Rethinking Pension Inclusion in the Pacific

September 13, 2017

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Micropension sign up at the Honiara Central Market PC: Rosi Pilgrim

By: Denton Rarawa and Krishnan Narasimhan

Social protection in the Pacific small island states is presently limited with only Fiji, Tonga and Samoa offering national level old age pension through budget supported schemes and even these are small amounts ($50 USD a month).

However, financial and social protection for the elderly in Pacific Island countries (PICs) is largely limited to those in the formal employed sector. With  majority of the population (nearly 80%) falling into the informal economy, how will we achieve pension inclusion for all in the Pacific?

As part of the informal employed sector, smallholder farmers, labourers, market vendors, and casual workers will inadvertently end up with a  lack of access to and/or minimally use formal financial services. Women, who constitute nearly 70 to 80% of the informal sector, are especially marginalized, with high rates of financial exclusion.

Because of this, the Pacific Financial Inclusion Programme (PFIP)[1] identified an opportunity to extend the suite of financial services that targets low-income communities in the Pacific by including voluntary micro-savings and micro-pensions through existing national superannuation funds.

This was made possible with PFIP’s history in catalysing the creation of innovative financial products, and services across the Pacific – such as mobile and branchless banking, mobile money, micro insurance, remittances, savings and micro-credit.

Through technical and grant assistance, PFIP worked closely with the National Provident Funds (NPFs) in Fiji and Solomon Islands to conduct feasibility assessments, develop suitable voluntary contribution superannuation products for the informal sector and pilot trials to validate the assumptions around operational viability, demand and feasibility.

A human-centered design approach in developing the product, distribution channels, payment gateways and client feedback loops was integrated into the validation plan, with early pilot results showing great promise.

While the ongoing pilot phase will see an initial coverage of 500 to 1000 clients (of whom minimum 50% are women), the scale-up after validation is expected to be nation-wide. Business case development is now underway in both countries and fully resourced, dedicated innovation hubs have been established. These projects are the first-of-their-kind in the region, and the potential for replicability in other developing countries in the Pacific and indeed globally is foreseeable.

In a society where traditional and cultural forms of social protection are rapidly declining, pension inclusion for all through innovative approaches holds promise in Pacific countries to protect citizens in their twilight years.

About the Authors: Denton Rarawa is the Governor of the Central Bank of Solomon Islands. Krishnan Narasimhan is the Deputy Program Manager of the PFIP.

[1] PFIP is jointly managed by United Nations Capital Development Fund (UNCDF) and United Nations Development Programme (UNDP) and receives funding support from the Australian Government (DFAT), the European Union and the New Zealand Government. It is based in the UNDP Pacific Office, Suva, Fiji and has offices in PNG, Samoa and Solomon Islands.

To continue following the conversation on pension inclusion around the globe, please visit The Book Project started by pinBox Solutions — A global social enterprise committed to digital micropension inclusion in developing countries.