Abstract
Micro-pension plans are meant to insulate low income earners against old-age poverty. The formulation of such plans requires a delicate balance between economic viability, generation of adequate returns and customized features for the participants. This study sought to determine the pragmatic models for implementation of micro-pension plans, regulatory issues surrounding their operations, challenges to implementation and the strategies that can address the challenges. The data, collected from 1083 informal sector participants, 30 Micro-finance institutions and 20 Savings and Credit Cooperative Societies in Kenya was analyzed by use of factor analysis and visual binary approaches. The study concludes that the ideal micro-pension scheme needs to address governance, administrative, design and efficiency issues to succeed and recommends a multi-model implementation of micro-pension plans in addition to a separate set of regulations to govern the micro-pension plans.
Highlights
The informal sector plays an imperative role in world economies as it creates jobs, boosts entrepreneurial activity, minimizes unemployment and underemployment, alleviates poverty and contributes to economic growth (Winters, 2002; World Bank, 2006; Chen, 2007)
A key policy issue in developing countries is how to get participants in the informal sector to save and plan for retirement as a result of which over 90% of the population in Sub Saharan Africa and South Asia are not covered by any pension arrangement (Keizi, 2006, 2007) due to general unemployment, low incomes, poor saving culture and above all pension arrangements that only favour workers in the formal sector (Kakwani, Sun & Hinz, 2006)
Different countries have varying forms of micro-pension systems; for instance Bangladesh and India have a model operated on the Grameen principles, Chile has a government subsidized and co-sponsored scheme, China has a scheme characterized by compulsion, minimum income guarantees and micro life insurance products, Kenya has a voluntary defined contributory scheme and South Africa’s informal sectors workers are covered by the public pension system (Hu & Stewart, 2009)
Summary
The informal sector plays an imperative role in world economies as it creates jobs, boosts entrepreneurial activity, minimizes unemployment and underemployment, alleviates poverty and contributes to economic growth (Winters, 2002; World Bank, 2006; Chen, 2007). Micro-pension schemes support small, regular and sustainable savings by low income earners and provide them with a regular stream of income for the old-age (Shankar, 2009; Uthira & Manohar, 2009) and can be viewed as smart forms of savings and insurance (Dullemen & Bruijin, 2011). Different countries have varying forms of micro-pension systems; for instance Bangladesh and India have a model operated on the Grameen principles, Chile has a government subsidized and co-sponsored scheme, China has a scheme characterized by compulsion, minimum income guarantees and micro life insurance products, Kenya has a voluntary defined contributory scheme and South Africa’s informal sectors workers are covered by the public pension system (Hu & Stewart, 2009).
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
