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

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. Introduction

3. Sub-questions and methodology
Sub-questions
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•
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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

4. Informal Sector and pension
scheme in Rwanda
Informal sector size
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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
•
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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

5. Achievements in extending
coverage
In Rwanda
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•
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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

6. International experiences in
extending coverage to informal
sector
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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)

7. 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

8. 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

9. 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

10. 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…)

11. 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.