Informal Pension Schemes powered by Mobile Money.

Posted: October 4th, 2011  |   viewed: (1,184)  |   Comments: ( 2 )  |  Topic: Blog Post, M-PESA, MTN MobileMoney, Savings  |   Region: Africa

Share: By Camilo Tellez

Paying into a pension plan is an important part of financial planning for any of us.  In developing countries where social safety nets are less developed, and in some cases do not exist, mobile money can be used as a  tool for governments  or the informal sector to channel funds into pensions schemes. This can allow people at the base of the pyramid to have an income to fall back on in times of need.  During the past year, two schemes have launched in East Africa which are powered by mobile money.

In Uganda, the majority of senior citizens live in rural areas where 85% of the active population is engaged in agriculture and only 7.1% of them have access to pensions. Like many seniors around the globe, they experience poverty, ill-health and malnutrition.  Recently, the Ministry of Gender, Labour and Social Development launched the Senior Citizens’ Grant under a cash transfer scheme called “Social Assistance Grants for Empowerment” or SAGE.  MTN Uganda has partnered with SAGE to deliver these funds to the beneficiaries via MTN’s MobileMoney platform. Beneficiaries will receive 23,000 Ugandan Shillings on a monthly basis and the project hopes to reach 95,000 households over the next five years. Beneficiaries who do not have mobile phones will be given SIM cards which they will be able to use at MTN’s EasyTalk call boxes where Mobile Money agents will be stationed.

Across the border in Kenya, where the “informal sector” term was first used back in 1971  The  “Jua Kali”—in Swahili “hot sun”—are  self-employed informal workers.  Statistics from the Kenyan Ministry of Labour estimate that only 15% of the 10 million workers in the country are enrolled in retirement benefit schemes, and that 70% of them without the scheme were jua kali.
Earlier this year, the National Jua Kali Cooperative Society and the Jua Kali Association launched a new pension product with can be funded through M-PESA and Airtel Money.   Users can now save for retirement via the Pay Bill feature starting at Kshs. 20 (US $0.24). This product has allowed Jua Kali to double the number of pension accounts in only six months and is targeting 8.5 million people involved in the informal sector.

Mobile money can greatly reduce the transaction costs in low income pension schemes making them more viable.  The Jua Kali Association has plans to expand this service to the East African region and we will be writing more on these developments in the future.