A key policy issue in low and middle-income countries is how to get participants in the informal sector to plan and save for retirement. The Mbao Pension Plan is a centralized micro-pension scheme targeted to informal sector workers in Kenya. To date, take-up and continued use of the product has been weak. Possible explanations include unpredictable earnings (especially for self-employed), delayed benefits, lack of familiarity with pension products, and limited experience with financial institutions.
This study provided SMS savings reminders as a mechanism to increase the consistency and amount of pension savings among Mbao participants. Participants were randomized to receive either positively or negatively-framed reminders with varied frequency of SMS notices. Administrative data was obtained from Kenya’s Retirement Benefits Authority to shed light on frequency and amounts saved by participants. A survey provided further information on participants, including income, occupation, and use of other saving methods.
The results of this study show that the SMS reminders influenced short-term savings, but not long-term. Preliminary discussions with service providers and the respondents point to the availability of short-term options that have automatic enrollment, accessible micro loans, and easy exit. Consequently, the research team determined that the Mbao pension plan must be aligned with these features.
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