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November 21, 2018

Giving the informal sector a chance to save for the future

Earlier this year, Labor cabinet secretary Kazungu Kambi postponed the enforcement of the new NSSF Act. This came amidst outcry by employees and employers about little knowledge of the new scheme.

 According to the National Social Security Fund law signed in December, workers were to pay more to the fund but unlike the old act where all employees paid a flat rate, deductions were graded according to salary scale.

 However, there appears to be a huge group of people who have been left out in this opportunity to save. These are the informal sector like Jua Kali, mama mbogas and so on who do not earn monthly wages.

The Star interviewed Eagle Africa Insurance Brokers chief executive on the effects of the new Act to the informal sector and what options they have so as to save pension for their future.   

 What role does the informal sector play in the economy and what proportion is covered by insurance? 

Kenya is a developing economy. In our case, the rising demand for job opportunities year in year out cannot be fully satisfied by the government or the formal private sector alone. Therefore, the informal sector is essential to the growth of our economy. On the insurance front, it’s quite a sector that is emerging as the new opportunity for growth and penetration of insurance.


 It is a great market that other sectors have ventured into such as banks and telecom companies, has insurance ventured to it?

Insurance penetration is still low in Kenya at about 3.1 per cent compared to other African countries like South Africa. Much of this low penetration has been attributed to many players who fight for a very small market of those who can afford insurance and undercutting. The informal sector is growing pretty fast and insurance sector like other sectors e.g banking is targeting this group with products that are affordable and specifically designed for them.


As we await the enforcement of the Act, has there been or how can the informal sector improve on saving for the future?

Well the new NSSF Act has been viewed as one intended for the employed or for those who have monthly wages. However, there is a huge percentage of Kenyans on the informal sector or what we commonly refer to as the Jua Kali sector. Now, as Eagle Africa Insurance Brokers, we thought about this group sometime a few years back and a product specifically targeting them called Mbao Pension Scheme was developed that has changed the savings plans for many. This is a pension scheme that allows people to save at least Sh20 a day. This is even made easier because the savings are done through the Mpesa or Airtel Money. 


Mbao Pension is a local innovated pension scheme, what was the drive to venture into it?

We are a leading administrator of pension especially private pension scheme. In our desire to promote Kenyans to save for the future, there was need to come up with a way of saving in a convenient manner. Mbao pension is one of several innovations that are affordable and targeted to this sector. The scheme involves people saving a minimum of a pound hence the local name “Mbao” derived from saving Sh20 a day.


What are the requirements for enrolling for the Mbao Pension Scheme?

It is very easy to join Mbao Pension Scheme.  All you need is a mobile phone registered for money transfer. You will need to fill an joining form that available in any of our branches countrywide and attach a copy of your ID and two passport size photographs. Then you will send at least Ksh. 20 to MPESA  pay bill No 710710 or through Airtel money using the  name MBAO.



Every innovation has its success, has Mbao Pension succeeded and to what extent


The biggest success is offering a solution to saving culture problem in the sector where we have made it easier and convenient for thousands of our informal sector players. The innovation has been so successful that other countries have emulated it. For example, South Africa has copied Mbao Pension Scheme and retained even the name. The World Bank is planning to roll it out in six other African countries with an aim to roll it out to the rest of African economies.

   What do you think can be done to increase uptake of insurance from the informal sector?

There is a lot of education needed in this area. This has started with huge support by the Retirement Benefits Authority taking the lead. We as the key players need to create exciting products for the SME’s and the Jua Kali sector. This simply means that the risks of doing business for them will be reduced and therefore the more the growth of this sector means more growth on insurance uptake.


   How does the informal sector benefit by joining the scheme?

The individuals are able to plan and save for retirement. The scheme also allows people to withdraw after three years which mean you can save and use the money to develop in a few years.

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