On my recent visit to Chimanimani in Manicaland province, I drove past a local branch of a certain organisation. I couldn’t help but notice that the place was overcrowded. What drew my attention was the average age of the crowd, they all looked old and frail with a few young men and women who were assisting them. These senior citizens were waiting to collect their pensions. Then I remembered, this is the reason why my father trusted me with his bank card so I could withdraw his pension and then send it through mobile money.
BY MUNYARADZI NYAKWAWA
The journey to access pensions from some remote rural area in Zimbabwe can take up to two days at a cost of not less than $10. This is quite exorbitant considering some pensions are as little as $25. Some pensioners would do a cost-benefit analysis and opt to skip some months until the ratio of cost of accessing the funds to the actual pension is relatively low.
Why should pensioners travel?
Due to our economic and financial situation, financial institutions cannot justify, on commercial grounds, the roll out of retail infrastructure at growth points or small towns to serve the poor and the elderly at the bottom of the pyramid. Financial institutions typically pull back their physical presence in rural areas. On my way to Chimanimani. I noticed that two bank branches had been closed at hot springs growth point. Banks more often than not, place restrictions that discourage the poor from opening accounts, by setting high minimum balance requirement and or high ledger fees. These have resulted in our elderly not being able to open or maintain accounts with financial institutions.
Because they can’t maintain accounts with financial institutions where they could link their bank accounts to their mobile wallets, the pensioners remain excluded and have to travel to the organisations’ offices at a cost to them to access their pensions. By failure to open branches and restrictions on account opening and maintenance, financial institutions are passing on the access cost to pensioners.
Sustainable financial inclusion for pensioners
The major goals of social security and pensions, firstly, is to prevent the working individual from being poor and dependent in old age. Are our social security distribution mechanism supporting this or are they making the poor poorer?
Secondly, individuals are basically transferring income from their younger-self now to their older-self in future. Is the older-self reaping the total benefit from his/her younger-self?
Cash and the pensioner
The majority of the elderly in rural areas have always had problems with cash. When social security and pension companies continue to use the same distribution methods, they are as good as paying cash to pensioners as the majority will take everything on site. The three major pain points that these organisations are imposing on pensioners include:
It is unsafe for the elderly to travel with cash. Everyone knows its pensioners’ pay day and it’s easy for the unscrupulous to hunt them down.
We recently heard in the news that pensioners are spending their cash on betting. Some can’t even resist the temptation of the growth point or business centre.
- Remote payments
What do they do when they want to send money to a dependent who is in another location? Half the time, because they already have the cash, they send someone to do the transactions on their behalf and sometimes they lose the money.Zimbabwe’s mobile money and digital financial services have been commended by a lot of countries and a number of them are already replicating. Why, with such good statistics on financial inclusion, do our social security and pension organisations continue to pay pensions and social security through expensive distribution channels, instead of the cheap mobile money platforms?
Zimbabwe has more than 25 000 mobile money agents, which means almost every business centre that has network coverage has a mobile money agent. This means pensioners are just a walking distance away from accessing their pensions.
Financial literacy of the pensioners — whose duty is it?
Article 22 and 25 of the United Nations universal declaration of human rights declares that social security is a human right. I strongly feel that over and above, provision of social security and pension funds should invest time in educating the pensioners. Pensioners should not lose money to betting, or to thieves and they should be able to send money to loved ones by themselves. Basic financial education is essential to safeguard the interests of the pensioners.
The informal sector, social security and micro-pensions
Very few in the informal sector are saving formally or informally towards their retirement, which is an opportunity for social security and pension fund organisations.
According to Zimstats labour force survey, 94,5% of the employed population in Zimbabwe is in informal employment and 5,5% are in formal employment. Zimbabwe’s economy is now more informal. However, it is worrying to note that our social security and pension funds are still concentrating on the 5,5% in formal employment and not thinking about the majority in informal employment.
Social security companies have tried to extend social security programmes designed originally for the formal sector to the informal sector. This obviously has its own challenges. The informal sector do not have guaranteed monthly salaries like the formal sector, thus the need to think outside the box and find new ways to include the informal sector.
Research has shown that the needs of those in informal employment and at the bottom of the pyramid are exactly the same as the needs of those in formal and at the middle or top of the pyramid. Social security organisations should probably start looking at micro-pensions. These would make it possible for the SMEs to easily, safely and at low-cost make contributions toward their retirement. This can be a voluntary scheme and the excluded informal sector can start contributing to a voluntary defined contribution scheme on individual basis. Contributors will pay for their premiums using mobile money, premiums can either be automated or manual, depending on preference. Frequency of contribution should also be a matter of the individual choice.
Social security organisations and pension funds’ adoption of mobile money is a catalyst to financial inclusion and can contribute to economic growth.
Munyaradzi Nyakwawa is Digital Financial Services consultant and Financial Inclusion analyst. He can be reached on firstname.lastname@example.org or on LinkedIn