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From Microfinance to Micropensions

How Microfinance can help in creating Micropensions for Aging populations in low-income to very low-income segment.

Photo of Adhish Patel
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Microfinance has been successful in alleviating poverty in developing countries. We all are acquainted with the success of Prof. Muhammad Yunus's Grameen Bank. How it helped shaped the financing for poor and a lot of other institutions have developed in many developing countries on the African continent to the Asia.


But for this challenge, I wondered how microfinance can help the aging segment. And after my research on google scholar, I stumbled upon a research paper by Prof. Stuart Rutherford at University of Machester, UK. In his paper, he talks about how microfinance can act as micro pensions for the aging population in developing countries. But, Can we bring Micropensions to developed countries with people with worst credit history or who are not able to support themselves by any means? As Microfinance was a successful Reverse Innovation in terms that it was successful in low-income neighborhoods of New York. This establishes a case for Micropensions and how effectively can Micropensions be implemented in low-income segments or people with worst credit (who are not eligible for any financial service).


For more information on Micropension, visit the source by clicking here.


Do let me know your thoughts on Micropensions and what challenges exists for its implementation?

What is a provocation or insight that might inspire others during this challenge?

A different vantage point towards Microfinance.

Tell us about your work experience:

I have worked in the Innovation & Entrepreneurship sector. I have experience in Design Thinking and have also worked in the areas of sustainable technologies and innovation.

Specifically, please check all that apply:

  • I'm not currently involved in a credit union, but am curious to learn more!

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Photo of OpenIDEO

Congrats on this being today's Featured Contribution!

Photo of Adhish Patel

OpenIDEO , Thanks!

Photo of Kate Rushton

Hi Adhish!

Thank you so much for sharing your thoughts on Micropensions. What do you envisage this working?
Do you envisage that it would work in a similar manner to 'Saving by Spending' mentioned in @Melina DiMambro 's post here - https://challenges.openideo.com/challenge/financial-longevity/research/saving-by-spending ?

Photo of Adhish Patel

Hi Kate Rushton , The Saving by Spending mentioned by Melina DiMambro is being currently done by a FinTech startup known as Acorns, https://www.acorns.com/. This could definitely be a way to fund your pension, but then it will be akin to 401(k). Even in his paper, Stuart Rutherford talks about better financial planning (saving) as a means of MicroPension. According to me, I think it would be a great way to think it from a community perspective. Taking inspiration from Grameen Bank, a community will pay each month for the pension of their aged population (to begin with). And, as this is a micro pension, it's not a lot of money people are getting at the end of the day, but at the same time, it is enough to sustain themselves. People who grow out to be successful won't need this MicroPension (this will add up to the pool), they would have other forms of retirement planning. But the low-income population will need it and it will sustain themselves.

Do let me know what are your thoughts on how it should be done?

Photo of Anne-Laure Fayard

Adish, thanks for sharing. It is indeed worth exploring the idea of microfinance and micropensions. It reminded of a post by Kate Rushton on crowdsourcing for insurance https://challenges.openideo.com/challenge/financial-longevity/research/bought-by-many-example-of-innovation-in-fintech
It'd be great if you could put the link for the article. Thanks!

Photo of Adhish Patel

Anne-Laure Fayard , I've hyperlinked the research paper in my text. Also, posting the link here, http://www.pensiondevelopment.org/documenten/Micropensions%20-%20Old%20Age%20Security%20for%20the%20Poor%20-%20Rutherford.pdf
I saw the Kate Rushton article, it's indeed a great idea. A lot of FinTech companies are challenging conventional methods in finance and I'll also highlight some of the FinTech companies and their initiatives in my upcoming posts.