Assessment of the
feasibility to extend the
pension scheme coverage
to self employed and
workers from informal
sector in R...
Outline
Introduction
Sub-questions and methodology
Sub-questions
•
•
•
•

What is the relationship of informal sector size and coverage rate?
W...
Informal Sector and pension
scheme in Rwanda
Informal sector size
•
•
•
•

Informal sector is employing more than 92% (EIC...
Achievements in extending
coverage
In Rwanda
•
•
•

Regular and organized sensitization
sessions in every district
Automat...
International experiences in
extending coverage to informal
sector
•
•

•

•
•

Moving towards universal coverage from the...
Feasible strategies to extend
coverage to informal sector and
self employed in Rwanda
Pension scheme designing strategies
...
Feasible strategies to extend
coverage to informal sector and
self employed in Rwanda
Pension scheme designing strategies ...
Feasible strategies to extend
coverage to informal sector and
self employed in Rwanda
Implementation and administration st...
Feasible strategies to extend
coverage to informal sector and
self employed in Rwanda
Implementation and administration st...
Conclusion
• Political will
It is important to emphasize that the strong political will for pension reform from the
presid...
Master`s thesis presentation in Social Protection Financing by jean d`amour Ntibitura
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Master`s thesis presentation in Social Protection Financing by jean d`amour Ntibitura

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Assessment of the feasibility to extend the pension scheme coverage to self employed and workers from informal sector in Rwanda.

The study gives a set of six feasible strategies to extend coverage to informal sector and self employed in Rwanda.

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Master`s thesis presentation in Social Protection Financing by jean d`amour Ntibitura

  1. 1. Assessment of the feasibility to extend the pension scheme coverage to self employed and workers from informal sector in Rwanda Master`s thesis in Social Protection Financing at University of Mauritius Presented by JEAN D’AMOUR NTIBITURA Mauritius, June 2013
  2. 2. Outline
  3. 3. Introduction
  4. 4. Sub-questions and methodology Sub-questions • • • • What is the relationship of informal sector size and coverage rate? What are the achievements and challenges in extending coverage in Rwanda? What are the strategies used to extend coverage in some countries? What are the feasible strategies can be implemented in Rwanda? Methodology • Review of available data from RSSB, National Statistics Institute of Rwanda and online data • Online survey for RSSB Staff members(136), and randomised survey for a sample of 165 moto taxi drivers operating in three districts
  5. 5. Informal Sector and pension scheme in Rwanda Informal sector size • • • • Informal sector is employing more than 92% (EICV3, 2010) 62% of labour force are independent farmers While the pension coverage was around 7-8% The total population who are not covered are working in informal sector Pension scheme in Rwanda • • Pension scheme in Rwanda is contributory defined benefits It was inherited from the belgian colonial regime • • The pension law was established in 1957, then revised and amended in 1962, 1974 and 2003 In 2009 the social security policy for all workers was adopted by Government
  6. 6. Achievements in extending coverage In Rwanda • • • Regular and organized sensitization sessions in every district Automatic registration of employers in pension scheme Working in partnerships with key institutions dealing with informal sector Increment of more than 7% per year from 2010/2011 for contributors Challenges for informal sector • Irregularity of income which is which is a major obstacle in ensuring sustainability of resources • The most informal economy workers work in agriculture • the design of the scheme is not responsive to the priority needs of informal sector workers
  7. 7. International experiences in extending coverage to informal sector • • • • • Moving towards universal coverage from the regulation ( China adopted social insurance law to provide “social security for all” by 2020 Compulsory coverage to self-employed workers ( in 1998, the South Korea has made the participation of self-employed workers in defined contributory pension scheme an obligation) Extending coverage by relaxing the eligibility criteria of existing schemes (In China registered 60 % of increment of contributors from 2005 to 2011 after lowering the contribution rate for self-employed workers ) Providing monetary incentives to participate ( By 1980s pension reform in Chile, all contributions and investment income treated as tax free) Utilizing existing (non-pension) financial sector institutions (In 2000, the Grameen Bank started to offer a product for old-age protection . Under this scheme, all borrowers in the Grameen Bank are required to deposit a minimum of 50 taka each month in a personal pension savings account)
  8. 8. Feasible strategies to extend coverage to informal sector and self employed in Rwanda Pension scheme designing strategies • Mandatory adhesion for all workers above the poverty line Affordability? At least 55% of workers may afford to pay a contribution in pension scheme ( poverty rate was 44,9% in 2011) Why mandatory? The myopia phenomena was observed in responses given in the survey by RSSB staff, where the majority(63%) of respondents chose to contribute at very low percentage(3-6%) of their brut salary assuming that the adhesion is voluntary. • Pension scheme for formal independent workers (Registered in RRA)  91,7% of 116,417 establishments operating in Rwanda were registered with RRA, are not covered  In Chile, from 1981 participation of independent workers in pension scheme is mandatory
  9. 9. Feasible strategies to extend coverage to informal sector and self employed in Rwanda Pension scheme designing strategies cont’d • Cooperative members pension scheme At least 6635 cooperatives registered with Rwanda Cooperative Agency were operating as formal establishments in 2010 Based on experience of Bangladesh with Grameen bank, and Israel with Moshav; it is feasible to design a pension scheme for cooperatives members Matching the contributions , e.g., a matching of 2 US dollars per month for every contribution of at least 4 US dollars per month can cost 0,03% of GDP • Pension scheme for informal sector workers e.g., in 2009 Kenya launched the Mbao Pension Scheme for the informal sector Incentives: pre-retirements benefits like education facilities and acquisition of houses, etc… 38,8 % of taxi moto drivers prefer saving for school fees , against 7,3% for the retirement benefit
  10. 10. Feasible strategies to extend coverage to informal sector and self employed in Rwanda Implementation and administration strategies • Auto enrolment and payment of advance on contributions by mobile phone e.g., the levy of VAT on every airtime scratch in Mauritius, and Health insurance tax levied on mobile services in Ghana; using mobile phone can be the effective and efficient way to boost the coverage rate in Rwanda Law regarding the registration of identification for every mobile phone user; which will establish a link between mobile phone number and electronic national identification number of every user In 2012 the country's mobile phone subscribers reached 5,690,751 52,7 % of taxi moto drivers prefer to pay their contributions with mobile phone
  11. 11. Feasible strategies to extend coverage to informal sector and self employed in Rwanda Implementation and administration strategies cont’d • Integrated Social security education programme Is marketing function not necessary? as the adhesion to public pension fund is compulsory. Most pension funds do promotion (publicity on radios, Tv show, billboards etc). What about other components of 4 P’s of marketing mix ( Product, Price and Place)? 35% of taxi moto drivers have a willingness to contribute 1000rwfs (1,6 USD ) per day in pension scheme, If RSSB pension scheme could facilitate them in their projects (Education, house, acquisition of motorcycle etc…)
  12. 12. Conclusion • Political will It is important to emphasize that the strong political will for pension reform from the president of Republic is needed for the success of the whole process starting by the designing of the pension system to the implementation • Pension reform (Contributory scheme) Like Ghana did in 2008, the pension reform commission may be appointed in Rwanda to prepare and implement a reform to achieve the pension coverage for all Cost evaluation of strategies to extend pension coverage analysed in this study still to be done • Social pension: For achieving the pension coverage for all, the Government should study the feasibility of providing the social pension benefits to elderly persons, especially the poor.

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