NAIROBI, Kenya, May 13 – The Retirement Benefits Authority (RBA) and government plan to increase the country’s pension coverage to 30 percent from the current 20.5 percent next year.
Together with the RBA, President William Ruto’s administration is focusing on the Bottom-Up Economic Transformation Agenda (BETA), whose aim is to bring those in the informal sector into the pension scheme.
The sector, which comprises over 90 percent of the Kenyan workforce, raised debate over its low pension coverage.
With only 1.3 percent of workers in the informal sector registered under a pension scheme, millions of Kenyans risk old-age poverty.
BETA will allow unserved segment of the economy to save and invest for their retirement.
“The renewed policy interventions will provide the sector with capacity to create sustainable, decent jobs and ensure equitable distributions of wealth among the population,” said Simon Chelugui, Cabinet Secretary, Ministry of Cooperatives and MSME Development, in a speech delivered by the State Department for Micro and Small Enterprise Development Senior Deputy Secretary Albert Mwaringa.
Mwariga spoke during Enwealth Financial Services’ 6th Annual Trustees forum themed ‘The Future of Pensions: Strategies for Success’.
One of the primary interventions undertaken includes facilitating access to finance through the financial inclusion fund under the Public Finance Management (Financial Inclusion Fund) Regulations, 2022.
The fund will provide credit with a mandatory savings component where 95 percent of the money is availed to the borrower while 5 percent is withheld and channeled towards savings.
The savings are then split such that 30 percent go to short-term savings and 70 percent to pensions.
“Lack of resources is the most common reason preventing workers from contributing to pension,” the CS added.
“The government has committed resources through the financial inclusion fund to ensure financial inclusion for MSMEs. The funds will be distributed through four products; Personal loans product; micro loans product; start-up loans; and small & medium, enterprise loan.”
Other policies will include increasing the licensing of businesses by making business permits affordable, facilitating their issuance to all who apply, and capping licenses at 1.5 percent of the total business turnover.
Other examples include the provision of infrastructure in the form of business development centers, industrial parks, and business incubation centers in TVET institutions.
