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Martin Kadzere : Senior Business Reporter

Zimbabwe should start looking at ways of tapping into the approximately $7 billion informal industry by establishing retirement savings schemes for the informal sector, Alexander Forbes (Kenya) chief executive Sundeep Raichura said. Addressing delegates at the Zimbabwe Association of Pension Funds annual conference last week in Johannesburg, Mr Raichura said the Government should start thinking from a policy perspective on creating pension schemes for millions of Zimbabweans in the informal industry. The pension schemes in Zimbabwe focus mainly on the formal sector

During the past decade, Zimbabwe’s economy experienced some structural shifts where the informal sector now accounts for a significant part of the economy. Mr Raichura noted the sector had been excluded when it comes to pension schemes.

“If you look at most African countries, the pension systems are based on the formal sector, but the majority of the (working) population is actually not in the formal sector,” he said.

“Most schemes are mainly sponsored by employers. So in a country like Zimbabwe, my understanding is that the population in the formal sector is much smaller than in the informal sector; the same in most African countries.

“The trend also shows that the formal sector is stagnating or even shrinking as it is in Zimbabwe. Most of the jobs are actually being created in the informal sector.”

Mr Raichura said the Government should seriously look at policy interventions to enable the establishment of “retirement” benefits schemes for the informal sector.

“If you look at the demographic transition taking place in Africa, we still have a very young population but in the next 20 years, a number of elderly is going to double. Unless policy makers start looking at this matter, we are going to have elderly people with no (financial) support and will become a burden to the society.”

He said it was important to have an agenda of what solutions could be provided to the informal sector. “The challenge is how do we get the informal sector to save, with intermediate income, low income or seasonal income as well as low levels of financial literacy,” he added.

Mr Raichura however, suggested that the initiative could be successfully achieved through rolling out the schemes to organised groups such as farmer organisations, association women groups or associations representing the informal businesses who can be brought together and contribute to the scheme.

Provisions of loans from accumulated savings could also incentivise others to join the schemes, he added. If funds permit, Government can also support the schemes by co-contributing.

In Kenya, for instance, a retirement saving scheme targeted at the informal sector called Mbao was established in 2011.

Mr Raichura said the scheme has more than 200 000 members with an asset base of $2 million. Members contribute about 20 shillings and collections are done though mobile phones. In India, there are micro pension cards where people use then at post offices to make contributions.

“I feel that this is an important matter; this is a priority matter. Even as the Government grapple with other challenges, it should start thinking from a policy perspective, how do you bring matter of the financial inclusion to the informal sector.

“It should combine with good technological solutions and financial literacy campaign.”