 into IIMPS and increased its own shareholding in the social enterprise.

Commenting on the equity round of funding, Gautam Bhardwaj, managing director of IIMPS said, “It is a great privilege to have KfW on board as a long term partner to IIMPS. KfW brings immense value in terms of global perspective and experience, as well as a sharp focus on sustainable financial inclusion. The equity investment from KfW and the Dell Family Foundation will help further strengthen financial literacy and client protection mechanisms as we surge ahead on building a mass-market for non-credit financial and risk management solutions for vulnerable households across the country. It is extremely encouraging that institutions like KfW, Michael & Susan Dell Foundation, UTI and SEWA believe in our model and in the long term impact that we are creating through it.”

“We have been able to develop a viable and scalable model that brings about a radical shift in consumer behavior with respect to long terms micro-savings. Ultimately pension streams in old age will largely reduce the dependence on state sponsored social security as a fallback option for the marginalized”, added Ashish Aggarwal, executive director of IIMPS.

Talking about their investment in IIMPS, Barbara Schnell, Division Head, Financial and Private Sector for Asia, KfW, said, “We have been long associated with IIMPS as a support partner and have seen them transform their ideas from a pilot into a scalable model. IIMPS is the only instance we see globally of an organization that is exclusively addressing old age micro-savings needs of the financially excluded and it is exciting for us to solemnize our long standing relationship into an equity partnership.”

“Through an innovative and tested model, IIMPS is uniquely positioned to address a critical financial need of low income families. Our follow-on investment in IIMPS will help the organization scale the business model and become a role model in the space of financial inclusion,” said Satyam Darmora, Lead, Family Economic Stability, at Michael & Susan Dell Foundation.

Jayshreeben Vyas, MD of Sewa Bank, commented, “We have already provided around 75,000 members of the SEWA Group a means to save for their old age needs through our long standing partnership with IIMPS. Each month, these low income self-employed women put away a small portion of their earnings which is invested by a reputed institution like UTI thus leading to compounding of their savings and resulting in a significant financial corpus for their twilight years. Ultimately, Micro-Pension is helping our women and other working poor more generally to participate actively in India's economic growth”

Talking about their strategic association with IIMPS, Mr. Imtaiyazur Rahman, Acting Chief Executive Officer of UTI commented, “Our association with IIMPS goes way back to 2006. We are reaching out to the low income segment’s needs by providing long term savings benefits coupled with emergency liquidity in the medium term through our Retirement Benefit Pension Fund (UTI RBPF) in partnership with IIMPS. IIMPS distributes this product for us on an exclusive basis across the country and has been able to build a significant subscriber base, which we would have been unable to otherwise cater to directly.”

Eric Savage, Co-founder & President of Unitus Capital, remarked, “It was a privilege to work with IIMPS, KfW and Michael & Susan Dell Foundation on this landmark transaction. IIMPS is making an incredible difference in the lives of hundreds of thousands of poor families, and they are just getting started. We set up Unitus Capital to help companies like IIMPS scale their massive social impact, and we get really excited when we are able to do so.”

Changing Lives
field updates

Low income individuals in remote tribal locations at Tamil Nadu are now being enrolled for "micro-pension" in partnership with Centre for Tribal Research and Development (CTRD).

IIMPS and eKutir will jointly assist low income farmers in Odisha to accumulate micro-savings through the Micro-Pension model.