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Friday, May 24, 2024

Informal sector urged to incorporate pension schemes

Story by Tichaona Kurewa

THE 2023 Global Forum on Private Pensions entered day three in Victoria Falls this Thursday, with discussions focusing on diversifying investments and tapping into the informal sector.

According to the African Development Bank, only 8% of working-age Africans have pension coverage, leaving a huge gap, especially in the informal sector.

The issue attracted the attention of delegates attending the Global Forum on Private Pensions after it was confirmed that Africa is a fertile ground for pension funds.

“In Kenya, we have come up with the Hustlers Fund where we are lending money to micro-business and when we lend them the money, we deduct a certain percentage toward savings and pension schemes. The fund encourages them to borrow, and, in the process, they are being captured into a database and most importantly contributing to savings and pensions. All this is being done through mobile money. The other way to collect pension funds from the informal sector is through collecting the pension contribution from airtime since most people use them,” said Gen Africa Kenya asset manager, Mr Patrick Kariuki.

The Zimbabwe Association of Pension Funds is convinced that micro pensions and pension tax should also be considered.

Zimbabwe Association of Pension Funds, director general, Ms Sandra Musevenzo said, “Another way that needs to be explored for people to contribute towards pension schemes is to introduce pension tax. This money is collected each time people make a purchase and the money deducted is credited to their respective pension schemes. This way a considerable population is tapped, the technicalities may look complex but through technology the process is easy.”

The Insurance and Pensions Commission (IPEC) is in full support of any sound innovation aimed at widening the pension schemes net.

“The use of mobile phones in the collection of pensions is viable, given the mobile penetration in Zimbabwe. A lot of people are using mobile money services. What’s critical is that we support from the regulatory perspective, the uptake of micro-pensions. As IPEC, we have issued a micro-pension framework which is meant to tap savings from the informal sector. We need to deal with the demand side and confidence issues to ensure that those in the informal sector subscribe to pensions,” said IPEC director, Mr Cuthbert Munjoma.

The United Nations estimates that by 2050, there will be almost two billion people over the age of 60 years worldwide, with close to 80% of them living in developing countries.

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