Uganda's informal sector workers to access pension schemes

In Summary

• The Uganda Retirements Benefits Regulatory Authority URBRA awarded licences to Mazima Voluntary Individual Retirement Benefits Scheme (MVIRBS) and Kampala City Traders Association (KACITA) Retirements Benefits Scheme; the country’s first informal sector-based pension schemes after several months of legal review.
• Whereas membership to MVIRBS is open to anybody engaged in the informal sector, enrolment in KACITA retirement benefits scheme is restricted to members of the country’s most prominent trade lobby group that boasts of more than 1,000 members spread countrywide.

Uganda's pensions regulator has issued licences to two pioneer players this month to extend social security benefits to the informal sector.

The Uganda Retirements Benefits Regulatory Authority URBRA awarded licences to Mazima Voluntary Individual Retirement Benefits Scheme (MVIRBS) and Kampala City Traders Association (KACITA) Retirements Benefits Scheme; the country’s first informal sector-based pension schemes after several months of legal review.

This will extend social protection coverage to the majority of Ugandan workers faced with inadequate social welfare coverage.

Several employers and employees in the informal sector lack proper hiring procedures, stable savings channels and reliable business records. Employees in the formal sector enjoy access to internal and external savings schemes.

An estimated two to three million Ugandan workers are covered by private pension schemes, the National Social Security Fund (NSSF) and the Public Service Pension Fund out of 15 million employed Ugandans, official data shows.

While some informal sector players earn considerable incomes every year, absence of stable revenue streams and low innovation appetite among fund managers is partly blamed for poor pension benefits coverage in the sector. Uganda’s informal sector accounts for 60 per cent of GDP and nearly 50 per cent of available jobs, government data shows.

Whereas membership to MVIRBS is open to anybody engaged in the informal sector, enrolment in KACITA retirement benefits scheme is restricted to members of the country’s most prominent trade lobby group that boasts of more than 1,000 members spread countrywide.

Member contributions to MVIRBS have been set at a minimum of Ush2,000 ($0.59) per day and a minimum of Ush10,000 ($2.9) per week for interested persons while registration fees have been fixed at Ush10,000 ($2.9) per person. Many local savings and credit co-operative organisations (Saccos) offer low income members monthly contribution rates of less than Ush20,000 ($5.9) that stimulate steady collection patterns and smooth lending operations.

MVIRBS said it has already accumulated initial contributions of Ush10 million ($2,925) from about 300 members and plans to grow its membership to 50,000 people over three years.