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Impact of SMS Reminders on Pension Savings

Financial Inclusion Kenya

Credit: ITU Pictures

A key policy issue in developing 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-employment), 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 either positively- or negatively-framed reminders; the frequency of SMS notices will also be varied. Administrative data was obtained from Kenya’s Retirement Benefits Authority, including frequency and amounts saved by participants. A survey provided further information, including income, occupation, and use of other saving methods. The results of this study showed that the SMS reminders influneced 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 enrolment, accessible micro loans, and easy exit– the researchers determined that the Mbao pension plan must be aligned with this reality.

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Financial Inclusion

DCO Quarterly Newsletter: October 2019


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